If you want to know how a business is performing, financial statements provide the answer. Is there enough cash in the bank to pay the bills? Is the company making money? Have the assets been swallowed up by debt? The users of financial statements such as the balance sheet include people both inside and outside your company. Show
Meet the StatementsBecause so many people rely on financial statements for information, federal regulation, and generally accepted accounting principles (GAAP) have standardized the formats. One big difference between internal and external users' statements is that financial statements for external use must fit these standard formats. If internal users such as your company's management or owners want information, you can use any format that works for them, or you. The essential financial statements are:
Internal Users of Financial StatementsInternal users of financial statements fall into three main groups: management, owners and, sometimes, employees. In many small businesses, the owners are the managers. The key users of financial information in a partnership, for instance, are usually the partners themselves.
Because those in management have to make decisions for the business, they need different information than other internal users of financial statements. For example, they may want income statements for each product line or store rather than for the business as a whole. External User StatementsIf someone wants to know about your finances but isn't part of your business, they're external users of financial statements. They fall into many more categories than internal users of financial statements:
External users' statements have to follow GAAP or similar accounting frameworks. That doesn't mean they all want the same information. Investors may be most interested in your financial performance, while lenders might focus on your current debt load.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. 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. What groups are considered to be internal users of accounting information?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.
What are 5 internal users of accounting information?Users of accounting information are internal and external. External users are creditors, investors, government, trading partners, regulatory agencies, international standardization agencies, journalists and internal users are owners, directors, managers, employees of the company.
Who are considered as internal users?Internal users refers to mangers who use accounting information in making decision related to the company's operation.
Which of the following is an internal users of accounting information quizlet?Users of a company's accounting information include internal users and external users. Examples of internal users include the company's employees (e.g., management, human resource personnel, marketing personnel, and finance personnel).
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