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Lesson 3 - Users of Accounting Information

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9 views

Lesson 3 - Users of Accounting Information

Uploaded by

angelacedera58
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Users of accounting

information

FUNDAMENTALS OF ABM1, LESSON 3

MARISSA F. RESANO
Subject Teacher
Learning competences

define external users and gives examples


ABM_FABM11-IIIa-7
define internal users and give examples
ABM_FABM11-IIIa-8
 identify the type of decisions made by
each group of users ABM_FABM11- IIIa-9
describe the type of information needed
by each group of users ABM_FABM11-IIIa-1
What is Accounting?

Why is Accounting
considered as the
language of business?
What business would you want to
enter into?

If you are the owner, what do you


want to know about the business?
What possible decisions can
accounting support?
Information needs
 How much income have I earned
for a certain period?
 How much receivables do I have?
 How much do I owe my suppliers?
 How much is the value of my
inventory
Decision supported by accounting
 Will I be able to pay my liabilities if I
earn this much?
 Can I expand my business?
 Will I be able to afford buying new
equipment?
 Do I need to adjust my selling price?
 Do I need to cut costs?
What if you are from a
Local Government Unit? Do
you think the Local
Government will be
interested with your
accounting
reports/records?
USERS OF
ACCOUNTING
INFORMATION
INTERNAL USERS
 Individuals inside a company who plan,
organize, and run the business.
 These users are directly involved in
managing and operating the business.
 These include marketing managers,
production supervisors, finance
directors, company officers and owners
Management
 Information need:
income/earnings for the period, sales,
available cash, production cost

 Decisions supported:
Analyze the organization's performance
and position and take appropriate measures to
improve the company results. sufficiency of cash
to pay dividends to stockholders; pricing
decisions
Employees
 Information need:
profit for the period, salaries paid to
employees

 Decisions supported:
job security, consider staying in
the employ of the company or look for
other employment opportunities
OWNER
 Information need:
profit or income for the period, resources
or assets of the business, liabilities of the
business

 Decisions supported:
considerations regarding additional
investment, expanding the business, borrowing
funds to support any expansion plans.
Accounting information is
presented to internal users usually
in the form of management
accounts, budgets, forecasts and
financial statements.
This information will support
whatever decision of the internal
users.
Extenal users (secondary users)
 individuals and organizations
outside a company who want
financial information about the
company
 These users are not directly
involved in managing and
operating the business.
Creditors

 for determining the credit


worthiness of an organization

 include suppliers as well as lenders


of finance such as banks
Tax Authorities (BIR)

 for determining the credibility


of the tax returns filed on
behalf of a company
Investors

 for analyzing the feasibility of


investing in a company
 Investors want to make sure they
can earn a reasonable return on
their investment before they commit
any financial resources to a
company
Customers

 for assessing the financial position


of its suppliers which is necessary
for them to maintain a stable
source of supply in the long term
Regulatory Authorities (SEC, DOLE)
 for ensuring that a company's
disclosure of accounting
information is in accordance with
the rules and regulations set in
order to protect the interests of the
stakeholders who rely on such
information in forming their
decisions

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