1)There are internal and external users of Accounting information. Please state at least 2 users of accounting information and explain why they need accounting information. If you use a website to find users of accounting information, please be sure to summarize this information and include the website link as your reference. If you utilize the textbook for your reference, please include the page numbers
Example Answer:(Dont use the same answer)
There are many internal and external users of Accounting information. An example of an internal user is managers and employees. They have a vested interest in the financial health of their organization. Managers may use the information to benchmark their progress internally across time, but also against key competitors. It also helps guide decision making and strategic planning.Their compensation such as profit sharing or stock ownership may also be tied to the company’s financial performance, so access and transparency to this information is vital. (Financial Acccouting for MBAs, p 1.4 -1.5) An example of an external user of this information is regulators. They require this information to verify compliance with the law, as well as to protect invesors. (Financial Accounting for MBAs, p 1.6-1.7)
The output of Accounting is the financial statements.
What is the purpose of these statements?
1) Balance sheet
2) Income Statement
3) Statement of Stockholders’ Equity
4) Statement of Cash Flows
Please remember to share the source of your posts. Page numbers are much appreciated.
Balance Sheet- pg 10-12
The balance sheet is a statement that shows assets, liabilities, and equity at a point in time for a company. The asset and liability sections have two major sections, a current and long term which are used in ratios to help determine liquidity and solvency.
Income Statement – pg 13
The income statement shows revenue and expense over a period of time. These sections show how a company receives revenue and where the expenses lie. Is it the cost of the product? High SG&A? Is the income from operations or other sources like interest from investments?
Statement of Shareholders Equity – pg 14
The statement of shareholder’s equity shows the changes in stockholder’s equity. The observed items include changes in difference stock, retained earnings, and accumulated other comprehensive income.
Statement of Cash Flow – pg 15
The statement of cash flows shows the change in cash flow. There are three sections, operating, investing, and financing. It provides more details than the income statement does on how a company is spending. Is the spend high from operations? Or is the company investing in a new building? Or is the high spend due to paying off debt?