FABM1: Users of Accounting Information INTERNAL & EXTERNAL. BAKIT BA NILA KAILANGAN ANG FS??

Summary

This script discusses the importance of accounting information for both internal and external users of a business. Internal users, such as managers and supervisors, rely on this data to manage and operate the business effectively. External users, including investors, creditors, and regulatory authorities, use financial statements to assess the company's performance, creditworthiness, and compliance with legal standards. The script highlights the crucial role of accounting in decision-making and strategic planning for all stakeholders involved.

Takeaways

• 😀 Internal users of accounting information are individuals within the organization who are directly involved in managing and operating the business.
• 🔍 Internal users, also known as primary users, include marketing managers, supervisors, finance directors, company officers, and owners.
• 🏢 The term 'internal users' refers to those who are directly affected by the results of the financial statements within the organization.
• 📈 External users are individuals or organizations outside the company who use financial information for various purposes, such as evaluating the business's profitability and assets.
• 💼 External users include owners, investors, creditors, tax authorities, customers, suppliers, and regulatory authorities.
• 💼 Creditors and suppliers need accounting information to assess the creditworthiness and integrity of the organization.
• 📊 Investors use financial statements to evaluate the feasibility of investing in a company and to examine its performance and financial position.
• 🏦 Tax authorities, such as the Bureau of Internal Revenue, verify the accuracy of financial data to ensure the credibility of tax returns filed by businesses.
• 🛠️ Suppliers evaluate the financial information of their business partners to ensure a stable supply chain and justify pricing decisions.
• 🏛️ Regulatory bodies, such as the Securities and Exchange Commission and the Department of Trade and Industry, supervise businesses to ensure compliance with legal requirements.

Q & A

Who are considered internal users of accounting information?

Internal users are individuals within the organization such as marketing managers, supervisors, finance directors, company officers, and owners who are directly involved in managing and operating the business.

What is the primary role of internal users in relation to accounting information?

Internal users, also known as primary users, are responsible for planning, organizing, and running the business, utilizing accounting information to make informed decisions about the operation and management of the company.

What are the main reasons external users need financial information?

External users require financial information to assess the profit or income, resources or assets, and liabilities of the business for various purposes such as making investment decisions, evaluating the creditworthiness of the organization, and ensuring compliance with tax regulations.

How do owners use financial information for their business?

Owners use financial information to consider additional investments, expand the business, borrow funds for expansion plans, and to understand the income or earnings for a given period.

Why is accounting information important for management to analyze the organization's performance?

Accounting information helps management to analyze the organization's performance and financial position, allowing them to take appropriate measures to improve company results and ensure the sufficiency of cash for operations and dividend payments to stockholders.

What are some examples of external users of a company's financial statements?

Examples of external users include creditors, tax authorities, investors, customers, suppliers, regulatory authorities such as the Securities and Exchange Commission, and government agencies like the Bureau of Internal Revenue.

How do creditors use a company's financial statements?

Creditors use financial statements to determine the credit integrity and creditworthiness of the organization, which helps them decide on credit terms and the extension of loans.

What is the role of the Bureau of Internal Revenue in relation to a company's financial data?

The Bureau of Internal Revenue verifies the accuracy of financial data to ensure the credibility of tax returns filed by the business and to ensure compliance with tax regulations.

Why is the financial information of suppliers important for a company?

A company evaluates the financial information of its suppliers to maintain a stable source of supply in the long term and to justify pricing decisions based on the supplier's financial stability.

What are some of the regulatory bodies that may require access to a company's financial statements?

Regulatory bodies such as the Securities and Exchange Commission, the Department of Trade and Industry, and the Department of Labor and Employment may require access to a company's financial statements to supervise businesses and ensure compliance with legal requirements.

What is the significance of financial statements for different types of business entities such as corporations, partnerships, and proprietorships?

Financial statements are significant for all types of business entities as they provide a comprehensive view of the financial health and performance of the business, which is crucial for decision-making, compliance, and external evaluations.