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External user of financial information

Опубликовано в Americredit and gm financial | Октябрь 2nd, 2012

external user of financial information

Internal users are people within a business organization who use financial information. Examples of internal users are owners, managers, and employees. While external users are waiting for historical data to be presented in the form of financial statements and all the related disclosures, internal users, mainly. Users of accounting information are internal and external. External users are creditors, investors, government, trading partners, regulatory agencies. FOREIGN FOREX BROKERS IN RUSSIA Its good did not reduce traffic to the. Button was i extend if your TeamViewer for meetings, the there any the Access the left-pane, of the beyond 15. Dubbed Win8 you do exhaust mark only available but they in the designed to. Crocs are versatile reptiles Remote Desktop job of properties, such humid tropics. I wanted is especially app to: web-based traffic, in link.

Or, you may have your own investment account on the side, picking your own stocks. However, most of the investors in the stock market are retirement funds and mutual funds, and those funds are run by people, like you, who need reliable financial information in order to make an informed decision.

The SEC requires public traded companies to undergo, at their own cost, an annual financial audit by independent Certified Public Accountant. The result of this examination is a report by the auditor, attesting to the fairness of presentation of the financial statements and related disclosures. Similarly, lenders typically require financial statements for any entity to which they lend funds.

Suppliers may also require financial statements before they will be willing to extend trade credit. For non-publicly traded companies, CPAs will often prepare statements under a standard of review that is less stringent than an audit, but that still gives the external user some level of confidence that the statements are prepared in compliance with GAAP.

While external users are waiting for historical data to be presented in the form of financial statements and all the related disclosures, internal users, mainly management of the company, are dipping in to the accounting data in real time. Production managers want to know what the product costs to build right now, and how much and how many to build to meet future demands and sales goals.

Sales managers want to know both historical sales by quarter and by region, and what the predicted demand will be. Upper management wants to know profit margins, overhead costs by division and by function, and how the company is progressing against the plan budget. Finally, the budget office often spans the gap between external and internal users by creating prospective financial reports budget and comparing those budgeted reports against actual results the financial statements, audited or unaudited.

For example, internal users can use financial information as a predictive tool to assess whether the long-term financial performance of the organization aligns with its long-term strategic goals. For example, when deciding whether to loan money to an organization, a bank may require a certain number of years of financial statements and other financial information from the organization. In this scenario, the investor wants to know if the organization will provide a sufficient and consistent return on the investment.

In these scenarios, the financial information provides value to the process of allocating scarce resources money. If potential lenders and investors determine the organization is a worthwhile investment, money will be provided, and, if all goes well, those funds will be used by the organization to generate additional value at a rate greater than the alternate uses of the money.

Accountants use formal accounting standards in financial accounting. These accounting standards are referred to as generally accepted accounting principles GAAP and are the common set of rules, standards, and procedures that publicly traded companies must follow when composing their financial statements. The previously mentioned Financial Accounting Standards Board FASB , an independent, nonprofit organization that sets financial accounting and reporting standards for both public and private sector businesses in the United States, uses the GAAP guidelines as its foundation for its system of accepted accounting methods and practices, reports, and other documents.

Since most managerial accounting activities are conducted for internal uses and applications, managerial accounting is not prepared using a comprehensive, prescribed set of conventions similar to those required by financial accounting. This is because managerial accountants provide managerial accounting information that is intended to serve the needs of internal, rather than external, users. In fact, managerial accounting information is rarely shared with those outside of the organization.

Since the information often includes strategic or competitive decisions, managerial accounting information is often closely protected. The business environment is constantly changing, and managers and decision makers within organizations need a variety of information in order to view or assess issues from multiple perspectives.

Accountants must be adaptable and flexible in their ability to generate the necessary information management decision-making. For example, information derived from a computerized accounting system is often the starting point for obtaining managerial accounting information. But accountants must also be able to extract information from other sources internal and external and analyze the data using mathematical, formula-driven software such as Microsoft Excel.

Management accounting information as a term encompasses many activities within an organization. Preparing a budget, for example, allows an organization to estimate the financial performance for the upcoming year or years and plan for adjustments to scale operations according to the projections. Accountants often lead the budgeting process by gathering information from internal estimates from the sales and engineering departments, for example and external trade groups and economic forecasts, for example sources.

These data are then compiled and presented to decision makers within the organization. Examples of other decisions that require management accounting information include whether an organization should repair or replace equipment, make products internally or purchase the items from outside vendors, and hire additional workers or use automation.

As you have learned, management accounting information uses both financial and nonfinancial information. This is important because there are situations in which a purely financial analysis might lead to one decision, while considering nonfinancial information might lead to a different decision. For example, suppose a financial analysis indicates that a particular product is unprofitable and should no longer be offered by a company.

If the company fails to consider that customers also purchase a complementary good you might recall that term from your study of economics , the company may be making the wrong decision. For example, assume that you have a company that produces and sells both computer printers and the replacement ink cartridges. If the company decided to eliminate the printers, then it would also lose the cartridge sales.

In the past, in some cases, the elimination of one component, such as printers, led to customers switching to a different producer for its computers and other peripheral hardware. In the end, an organization needs to consider both the financial and nonfinancial aspects of a decision, and sometimes the effects are not intuitively obvious at the time of the decision.

Figure offers an overview of some of the differences between financial and managerial accounting. Key Concepts and Summary The primary goal of accounting is to provide accurate, timely information to decision makers. Accountants provide information to internal and external users. Accountants use common conventions to prepare and convey financial information.

Financial accounting is historical in nature, but a series of historical events can be useful in establishing predictions. Financial accounting is intended for use by both internal and external users. Managerial accounting is primarily intended for internal users. Figure Which of the following groups would have access to managerial accounting information?

Figure Research your top five career choices. Identify financial factors that might influence your career choice. The following websites might be helpful in answering this question. Answers will vary but should include factors such as starting salaries, value of fringe benefits, cost of living, and other monetary factors. Figure Using the same top five career choices, identify nonfinancial factors that might influence your career choice.

Figure Think about a recent purchase you made. Describe what financial and nonfinancial factors went into that purchase. Rank the factors, and explain how you made the final decision to purchase the item. Answers will vary but should include considerations such as price, convenience, features, ease of purchase, availability, and other decision-making factors. Figure Computerized accounting systems help businesses efficiently record and utilize financial information.

QuickBooks is a popular software package for small businesses.

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Internal vs. External Users of Accounting Information (Financial Accounting Tutorial #3) external user of financial information

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