What Final Accounts Are and Why They Matter
Every business, whether a corner shop or a multinational, produces a set of financial statements at the end of each accounting period. These are called final accounts.
The financial statements prepared at the end of an accounting period, typically comprising the profit and loss account and the balance sheet.
Together these two documents answer two different but equally important questions. The profit and loss account asks: how well did the business perform over the past year? The balance sheet asks: what does the business own and owe right now?
Both documents are used by people inside and outside the business. Knowing who reads them, and why, is just as important as knowing how to construct them.
Stakeholder Interests in Final Accounts
Different stakeholders read the same set of accounts looking for very different things.
These two terms are not interchangeable. Stakeholders are any individuals or groups with an interest in the business, including employees, suppliers, governments, and communities. Shareholders are one specific type of stakeholder: the owners of the business.
Internal stakeholders are those inside the business.
- Shareholders focus on profitability, dividend payments, retained profits, and how the company's overall valuation is changing over time. A business posting strong retained profits prompts shareholders to ask whether those funds will be returned as dividends or reinvested in growth.
- Employees look at financial stability and profitability because these signal job security, the likelihood of pay increases, and the possibility of bonuses or share options.
- Managers use the accounts as the raw material for strategic decisions: spotting revenue trends, controlling cost growth, and evaluating how much capital is available for future investment.
External stakeholders are those outside the business.
- Government agencies use reported profits to calculate tax liabilities, monitor compliance with financial regulations, and assess a company's contribution to the wider economy through employment and output.
- Suppliers check accounts before extending credit terms. A business with deteriorating liquidity may find suppliers shortening payment windows or demanding payment upfront to reduce their own risk.
- Customers, particularly large corporate buyers, will review accounts before signing long-term supply contracts. Financial instability in a supplier creates real operational risk.
- Investors and lenders study revenue trends, profit margins, and the debt structure of the business before committing funds.
- Pressure groups and NGOs scrutinise profitability alongside wage bills, environmental spending, and community investment to assess whether the business is behaving responsibly.
The same profit figure can mean very different things depending on who is reading it.
A record profit impresses investors but may attract scrutiny from a pressure group asking whether workers and communities are sharing in that success. Ethics and financial reporting are rarely separate questions.