Information Needs of the Data- Users

The process of making intelligent financial decisions requires the use of relevant, reliable, understandable, and comparable financial data. Such data generally come from the end-products of the recording, classifying and summarizing processes- the financial reports and statements. These general-purpose financial statements are prepared and presented at least annually. They are the means through which certain common financial information needs of a wide range of data-users are communicated. These financial statements are also used in assessing the business enterprise's accountabilities and responsibilities to other.


Accounting provides the many interested data-users- both the insiders and outsiders- the following basic quantitative information related to:

1. The financial condition of the enterprise. These are the kinds and values of assets (economic resources) and liabilities (economic obligations) of a certain business enterprise, as well as the financial status of the owners at a given point of time.
2. The results of the operations of the business during the given period of time- which could either be a net income or net loss.
3. The financing and investing activities that were possible for the changes in the cash balance of the business enterprise- which are the sources and applications of cash and cash equivalents during a given period of time.
4. The reason why the equity of the owners increased or decreased during a given period of time.

Since the investors in an enterprise are the primary providers of the risk capital, it is assumed that the financial statements that meet their information requirements would also meet most of the needs of the other data-users.