Question

What branches of accounting focuses on information for external users and internal users?

Answer 1

There are different branches of accounting like financial accounting, cost accounting, forensic accounting, management accounting, fund accounting,tax accounting,auditing, government accounting...

The branch of accounting which focuses on information for external and internal users is financial accounting.

  Financial accounting is the process of preparing financial statements to ascertain the income position and financial position of an enterprise. The financial statements include cash flow statement , balance sheet, income statement and statement of chnges in equity.

Importance of financial accounting are :

• Communication of information internally
• Communication of information externally
• Comparison of information through analysis

Internal users of financial information includes employees, owners and managers.They use the information for decision making ,confirming past results , adjusting the future events and to take decision regarding expansion, diversification or liquidation.

External users of financial information includes investors, lenders , government, suppliers ,auditors , customers and so on.They use the financial information for various purposes. Some of them are

1.For knowing the credit worthiness of an entity(creditors)

2.Assess the feasibility of making investment in the company. (Investors)

3.Whether appropriate taxes are paid on regular basis.(tax authorities)

4. To check the compliance of rules and regulations. (Government)

5. Ability to repay the loans and interest (lenders)

Financial accounting is concerned with historical data.Financial accounting is based on a series of accounting principles and these are strictly followed for the preparation of financial statements.And this makes it different from other branches like management accounting and cost accounting.