General-purpose financial statements are issued throughout the year to aid investors and creditors in their decision making process. A set of general-purpose financial statements includes a balance sheet, income statement, statement of owner’s equity/retained earnings, and statement of cash flows.
What Does General Purpose Financial Statement Mean?
This set of financial statements is called “general purpose” because it consists of the basic financial statements that can be used by a broad group of people for a broad range of activities. Companies use this set of financial statements as a form of financial reporting to communicate company performance with the people outside of the organization.
More specific financial reports like production flow processes and market analyzes are not included in a set of general-purpose financial statements. These types of reports are only available to company management.
Both creditors and investors can analyze this set of financial statements to help predict the future performance of the company as well as the company’s ability to pay off its current and future debts. If outside users would like more financial information about the company they will have to look at reports outside the traditional general-purpose statements like shareholder minutes or the management’s discussion and analysis.
All public companies are required to issue an audited set of general-purpose financial statements by the Public Company Accounting Oversight Board or PCAOB. Most public companies issue quarterly earnings reports as well as annual financial statements. This gives potential investors more financial information about the company to base their decisions on.