Question

Financial statements are prepared _______ .

• A. primarily for the benefit of the parties external to the business
• B. primarily for the benefit of the management
• C. for corporate bodies only
• D. for tax department

Answer 1

Answer: (A)

primarily for the benefit of the parties external to the business

Owner usually have the complete control of their business and are involved in the day to day activities. Hence they are usually aware about the financial health of the business. External parties like lenders, creditors and money lenders who are investing the business are not involved in the business on a routine basis hence all these parties refers the financial statement to know the financial health of the business.