The generic accounting principles include four types of financial statements: balance sheet, income statement, cash flow statement and retained earnings statement (Nikolai et al, 2009). The balance sheet is one of the core accounting documents produced for all business entities, which provide the financial position of a company, with details on its assets, liabilities and ownership equity, at any given point in time. The income statement is a reflection of the profit and loss details that the entity generated over a particular period of time. Reflecting the operation of the enterprise, profit and loss statements, a term commonly used to describe the income statement, include the revenue generated from sale and the expenses that are incurred over the reporting period used for the document. The cash flow statement is a report that details the various activities undertaken by an entity, linked to investing and financing. Lastly, the statement of retained earnings is a snapshot of the changes that have taken place in the earnings of the entity over the reporting period that is in place as part of the accounting policy.
The objective of the financial statement is variable to the stakeholder utilising the information. Organizational owners and managers use financial statements as a resource to base strategic decisions on, by assessing the overall operational efficiency of the business. On the other hand, investors look into the reporting data as a way of judging the viability of the institution, especially in context of the security and benefit it would create for any investment. The government bodies would use institutional financial statements within their due diligence and auditing process, to ascertain the declarations made by the entity, especially in relation to taxes and duties (Ding et al, 2007). Furthermore, financial bodies use this form of organizational documentation to decide the security