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Users of Financial Accounting Information

INTERNAL AND EXTERNAL USERS OF FINANCIAL ACCOUNTING INFORMATION

Financial abcounting inform`tion is used by internal entities (units and individuals within the reporting organization) and external entities (organizations and individuals outside of the structure of the reporting organization). The financial accounting information is equally important to internal and external entities. Because the uses of financial accounting information are different for internal and external users of such information, however, the criteria that determine the importance of financial accounting information internal and external users of the informal also are different.

Internal users of accounting information require that such information reflects directly on the efficiency and the effectiveness of production processes, marketing initiatives, and strategic foci. The information must be detailed and focused to facilitate not only the efficiency and effectiveness assessments mentioned above, but also to facilitate price setting (internal transfer and external sales), resource allocations, decisions involving selection from among alternative investment proposals, and appropriate responses to competitive pressures and consumer demands.

External uses of accounting information require that such information enable them evaluate fir reporting organization. Such evaluations include the following: assessing the future market value of the reporting organization; accurately assessing the effectiveness of the management of the reporting organization; making rational evaluations of the reasonableness of the financial accounting data provided by the reporting organization; and fairly assessing the financial position and strength of the reporting organization.

Both internal users and external users require accurate and transparent information. The discussion above is not intended to address issues of corporate fraud. Rather the discussion above is in...

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Users of Financial Accounting Information. (1969, December 31). In LotsofEssays.com. Retrieved 23:31, October 24, 2014, from http://www.lotsofessays.com/viewpaper/1696289.html