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Identify user groups of financial statements and explain what information they are likely to want from them?
One user group for financial statements is external investors. They use the documents to determine whether the business is profitable. Internally, managers look at financial documents to determine whether their department is profitable.
What is meant by the concept of neutrality in accounting?
financial statements are not prepared in a way to favor groups of users (managements, owners, creditors ect) over other groups. the information is prepared to be helpful to all
Why are financial statements useful to employees?
Advantages of Financial StatementsGoals financial statements are supposed to accomplish. The intent of financial statements is to provide information useful in economic decision making. In particular, the data should be useful in making investment and credit decisions. Financial statements should provide a reliable indication of a company's financial position, operating results, and changes in financial position. Also, statement components and categories should aid in decisions. Financial statements may provide information in addition to that specified by authoritative requirements and regulatory groups. Inasmuch as management knows the most about the business, it is encouraged to identify certain circumstances and explain their financial effects on the enterprise.
What 3 groups of people who will be interested in the financial statements of a sole trader?
The trader himself, tax man and the bank
Is company management an external user of financial information?
no it is an internal user of information.External users are financial analysts outside the company, lenders and creditors such as banks and suppliers, and groups such as environmentalism groups and govermental bodies.
Why accounting is called the language of business?
Because it communicates financial information, accounting is often called "the language of business." The information that a user of financial information needs depends upon the kinds of of decisions the user makers. The differences in the decisions divide the users of financial information into two broad groups: internal users and external users.
What are three major groups of players that interact in the financial market?
Brokers, agents and financial advisors are the three groups that mainly interact in the financial market.
What are the DISADVANTAGES of INTERNATIONAL REPORTING FINANCIAL STANDARDS?
The major disadvantage in the short run will be the cost to businesses of adopting the new standards. For some years into the future, accountants will have to understand both their own country's "traditional" GAAP (Generally Accepted Accounting Principles) rules, as well as the IFRS (International Financial Reporting Standards). Having to understand two different sets of rules requires extra time and work on the part of accountants, and that costs money.There will be some inefficiencies (e.g., the cost of changing historical audited financial statements prepared under the old rules, just for the sake of comparability with later year financial results) and resulting extra expense (those accountants have to be paid for all that extra work!) for the company whose financial statements will have to be restated.The financial markets community, whose members analyze American financial statements, will also have to re-learn how to read the financial statements of U.S. companies under the new accounting rules.Another disadvantage is related to the fact that under the old rules, the financial statements of companies of a given country were geared to specific user groups. For example, German financial statements were geared mostly toward creditors and potential creditors, while American financial statements were geared toward investors and potential investors. So there will be some users of financial statements who won't find statements prepared under the new standards as useful as those prepared under the old standards. As time passes, this problem will go away as readers of financial statements become accustomed to seeing financial data prepared under IFRS.The ultimate advantage is that the financial statements of (e.g.) a German pharmaceutical company will be prepared under the same set of accounting rules as those of an American pharmaceutical company, so investors will be able to directly compare the financial statements of the two companies in deciding where to invest in this increasingly global economy.
What group or groups of people are not considered to be the external users of accounting information?
Internal Users of accounting information would not usually be external users. Management, staff, the board, would all be classed as internal users of financial information.
Why do you need to study accounting?
Simply put, Accounting is the language of business. It is the means by which relevant and reliable financial information can be communicated to the users who can analyze that information to make business decisions. Think of all of the different groups of people that use financial information. Current and potential investors analyze a firm's financial statements to determine growth potential, how effectively a firm has been using its resources, how profitable it is, etc. Similarly, creditors use them to determine how liquid a firm is (how likely it is that the firm can meet its short-term obligations). Managers use different financial information to make decisions about various costs to the firm. Furthermore, Accountancy allows firms to analyze the tax impacts of their various business decisions. Even if you do not choose to accounting as a course of study, you will very likely need to be able to use information prepared by accountants if you find yourself in any position in which you are required to make business decisions. That is not to say that financial information is the only factor that should influence your decisions; but it is a tool that it often works to your advantage to use.
Which of these statements does not describe macroeconomics?
Macroeconomics examines the consumer purchases of families and age groups.
Why general purpose financial statements cannot be focused on all users of financial statements?
in general, financial reports cannot focus on servicing a single group of users. There is the so-called conflict of interest between the user groups, such as suppliers and lenders vs shareholders.Suppliers and lenders require conservative approach in the reports which will reduce thhe shareholdes forecasts of profitability.Senior management vs Employess. Senior management worries that large profit will increase the wage demand, so they ensure that reports show only a small percentage of the total income.
