Question

Reference Material: Chapter 13-21 Intermediate Accounting by Spiceland

Classify these areas of accounting below in table form as to : 1) most reasonable and useful to investors and creditors; 2.) confusing, makes less sense and may lack value to investors and creditors; and State the accounting treatment of each classifcation and reasons why it is identified as strong or weak. Provide in detail explanation.

Financial Accounting

Managerial Accounting

Auditing

Tax Accounting

Governmental Accounting

Answer 1

Areas of Accounting	Classification	Reasons
Financial Accounting	most reasonable and useful to investors and creditors	Presentation of Financial Statements
Managerial Accounting	confusing, makes less sense and may lack value to investors and creditors	Internal to business, gives support to management
Auditing	most reasonable and useful to investors and creditors	Ensures that Financial Statements give a true and fair view
Tax Accounting	confusing, makes less sense and may lack value to investors and creditors	Payment of taxes to Government
Governmental Accounting	confusing, makes less sense and may lack value to investors and creditors	Accounting to match the balance of payments

Financial Accounting is a very important aspect since the investors view the Financial Statements and takes decisions on whether to invest in a company. Thus, auditing of financial statements is also crucial for investors as audited financial statements ensure that the accounts are not window dressed and are free from material misstatements.

Managerial Accounting, Tax Accounting and Government Accounting is absolutely irrelevant for investors as managerial accounting caters to the internal business perspective and assist management in taking decisions. Tax Accounting and Government Accounting is relevant for business to ensure compliance with direct tax laws and payment of tax liabilities as well as matching the balance of payments which is of no interest of the investors and creditors.