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Write a 2 pages paper on week 4 paper 07012008. Managerial and Financial Accounting Paper Introduction Accounting information is very essential in daily business and business-related operations. Itis
Write a 2 pages paper on week 4 paper 07012008. Managerial and Financial Accounting Paper Introduction Accounting information is very essential in daily business and business-related operations. Itis used in many different ways by many different people. This paper aims to identify the users of managerial and financial accounting information and also highlight what kind of business decisions are made by making use of this information.
Discussion
There are many types of accounting information and this information is very important to everyone within and related to an organization in a variety of ways. Financial and Managerial information are two of the many types. The users of financial and managerial information like balance sheets, income and expenditure accounts, cash flows and other accounting information can therefore be divided into two groups, internal users of accounting information and external users of accounting information.
Internal Users of Accounting Information
Managerial accounting information is historical or forecasted information that is collected to help in managing and planning business strategies. (Warren, C., Reeve, J. & Fess, P., 2004) This information is used by a company’s managers and employees etc. Accounting information is used by every member within an organization for many reasons. These users can be from higher or the lower levels of management. Internal users of accounting information could use accounting information for a variety of reasons. Firstly, this information can be used to analyze previous year’s performance. This performance would help them in business decisions in future. A company could also use this information to calculate various ratios that will help it determine is profitability and liquidity. Employees could use this information before demanding for wage increase. Largely, all business decision making is based upon such information. Owners of the company can use this information to see whether their retained profits are enough to cover up for a planned investment in future.
External Users of Accounting Information
Financial accounting information is information that is collected for groups who are not a part of the organization. These groups include shareholders, investors, government agencies, creditors, customers, suppliers and of course, the general public. (Warren, C., Reeve, J. & Fess, P., 2004) Shareholders will use a firm’s accounting information to determine their current or future share values. Investors would use accounting information to help decide whether or not they want to invest in particular company. They would use accounting information to calculate different ratios that will help them in deciding where to invest. Government agencies will use accounting information to probably check whether an organization is following a particular regulation set by them. Creditors would use this information to see the company’s ability to pay back the money they have lent. This will help them decide whether or not they should lend to this company or not. Supplier would also use the accounting information more or less the same way as creditors. They would want to analyze whether or not it is safe to continue doing business with a company after going through its accounting information. And lastly, the general public could probably be interested in a company’s accounting information in order to find out if the company is socially responsible or not.
Conclusion
A lot of different groups make use of an organization’s various accounting information for a variety of reasons. These reasons range from whether or not an employee should demand for a higher wage to whether or not a business should invest in a particular project. This information is helps in making various business related decisions therefore, it is very essential for an organization to collect and document such information.
References
1. Warren, C., Reeve, J. & Fess, P. Accounting. Thomson South Western. 2004. 02 July, 2008.
