The 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. Accounting 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
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Meta © 2022 Which of the following would not be considered internal users of accounting data for a company *?Creditors are not the internal users. Creditors are outsiders and they are not intended to be the internal user of management information.
Who are the internal users of accounts?Internal Users: Internal users are inside the business of the entity.. Example: managers, owners, directors, CEO, CFO etc.. External Users: These are outside the affairs of the entity.. Example: Creditors. Government, Shareholders etc.. Which of the following would be considered as internal users of a business?Internal users of financial statements fall into three main groups: management, owners and, sometimes, employees. In many small businesses, the owners are the managers.
Which of the following would not be considered an internal users of accounting data for the Xanadu company?The correct option is c. “Creditor of a company”. Explanation: Creditors are the external user of accounting data of a company.
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