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Employees need these reports in making collective bargaining agreements with the management, in the case of labor unions or for individuals in discussing their compensation, promotion, and rankings. Prospective investors make use of financial statements to assess the viability of investing in a business. Financial analyses are used by investors and prepared by professionals (financial analysts), thus providing them with the basis for making investment decisions.

Vendors who extend credit to a business require financial statements to assess the creditworthiness of the business.

Government also produces financial reports to stay accountable to the public and people. The rules for recording, measurement and presentation of government financial statements may be different from those required for business and even for non-profit organizations. The requirements for non-profit financial statements differ from those of a for profit institution and therefore, will not be discussed.

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In order to prepare the financial statements, it is important to adhere to certain fundamental accounting concepts. Going Concern, unless there is evidence to the country, it is assumed that a business will continue to trade normally for the foreseeable future.

Accruals and Matching, revenue earned must be matched against expenditure when it was incurred Prudence, if there are two acceptable accounting procedures choose the one gives the less optimistic view of profitability and asset values. Consistency, similar items should be accorded similar accounting treatments. Entity, a business is an entity distinct from its owners. Money Measurement, accounts only deal with items to which monetary values can be attributed.

Helps existing and potential investors and creditors and other users to assess the amounts, timing, and uncertainty of prospective net cash inflows to the enterprise

Separate Valuation each asset or liability must be valued separately.
Materiality, only items material in amount or in their nature will affect the true and fair view given by a set of accounts. Historical Cost, tTransactions are recorded at the cost when they occurred. Realization, revenue and profits are recognized when realized. Duality, every transaction has two effects.

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In order to prepare the financial statements, it is important to adhere to certain fundamental accounting concepts. Going Concern, unless there is evidence to the country, it is assumed that a business will continue to trade normally for the foreseeable future.

Accruals and Matching, revenue earned must be matched against expenditure when it was incurred Prudence, if there are two acceptable accounting procedures choose the one gives the less optimistic view of profitability and asset values. Consistency, similar items should be accorded similar accounting treatments. Entity, a business is an entity distinct from its owners. Money Measurement, accounts only deal with items to which monetary values can be attributed.

Helps existing and potential investors and creditors and other users to assess the amounts, timing, and uncertainty of prospective net cash inflows to the enterprise

Separate Valuation each asset or liability must be valued separately.
Materiality, only items material in amount or in their nature will affect the true and fair view given by a set of accounts. Historical Cost, tTransactions are recorded at the cost when they occurred. Realization, revenue and profits are recognized when realized. Duality, every transaction has two effects.

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