Question

General-purpose financial statements are prepared primarily for: (a) internal users (b) external users (c) auditors (d) government regulators

Short answer

The correct option is (b).

Step-by-step solution

Meaning of Internal users

The individuals who run the business by performing activities for the business are called internal users like directors, stakeholders, etc. Internal users obtain necessary information from business records. However, owners, managers, and some employees, such as accountants or finance departments, are users of financial statements.

Explanation for the correct option

Correct option: b. (external users)

Explanation:

External users are those other than the internal users such as investors, creditors, government, and so on. The information required by these users is provided through financial statements, which includes profit and loss account and balance sheet.

Examples of external users for which the general-purpose financial statements are primarily prepared include suppliers, banks, customers, investors, potential investors, and tax authorities.

Option B is correct as general-purpose financial statements are mostly prepared for external users. Hence, the other options are incorrect.