What is the primary goal of financial accounting?

The primary goal of financial accounting is to provide financial information that is useful to external users. This encompasses a broad audience, including investors, creditors, regulators, and analysts, who rely on accurate and reliable financial reports to make informed decisions regarding the organization. These financial reports, such as income statements, balance sheets, and cash flow statements, present an overview of the company's performance and position over a specific period, thereby facilitating transparency and accountability.

The focus of financial accounting is distinct from other functions, such as tax preparation, management support, or internal audits. While tax returns and budgeting are essential aspects of business operations, they pertain more to management accounting and tax accounting, aimed at fulfilling internal and regulatory requirements rather than serving external stakeholders. Internal audits are more concerned with compliance and performance evaluation within the organization. Thus, the emphasis on generating information for external users firmly establishes the primary role of financial accounting.