Answer
Statements of Financial Accounting Concepts No. 1 created standards to meet the informational needs of big groups of external clients, for example, creditors, investors, and their delegates. In spite of the fact that the level of sophistication affiliated with business and financial accounting matters differs both inside and between these client groups, clients are required to have a sensible comprehension of financial statements, accounting concepts, and are expected to be willing to study and decipher the info with reasonable diligence.
Accounting numbers influence investing choices. Investors, for instance, utilize the financial statements of various organizations to upgrade their comprehension of each organization's monetary strength and operating results. Since these announcements follow generally accepted accounting principles (GAAP), investors can make significant comparisons of the various statements for a more informed investment decision.
Work Step by Step
Moreover, accounting numbers also affect the decisions of a creditor. A commercial bank normally investigates into an organization's financial summaries and record of loan repayment before choosing whether to give or deny the loan requested. The financial statements give a fair image of the organization's financial strength (for instance, long-term solvency and short-term liquidity) and operating performance for the current period and over some time. The data is fundamental for the bank to guarantee that the loan is secure.
