There are several groups of people within a business that use its accounting information, each having different needs and objectives. These groups of users are noted below. Show
ManagementThe core internal users are the managers. They need detailed performance information about each segment of the business, so that they can make ongoing corrections and enhancements to the organization. Their objectives are to maintain a steady or increasing level of cash flow, while also maintaining a prudent level of debt risk. They may also need this information to make decisions about acquisitions or divestitures. OwnersInvestors use accounting information to determine their return on investment, based on the reported cash flows being generated by the business. Depending on the outcome, investors may alter their level of investment in the business, either selling from their current positions or acquiring additional shares from others. EmployeesIf employees have access to accounting information (which is not always the case), they can use it to estimate the ability of the firm to pay them an adequate level of compensation, as well as to fund any pension plan that the organization offers them. This can result in decisions to remain with the firm or seek employment elsewhere. UnionsUnions can use a firm’s accounting information to determine its level of profitability and debt load. This information is useful for deciding how hard to push for a wage and benefits increase in the next contract negotiations. If the company is reporting marginal results, then the union might be inclined to push less hard, and vice versa. Learning Outcomes
The accounting process provides financial data for a broad range of individuals whose objectives in studying the data vary widely. There are three primary users of accounting information: internal users, external users, and the government (which is a specific form of an external user). Each group uses accounting information differently and requires the information to be presented differently. Internal Users External UsersThe external users of accounting information fall into five groups; each has different interests in the company and wants answers to unique questions. The groups and some of their possible questions are:
GovernmentThe government is a separate type of external user that is also interested in a company’s performance, mainly for purposes of collecting the proper amount of tax, but also for other regulatory purposes. In fact, a single company may be reporting to several state and local governments and even to foreign governments, depending on where they are doing business. Practice Question
ProblemWho are the external users of accounting data? Gi…Get the answer to your homework problem. Try Numerade free for 7 days Input your name and email to request the answer Numerade Educator Numerade Educator Like Report Problem 1 Problem 2 Problem 3 Problem 4 Problem 5 Problem 6 Problem 7 Problem 8 Problem 9 Problem 10 Problem 11 Problem 12 Problem 13 Problem 14 Problem 15 Problem 16 Problem 17 Problem 18 Problem 19 Problem 20 Problem 21 Problem 5 Easy DifficultyAnswerRelated CoursesNo Related Courses
Financial Accounting: Tools for Business and Decision Making
Chapter 1 Introduction to Financial Statements Related TopicsMoney and Prices in the Long Run DiscussionYou must be signed in to discuss. Top EducatorsRecommended VideosWatch More Solved Questions in Chapter 1Problem 1 Problem 2 Problem 3 Problem 4 Problem 5 Problem 6 Problem 7 Problem 8 Problem 9 Problem 10 Problem 11 Problem 12 Problem 13 Problem 14 Problem 15 Problem 16 Problem 17 Problem 18 Problem 19 Problem 20 Problem 21 Video TranscriptNo transcript available We have video lessons for 1.66% of the questions in this textbook
Paul D. Kimmel, Jerry J. Weygandt, Donald E. KiesoFinancial Accounting: Tools for Business and Decision Making View More Answers From This Book Find Another Textbook Related TopicsMoney and Prices in the Long Run Top EducatorsRecommended VideosAdditional Mathematics Questions01:50 A local bank reported that it lost $\$ 150,000$ as the result of an employee… 01:38 Accounting is ingrained in our society and is vital to our economic system,&… 04:45 Journalize these accounting transactions. 01:06 A television costs $\$ 500$ in the United States. The same television costs … Who are internal users of accounting data How does accounting provide relevant data to this users?Internal users include managers and other employees who use financial information to confirm past results and help make adjustments for future activities. External users are those outside of the organization who use the financial information to make decisions or to evaluate an entity's performance.
Who are the users of accounting information How does accounting provide relevant information to these users?The accounting process provides financial data for a broad range of individuals whose objectives in studying the data vary widely. There are three primary users of accounting information: internal users, external users, and the government (which is a specific form of an external user).
Who are accounting users?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.
How does accounting provide information?Accounting provides vital information regarding cost and earnings, profit and loss, liabilities and assets for decision making, planning and controlling processes within a business.
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Who are the users of accounting data How does accounting provide relevant data to these users
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