Question

Your direct manager has approached you to draft a preliminary memorandum to discuss the importance of the continued effort of compiling financial statements that serve purposes of external financial reporting and also internal decision making. She asked you to explain why this is done, some of the differences of those statements, and the decisions/implications of having such separate statements. The purpose of the memo is to essentially explain/defend this practice. Consider how you would write this memo to an individual who has a weak understanding of accounting.

Answer 1

PRELIMINARY MEMORANDUM.

financial statement that serve purposes of external financial reporting and also internal decision making.

External purpose.

* if company disclosure the accounting information accordance to accounting policy than government also ensured the same.

*External auditor and auditors examine the financial statement and also accounting records of the org.

and stakeholder also trust on such independent audit report.

*shareholder is also interested in financial statement of company before he wants to invest in share of company.

*public tax authorities also check financial statement of company to check correct profit is disclosure

by company.

* industrial purchaser is also interested in financial statement of company in order to ensured that they have required sources to supply the goods or services on time.

*public financial institution,lender,banks also needs accounting and financial information of company to check credit worthiness of its customers before granting the loan.

Internal Users.

*Financial statement also provides useful information to owner of the company about profitability of company,the risk in the business,credit structure,know goods and services

financial statement also helps the owner in assessing stability in the business.accounting information also helps the owner in decision making.

* accounting information also help the managers to take the decision managers rely on accounting information to take any decision.

* If managers wants to take any investment decision then he need some information like ROI,nature of investment etc which will available form existing accounting information.