What is the primary objective of financial statements?

The primary objective of financial statements is to provide useful information to users for economic decision-making. This encompasses a wide range of stakeholders, including investors, creditors, management, and regulators, who rely on financial statements to make informed decisions regarding resource allocation, investment, and assessments of financial performance and position.

Financial statements, such as the income statement, balance sheet, and cash flow statement, are designed to present an organization’s financial condition and results of operations clearly and comprehensively. This information aids users in evaluating an entity's ability to generate future cash flows, assess risks, and make comparisons with other entities.

While reporting profits is a part of the information provided within financial statements, the overarching goal goes beyond merely stating profit figures. Similarly, providing tax records or ensuring compliance with tax laws is a secondary activity that stems from the need to adhere to legal obligations, rather than the primary function of financial reporting. Compliance with tax laws may rely on the reported financial figures, but it is not the fundamental purpose of financial statements themselves.