Accounting Basics
What is the process of recording, summarizing and communicating the financial transactions of a business?
Financial accounting
Who are individuals directly involved in managing, operating, or running the day-to-day activities of a business?
Internal users.
Who are stakeholders outside the business who rely on general-purpose financial reports?
External users.
What do investors use financial information to assess?
Risk and potential return on investment.
I use financial information to plan future budgets and control operating costs. Who am I?
Manager/Executive.
What are the two main categories of users of financial information?
Internal users and external users
Name two internal user identified in the presentation.
Managers/Executives, Owners/Shareholder-Managers, or Employees.
Managers/Executives, Owners/Shareholder-Managers, or Employees.
Name two external users of financial information.
Investors/Potential Investors
Creditors/Lenders
Suppliers/Trade Creditors
Customers
Government/Tax Authorities
What do creditors and lenders use financial information to evaluate before granting credit facilities or loans? (Must name at least 2)
The business's creditworthiness, liquidity and debt-repayment ability
I use financial information to assess job security and understand whether my business can provide wages and benefits. Who am I?
Employee.
Which type of users are directly involved in managing and operating a business?
Internal users
Name one way managers use financial information.
Planning future budgets
Controlling operating costs
Monitoring departmental efficiency
Making tactical decisions
Making strategic decisions.
Which external users assess risk, potential return on investment, financial stability and profitability?
Investors and potential investors.
What do suppliers and trade creditors assess to ensure that a business can pay its short-term trade debts on time?
Short-term solvency and liquidity
I assess risk, potential return on investment and financial stability before deciding whether to invest. Who am I?
Investor/Potential Investor.
Which type of users are outside the business but rely on financial reports?
External users
Which internal users are interested in the profitability and long-term growth of their investment?
Owners/shareholder-managers.
Which external users assess the liquidity and debt-repayment ability of a business?
Creditors and lenders, such as banks.
Name four things financial information helps users do
I assess liquidity to ensure that a business can pay its short-term trade debts. Who am I?
Supplier
Give three reasons why financial information is important.
Name three ways employees use financial information.
Determining whether the business is financially stable
Understanding the business's ability to provide wages and benefits
Supporting discussions about wages and working conditions.
Which external users assess stability to ensure a steady, reliable supply of products or services?
Customers
What does financial information help users determine about a business's ability to meet its financial obligations?
Its ability to repay debts.
I use financial information for determining taxes owed, monitoring compliance with laws and regulations, assessing economic activity and supporting government planning. Who am I?
Government/Tax Authorities.