What are at least 5 examples of decisions or questions that can be supported by accounting information?
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Users of Accounting InformationThe accounting process provides financial data for a broad range of individuals whose objectives in studying the data vary widely. Three primary users of accounting information were previously identified, internal users, external users, and government/IRS. Each group uses accounting information differently and requires the information to be presented differently. Internal UsersAccounting supplies managers and owners with significant financial data that is useful for decision making. This type of accounting is generally referred to as managerial accounting. Some of the ways internal users employ accounting information include the following:
External UsersTypically called financial accounting, the record of a business’ financial history for use by external entities is used for many purposes. The external users of accounting information fall into six groups; each has different interests in the company and wants answers to unique questions. The groups and some of their possible questions are:
Some of the ways external users employ accounting information include the following:
General-purpose financial statements provide much of the information needed by external users of financial accounting. These financial statements are formal reports providing information on a company’s financial position, cash inflows and outflows, and the results of operations. Many companies publish these statements in annual reports, also known as a 10-K or a 10-Q (quarterly report). The annual report contains the independent auditor’s opinion as to the fairness of the financial statements, as well as information about the company’s activities, products, and plans. Typically, the best place to find these reports for a public company can be on their website under the Investor relations section. Financial statements used by external entities are prepared using generally accepted accounting principles, or GAAP. We will discuss the language of GAAP further in later sections. Government/IRSGovernment agencies that track and use taxes are interested in the financial story of a business. They want to know whether the business is paying taxes according to current tax laws. The language in which tax-related financial statements are prepared is called IRC or Internal Revenue Code. Tax preparation will be outside the scope of this course. Important Points to Remember
1.3: Users of Accounting Information is shared under a not declared license and was authored, remixed, and/or curated by LibreTexts. What are the examples of decisions or questions that can be supported by accounting information?Decisions may include expanding current operations, using different economic resources, purchasing new equipment or facilities, estimating future sales or reviewing new business opportunities. Accounting information usually provides business owners information about the cost of various resources or business operations.
What possible decisions can be accounting support?Accountancy can support the decision making process and management activity. The objective of an accounting system is to provide financial information concerning the studied company. The information concerns the financial situation and the performance of a company and there is intended to the users to taking decisions.
What are some accounting questions?To help get you started, we found answers to some of the most frequently asked accounting questions.. Should I hire an accountant?. What records should I keep?. How do I find my break-even point?. What are my financing options as a business owner?. How can I prepare for tax season?. What are 5 users of accounting information?The public, the government and its agencies, management, employees, lenders, suppliers, and other creditors in the business world are among the users of accounting information.
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