Who are the internal users of management accounting?
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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. Accounting supplies managers and owners with significant financial data that is useful for decision making. This type of accounting is generally referred to as managerial accounting. Some of the ways
internal users employ accounting information include the following: External UsersTypically 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. The groups and some of their possible questions are:
Some of the ways external users employ accounting information include the following:
General-purpose financial statements provide much of the information needed by external users of financial accounting. These financial statements are formal reports providing information on a company’s financial position, cash inflows and outflows, and the results of operations. Many companies publish these statements in annual reports, also known as a 10-K or a 10-Q (quarterly report). The annual report contains the independent auditor’s opinion as to the fairness of the financial statements, as well as information about the company’s activities, products, and plans. Typically, 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. We will discuss the language of GAAP further in later sections. Government/IRSGovernment agencies that track and use taxes are interested in the financial story of a business. They 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. Tax preparation will be outside the scope of this course. Important Points to Remember
Learning Outcomes
The accounting process provides financial data for a broad range of individuals whose objectives in studying the data vary widely. There are three primary users of accounting information: internal users, external users, and the government (which is a specific form of an external user). Each group uses accounting information differently and requires the information to be presented differently. Internal UsersExternal UsersThe external users of accounting information fall into five groups; each has different interests in the company and wants answers to unique questions. The groups and some of their possible questions are:
GovernmentThe government is a separate type of external user that is also interested in a company’s performance, mainly for purposes of collecting the proper amount of tax, but also for other regulatory purposes. In fact, a single company may be reporting to several state and local governments and even to foreign governments, depending on where they are doing business. Practice QuestionWho are the internal users of managerial accounting?Managerial accounting. focuses on internal users—executives, product managers, sales managers, and any other personnel within the organization who use accounting information to make important decisions. Managerial accounting information need not conform with U.S. GAAP.
Who are the internal users?Definition: An internal user is a person inside or an organization that helps run its operations and uses the company's financial information to make decisions.
What are the 3 internal users of accounting?Examples of internal users are owners, managers, and employees. External users are people outside the business entity (organization) who use accounting information.
What are 5 internal users of accounting information?Users of accounting information are internal and external. External users are creditors, investors, government, trading partners, regulatory agencies, international standardization agencies, journalists and internal users are owners, directors, managers, employees of the company.
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