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Lesson 2 - Users of Accounting Information

Here is a concept map showing the relationship of the terms: Accounting Branches Public Accounting Private Accounting Auditing General/Financial Accounting Management Advisory Cost Accounting Services Tax Services Budgeting Governmental Accounting Internal Auditing

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Joan
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47 views

Lesson 2 - Users of Accounting Information

Here is a concept map showing the relationship of the terms: Accounting Branches Public Accounting Private Accounting Auditing General/Financial Accounting Management Advisory Cost Accounting Services Tax Services Budgeting Governmental Accounting Internal Auditing

Uploaded by

Joan
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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USERS OF

LESSON 2 ACCOUNTING
INFORMATION
LEARNING COMPETENCIES

• define external users and gives examples ABM_FABM11-IIIa-7


• define internal users and give examples ABM_FABM11-IIIa-8
WHAT IS
ACCOUNTING?
COMMUNICATING
“IF YOU ARE THE OWNER,
WHAT DO YOU WANT TO
KNOW ABOUT THE BUSINESS?
WHAT POSSIBLE DECISIONS
CAN ACCOUNTING SUPPORT?”
“What if you are from a Local Government Unit
(City/Municipality)? Do you think the Local Government
( City/Municipality) will be interested with your accounting
reports/records?”
• Investors/Owners/Stockholders
• Government
• Creditors (Financial Institutions)
USERS OF
• Management
ACCOUNTING
INFORMATION • Employees
• Supplier
• Customers
I am presented a financial statement of a company
and this will help me decide whether to invest in a
business or not.

Who am I?
I look at the financial statements to help me
decide on future goals of the company.

Who am I?
A company who wants to acquire a loan presented a
financial statement to me and this will help me decide
whether I will extend credit to them or not.

Who am I?
I want to look at the financial statements of a company so
that I know if it they are selling goods or services at the
right price.

Who am I?
I am presented a financial statement of a company
and this will help me determine whether the company
is paying the right amount of taxes.

Who am I?
I want to look at the financial statement of a company to
know whether they will be able to pay for the supplies
(merchandise) they bought from me.

Who am I?
I want to look at the financial statement of the company so
that I know whether the company I am working for is stable
or not, and whether I have a future in the company I am
working for.

Who am I?
WHO ARE THE USERS OF
ACCOUNTING INFORMATION?
Users of
Accounting
Information

Internal External
INTERNAL USERS

• Are users belonging to the management of a business


enterprise.
INTERNAL USERS (PRIMARY USERS) OF
ACCOUNTING INFORMATION

• 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.
INTERNAL USERS (PRIMARY USERS) OF
ACCOUNTING INFORMATION

• 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
INTERNAL USERS (PRIMARY USERS) OF
ACCOUNTING INFORMATION

• Owners
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
EXTERNAL USERS

• Are users of accounting information directed towards


their common need.
EXTERNAL USERS (SECONDARY USERS) OF
ACCOUNTING INFORMATION
• Creditors: for determining the credit worthiness of an
organization.
• 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.
EXTERNAL USERS (SECONDARY USERS) OF
ACCOUNTING INFORMATION
• 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.
Users of
Accounting
Information

Internal External

Owner Manager Government Creditor Supplier

Employee
SEAT WORK

• Is the Local Government Unit (LGU) interested in your


accounting reports?
• “Are the officers of the Local Government Unit internal or
external users? Why?
IDENTIFY THE FOLLOWING WHETHER AN
INTERNAL OR EXTERNAL USER.
1. Financial Institutions
2. Chief Executive Officer
3. Sales Manager
4. Banco de Oro
5. Payroll Assistant
6. Insurance broker
7. Factory worker
8. Accounting Supervisor
9. University of Sto. Tomas
10. Proctor and Gamble Phils.
WHO PROVIDES THE ACCOUNTING
INFORMATION TO THE USERS?
ACCOUNTANT
ACCOUNTANTS ARE EMPLOYED IN
DIFFERENT FIELDS, ALSO KNOWN AS
THE BRANCHES OF ACCOUNTING.
BRANCHES OF ACCOUNTING

Public Accounting

Private Accounting

Government Accounting
PUBLIC ACCOUNTING

Offers services to companies, other organizations and the general public.

Accountants who practice public accounting do auditing, management advisory services


and tax services.
PUBLIC ACCOUNTING

Auditing

Management
Public
Advisory
Accounting
Services

Tax Services
AUDITING

It examines the accounting records and the financial statements of


companies and presents an opinion as to the fairness and accuracy of the
accounting data.

The purpose of the audit is to lend credibility to a company’s financial


statements.
MANAGEMENT ADVISORY SERVICES

It employs both historical and estimated data in assisting management with


day to day problems and planning for the future.

They engage accountants to conduct investigations for the purpose of


determining ways in which their operations may be improved.
TAX SERVICES

It involves the preparation of tax returns and the consideration of tax


consequences of proposed business transactions.
PRIVATE ACCOUNTING

Private accounting provides services to a particular business firm.


PRIVATE ACCOUNTING
General or
Financial
Accounting

Cost Accounting
Private
Accounting
Budgeting

Internal
Auditing
GENERAL OR FINANCIAL ACCOUNTING

The field of accounting concerned with the recording of transactions and the
preparation of reports (financial statements) from these records.
COST ACCOUNTING

It involves the determination and the control of costs particularly the cost of
manufacturing process and manufactured products.
BUDGETING

It presents a plan of financial operations for a period and provides


comparison of actual operation with the predetermined plan.
INTERNAL AUDITING

All established accounting procedures and management policies are being


followed throughout the company.
GOVERNMENTAL ACCOUNTING

Accumulation of data for governmental units such as provinces, cities, and municipalities.
QUESTIONS?
SEATWORK 1

Create a concept map showing the relationship of the terms given below:

Public Accounting Governmental Accounting Internal Auditing General/Financial


Accounting

Auditing Budgeting Management Advisory Tax Services


Services
Cost Accounting Private Accounting

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