Question

Assignment Details

This assignment has 3 parts:

What are some of the groups that need accounting information? What kind of accounting information do they need? Why? 

Think of a company you’ve done business with as a consumer. How might managers in this company use accounting information to made decisions? 

What might happen to the company if it did not have access to timely and accurate accounting information?

Answer 1

1) Following are the groups that need accounting information:-

Internal Users - The internal users are the employees of the companies, managers of the companies, board of directors etc. employees look at the financial figures to know that they have maximum job security and they can get timely salary hikes and bonuses. Managers need to know the financial figures to see whether the goals and objectives of the company are fulfilled. BOD want to evaluate the growth of the company

External Users - The external users are the shareholders, creditors, financial institution, government etc. Shareholders need the financial figures of the company to know the worth of the company and the return they can expect from their investment. Shareholders need financial statements to evaluate their equity investments and help them make informed decisions as to how to vote on corporate matters Creditors need the information to know the liquidity of the company to pay off their dues. FI need the financial information to know that their loans and interest amount is secured and is recoverable. They need to know the liquidity of the company. Government need to know that the company is complying with the laws and the requirements of the law.

2) Managers generally use accounting information to make future decisions. If there are two products that are produced by the company, managers will review the costs and profits of both the products. The one product which will be more cost efficient and profitable, will get a more preference on the selling front. They also make decisions regarding the consumers to whom they want to sell. They check the credit score of the consumers, they check their receivable schedules, bad debts if any etc and on the basis of the same, they make decisions on whom to sell the product. They will generally sell the product to the consumer who pays on time.

3) The following might happen if company did not have access to timely and accurate accounting information:-

a) Government will impose heavy penalties if the accounting information is not available on time and are inaccurate.

b) Growth of the company will hamper if the accounting information is inaccurate. Shareholders will see the comapny as a fraud company and will not generally invest in the company.

c) Company will not be able to take the tax benefits because such benefits are available only if the financial information is available on time.