The following are the objectives of preparing financial statements:
To ascertain profit earned or loss incurred by a business during an accounting **. This is estimated by preparing Trading and Profit and Loss Account.
To ascertain the true financial position of a business. This is reflected by the Balance sheet.
To enable comparison of current year’ performance with that of the previous year’, i. e., intra-firm comparisons. Also, to compare own performance with that of the other firms in the same industry, i.e., interfirm comparisons.
To assess the solvency and credit worthiness of the business
To provide various provisions and reserves to meet unforeseen future conditions and to toughen the financial position of the business
To provide vital information to facilitate various users of accounting information in decision making process.
