‘Government and its Authorities do not have a direct access to day-to-day accounting records of the different business organisations in the country but they are one of the important users of accounting information’. Justify the statement with any 2 points.
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Answer:
The accounting process provides financial data for a broad range of individuals whose objectives in studying the data vary widely. Three primary users of accounting information were previously identified, Internal users, External users, and Government/ IRS. Each group uses accounting information differently, and requires the information to be presented differently.
Internal Users
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.
Some of the ways internal users employ accounting information include the following:
- Assessing how management has discharged its responsibility for protecting and managing the company’s resources
- Shaping decisions about when to borrow or invest company resources
- Shaping decisions about expansion or downsizing
External Users:-
Typically called financial accounting, the record of a business’ financial history for use by external entities is used for many purposes. The external users of accounting information fall into six groups; each has different interests in the company and wants answers to unique questions.
Answer:
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