A shareholder, commonly referred to as a stockholder, is any person, company, or institution that owns at least one share of a company’s stock. Because shareholders are a company's owners, they reap the benefits of the company's successes in the form of increased stock valuation. If the company does poorly and the price of its stock declines, however, shareholders can lose money.
Historically, business accounting developed to supply information to those who had invested their wealth in business ventures. Financial accounting, as it is now known, emerged in the 19th century as a result of the need to protect investors in Joint Stock Companies trading under limited liability. It has been evident for a long time that the information needs of investors are not adequately met by published balance sheets and income statements. In Part 2, we shall examine the nature of the information disclosed to shareholders and investors, and in Part 4, we shall subject traditional financial accounting practice considered in Part 2 to a critical analysis based on the question 'what information should be provided to investors'? To answer this question, we begin our discussion in Part 4 with an inquiry into the objectives of shareholders in business corporations. By stating that they are concerned with the value of their investment and the income which they expect to derive from their shareholding we are able to enquire into the nature of the information which they need in order to make rational decisions..
Organizations may be considered as falling into two broad classes: those having profit or business objectives, and those having welfare objectives. In this book, we are concerned mainly with business organizations, but it should be remembered that many of the accounting methods employed in business organizations are equally employed by welfare or non-profit organizations. As regards the management of organizations, little difference exists between the information needs of managers of business organizations and those of welfare organizations.