{"id":32,"date":"2015-03-18T22:05:30","date_gmt":"2015-03-18T22:05:30","guid":{"rendered":"https:\/\/courses.candelalearning.com\/finacct2x10xmaster\/?post_type=chapter&#038;p=32"},"modified":"2015-07-17T13:04:56","modified_gmt":"2015-07-17T13:04:56","slug":"users-of-accounting-information","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/clinton-finaccounting\/chapter\/users-of-accounting-information\/","title":{"raw":"Users of Accounting Information","rendered":"Users of Accounting Information"},"content":{"raw":"The accounting process provides financial data for a broad range of individuals whose objectives in studying the\u00a0data vary widely. \u00a0 Three primary users\u00a0of accounting information were previously identified, Internal users, External users, and Government\/ IRS. \u00a0Each group uses accounting information differently, and requires the information to be presented differently.\r\n\r\n<span style=\"text-decoration: underline\">Internal Users<\/span>\r\n<p style=\"text-align: left\">Accounting supplies managers and owners with significant financial data that is useful for decision making. This type of accounting in generally referred to as managerial accounting.<\/p>\r\n<p style=\"text-align: left\"><a href=\"https:\/\/courses.candelalearning.com\/browardacg2001\/wp-content\/uploads\/sites\/176\/2015\/03\/desk-with-calculator.jpg\"><img class=\"alignnone size-medium wp-image-251\" src=\"https:\/\/courses.candelalearning.com\/browardacg2001\/wp-content\/uploads\/sites\/176\/2015\/03\/desk-with-calculator-300x180.jpg\" alt=\"desk with calculator\" width=\"300\" height=\"180\" \/><\/a><\/p>\r\n\u00a0Some of the ways internal users employ\u00a0accounting information\u00a0include the following:\r\n<ul>\r\n\t<li style=\"text-align: left\">Assessing how management has discharged its responsibility for protecting and managing the company's resources<\/li>\r\n\t<li style=\"text-align: left\">Shaping\u00a0decisions about when to borrow or invest company resources<\/li>\r\n\t<li style=\"text-align: left\">Shaping decisions about expansion or downsizing<\/li>\r\n<\/ul>\r\n<span style=\"text-decoration: underline\">External Users<\/span>\r\n\r\nTypically called financial accounting, the record of a business' financial history for use by \u00a0external entities is used for many purposes. \u00a0The external users of accounting information fall into six groups; each has different interests in the company\u00a0and wants answers to unique questions. The groups and some of their possible questions are:\r\n<ul>\r\n\t<li><strong>Owners and prospective owners.<\/strong> Has the company earned satisfactory income on its total investment?\u00a0Should an investment be made in this company? Should the present investment be increased, decreased, or\u00a0retained at the same level? Can the company install costly pollution control equipment and still be profitable?<\/li>\r\n\t<li><strong>Creditors and lenders.<\/strong> Should a loan be granted to the company? Will the company be able to pay its\u00a0debts as they become due?<a href=\"https:\/\/courses.candelalearning.com\/browardacg2001\/wp-content\/uploads\/sites\/176\/2015\/03\/Piggy-Bank.jpg\"><img class=\"wp-image-250 alignright\" src=\"https:\/\/courses.candelalearning.com\/browardacg2001\/wp-content\/uploads\/sites\/176\/2015\/03\/Piggy-Bank-300x233.jpg\" alt=\"Hand Putting Deposit Into Piggy Bank\" width=\"171\" height=\"133\" \/><\/a><\/li>\r\n\t<li><strong>Employees and their unions.<\/strong> Does the company have the ability to pay increased wages? Is the\u00a0company financially able to provide long-term employment for its workforce?<\/li>\r\n\t<li><strong>Customers.<\/strong> Does the company offer useful products at fair prices? Will the company survive long enough\u00a0to honor its product warranties?<\/li>\r\n\t<li><strong>Governmental units.<\/strong> Is the company, such as a local public utility, charging a fair rate for its services?<\/li>\r\n\t<li><strong>General public.<\/strong> Is the company providing useful products and gainful employment for citizens without\u00a0causing serious environmental problems?<\/li>\r\n<\/ul>\r\nSome of the ways external users employ accounting information include the following:\r\n<ul>\r\n\t<li>Stockholders have the right to know how a company is managing its investments<\/li>\r\n\t<li>Federal and State Governments require tax returns and other documents often prepared by accountants<\/li>\r\n\t<li>Banks or lending institutions may use accounting information to guide decisions such as whether to lend or how much to lend a business<\/li>\r\n\t<li>Investors will also use accounting information to guide investment decisions<\/li>\r\n<\/ul>\r\nGeneral-purpose financial statements provide much of the information needed by external users of financial\u00a0accounting. These financial statements are formal reports providing information on a company\u2019s financial\u00a0position, cash inflows and outflows, and the results of operations. Many companies publish these statements in\u00a0annual reports, also known as a 10-K or a 10-Q (quarterly report). The annual report contains the independent auditor\u2019s opinion as to the fairness of the financial statements, as well as information\u00a0about the company\u2019s activities, products, and plans. \u00a0Typically, the best place to find these reports for a public company can be on their website under the Investor relations section. Financial statements used by external entities are prepared using generally accepted accounting principles, or GAAP. \u00a0 We will discuss the language of GAAP further in later\u00a0sections.\r\n<h4 style=\"text-align: left\"><span style=\"text-decoration: underline\">Government \/ IRS<\/span><\/h4>\r\n<p style=\"text-align: left\">Government agencies that track and use taxes are interested in the financial story of a business. \u00a0They want to know whether the business is paying taxes according to current tax laws. The language in which tax-related financial statements are prepared is called IRC or Internal Revenue Code.\u00a0 Tax preparation\u00a0will be outside the scope of this course.<\/p>\r\n<p style=\"text-align: left\"><a href=\"https:\/\/courses.candelalearning.com\/browardacg2001\/wp-content\/uploads\/sites\/176\/2015\/03\/675px-IRS_Sign.jpeg\"><img class=\"alignnone size-medium wp-image-248 aligncenter\" src=\"https:\/\/courses.candelalearning.com\/browardacg2001\/wp-content\/uploads\/sites\/176\/2015\/03\/675px-IRS_Sign-225x300.jpeg\" alt=\"675px-IRS_Sign\" width=\"225\" height=\"300\" \/><\/a><\/p>\r\n\r\n<div class=\"bcc-box bcc-success\">\r\n<h3>Important Points to Remember<\/h3>\r\n<section>\r\n<div>\r\n<ul>\r\n\t<li><strong>Internal users <\/strong>are people within a business organization who use financial information. Examples of internal users are owners, managers, and employees.<\/li>\r\n\t<li><strong>External users <\/strong>are people outside the business entity (organization) who use accounting information. Examples of external users are suppliers, banks, customers, investors, potential investors, and tax authorities.<\/li>\r\n<\/ul>\r\n<\/div>\r\n<\/section><\/div>\r\n<h3><\/h3>","rendered":"<p>The accounting process provides financial data for a broad range of individuals whose objectives in studying the\u00a0data vary widely. \u00a0 Three primary users\u00a0of accounting information were previously identified, Internal users, External users, and Government\/ IRS. \u00a0Each group uses accounting information differently, and requires the information to be presented differently.<\/p>\n<p><span style=\"text-decoration: underline\">Internal Users<\/span><\/p>\n<p style=\"text-align: left\">Accounting supplies managers and owners with significant financial data that is useful for decision making. This type of accounting in generally referred to as managerial accounting.<\/p>\n<p style=\"text-align: left\"><a href=\"https:\/\/courses.candelalearning.com\/browardacg2001\/wp-content\/uploads\/sites\/176\/2015\/03\/desk-with-calculator.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-251\" src=\"https:\/\/courses.candelalearning.com\/browardacg2001\/wp-content\/uploads\/sites\/176\/2015\/03\/desk-with-calculator-300x180.jpg\" alt=\"desk with calculator\" width=\"300\" height=\"180\" \/><\/a><\/p>\n<p>\u00a0Some of the ways internal users employ\u00a0accounting information\u00a0include the following:<\/p>\n<ul>\n<li style=\"text-align: left\">Assessing how management has discharged its responsibility for protecting and managing the company&#8217;s resources<\/li>\n<li style=\"text-align: left\">Shaping\u00a0decisions about when to borrow or invest company resources<\/li>\n<li style=\"text-align: left\">Shaping decisions about expansion or downsizing<\/li>\n<\/ul>\n<p><span style=\"text-decoration: underline\">External Users<\/span><\/p>\n<p>Typically called financial accounting, the record of a business&#8217; financial history for use by \u00a0external entities is used for many purposes. \u00a0The external users of accounting information fall into six groups; each has different interests in the company\u00a0and wants answers to unique questions. The groups and some of their possible questions are:<\/p>\n<ul>\n<li><strong>Owners and prospective owners.<\/strong> Has the company earned satisfactory income on its total investment?\u00a0Should an investment be made in this company? Should the present investment be increased, decreased, or\u00a0retained at the same level? Can the company install costly pollution control equipment and still be profitable?<\/li>\n<li><strong>Creditors and lenders.<\/strong> Should a loan be granted to the company? Will the company be able to pay its\u00a0debts as they become due?<a href=\"https:\/\/courses.candelalearning.com\/browardacg2001\/wp-content\/uploads\/sites\/176\/2015\/03\/Piggy-Bank.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-250 alignright\" src=\"https:\/\/courses.candelalearning.com\/browardacg2001\/wp-content\/uploads\/sites\/176\/2015\/03\/Piggy-Bank-300x233.jpg\" alt=\"Hand Putting Deposit Into Piggy Bank\" width=\"171\" height=\"133\" \/><\/a><\/li>\n<li><strong>Employees and their unions.<\/strong> Does the company have the ability to pay increased wages? Is the\u00a0company financially able to provide long-term employment for its workforce?<\/li>\n<li><strong>Customers.<\/strong> Does the company offer useful products at fair prices? Will the company survive long enough\u00a0to honor its product warranties?<\/li>\n<li><strong>Governmental units.<\/strong> Is the company, such as a local public utility, charging a fair rate for its services?<\/li>\n<li><strong>General public.<\/strong> Is the company providing useful products and gainful employment for citizens without\u00a0causing serious environmental problems?<\/li>\n<\/ul>\n<p>Some of the ways external users employ accounting information include the following:<\/p>\n<ul>\n<li>Stockholders have the right to know how a company is managing its investments<\/li>\n<li>Federal and State Governments require tax returns and other documents often prepared by accountants<\/li>\n<li>Banks or lending institutions may use accounting information to guide decisions such as whether to lend or how much to lend a business<\/li>\n<li>Investors will also use accounting information to guide investment decisions<\/li>\n<\/ul>\n<p>General-purpose financial statements provide much of the information needed by external users of financial\u00a0accounting. These financial statements are formal reports providing information on a company\u2019s financial\u00a0position, cash inflows and outflows, and the results of operations. Many companies publish these statements in\u00a0annual reports, also known as a 10-K or a 10-Q (quarterly report). The annual report contains the independent auditor\u2019s opinion as to the fairness of the financial statements, as well as information\u00a0about the company\u2019s activities, products, and plans. \u00a0Typically, the best place to find these reports for a public company can be on their website under the Investor relations section. Financial statements used by external entities are prepared using generally accepted accounting principles, or GAAP. \u00a0 We will discuss the language of GAAP further in later\u00a0sections.<\/p>\n<h4 style=\"text-align: left\"><span style=\"text-decoration: underline\">Government \/ IRS<\/span><\/h4>\n<p style=\"text-align: left\">Government agencies that track and use taxes are interested in the financial story of a business. \u00a0They want to know whether the business is paying taxes according to current tax laws. The language in which tax-related financial statements are prepared is called IRC or Internal Revenue Code.\u00a0 Tax preparation\u00a0will be outside the scope of this course.<\/p>\n<p style=\"text-align: left\"><a href=\"https:\/\/courses.candelalearning.com\/browardacg2001\/wp-content\/uploads\/sites\/176\/2015\/03\/675px-IRS_Sign.jpeg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-248 aligncenter\" src=\"https:\/\/courses.candelalearning.com\/browardacg2001\/wp-content\/uploads\/sites\/176\/2015\/03\/675px-IRS_Sign-225x300.jpeg\" alt=\"675px-IRS_Sign\" width=\"225\" height=\"300\" \/><\/a><\/p>\n<div class=\"bcc-box bcc-success\">\n<h3>Important Points to Remember<\/h3>\n<section>\n<div>\n<ul>\n<li><strong>Internal users <\/strong>are people within a business organization who use financial information. Examples of internal users are owners, managers, and employees.<\/li>\n<li><strong>External users <\/strong>are people outside the business entity (organization) who use accounting information. Examples of external users are suppliers, banks, customers, investors, potential investors, and tax authorities.<\/li>\n<\/ul>\n<\/div>\n<\/section>\n<\/div>\n<h3><\/h3>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-32\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Photo: IRS Sign. <strong>Authored by<\/strong>: Joshua Doubek. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"http:\/\/commons.wikimedia.org\/wiki\/File:IRS_Sign.JPG#mediaviewer\/File:IRS_Sign.JPG\">http:\/\/commons.wikimedia.org\/wiki\/File:IRS_Sign.JPG#mediaviewer\/File:IRS_Sign.JPG<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by-sa\/4.0\/\">CC BY-SA: Attribution-ShareAlike<\/a><\/em><\/li><li>Accounting Principles: A Business Perspective. <strong>Authored by<\/strong>: James Don Edwards, University of Georgia &amp; Roger H. Hermanson, Georgia State University. <strong>Provided by<\/strong>: Endeavour International Corporation. <strong>Project<\/strong>: The Global Text Project   . <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":276,"menu_order":6,"template":"","meta":{"_candela_citation":"[{\"type\":\"cc\",\"description\":\"Photo: IRS Sign\",\"author\":\"Joshua Doubek\",\"organization\":\"\",\"url\":\"http:\/\/commons.wikimedia.org\/wiki\/File:IRS_Sign.JPG#mediaviewer\/File:IRS_Sign.JPG\",\"project\":\"\",\"license\":\"cc-by-sa\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"Accounting Principles: A Business Perspective\",\"author\":\"James Don Edwards, University of Georgia & Roger H. Hermanson, Georgia State University\",\"organization\":\"Endeavour International Corporation\",\"url\":\"\",\"project\":\"The Global Text Project   \",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-32","chapter","type-chapter","status-publish","hentry"],"part":3,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-finaccounting\/wp-json\/pressbooks\/v2\/chapters\/32","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-finaccounting\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-finaccounting\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/clinton-finaccounting\/wp-json\/wp\/v2\/users\/276"}],"version-history":[{"count":9,"href":"https:\/\/courses.lumenlearning.com\/clinton-finaccounting\/wp-json\/pressbooks\/v2\/chapters\/32\/revisions"}],"predecessor-version":[{"id":1426,"href":"https:\/\/courses.lumenlearning.com\/clinton-finaccounting\/wp-json\/pressbooks\/v2\/chapters\/32\/revisions\/1426"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-finaccounting\/wp-json\/pressbooks\/v2\/parts\/3"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-finaccounting\/wp-json\/pressbooks\/v2\/chapters\/32\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-finaccounting\/wp-json\/wp\/v2\/media?parent=32"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/clinton-finaccounting\/wp-json\/pressbooks\/v2\/chapter-type?post=32"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/clinton-finaccounting\/wp-json\/wp\/v2\/contributor?post=32"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/clinton-finaccounting\/wp-json\/wp\/v2\/license?post=32"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}