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The goal of accounting is to provide useful information for decision. Therefore, financial accounting is governed...

The goal of accounting is to provide useful information for decision. Therefore, financial accounting is governed by concepts and rules knows as generally accepted accounting principles (GAAP).

A) Explain that sentence showing the qualitative characteristics of useful information.

B) The information needs of a specific user of financial accounting information depends upon the kinds of decisions that user makes. Identify the major users of accounting information and discuss what questions financial accounting information answers for each group of users.

Solutions

Expert Solution

The accounting information published by the company are used for various reasond by the various stakeholders. Thus to maintain an uniformity in those reports the GAAP is implemented. The financial accounting is governed by concepts and rules known as GAAP. The qualitative characteristics of useful informations are-

  1. Relevence- the accounting information has the potential to make useful decision.
  2. Faithful representaion- the accounting informstions are found factorial, neutral and free from error.
  3. comparability- the accounting infromation helps it users to make suitable comparisons between different businesses.
  4. Understandable- the accounting information reports are made unstanble for common people.
  5. Consistency- these reports are made consistenly year after year.

There are basically two types of users of accounting information, the internal and external. They are briefly discussed below-

  1. Internal users- Managers, employees and the owners.
  • Managers- they uses the reports to plan, monitor and take various decisions for the businesses.
  • employees- uses the informations for job security and income
  • owners uses the reports to analyze how their business is doing

2. External users- Investors, customers, suppliers, lendors.

  • Investors uses the accounting information to make investing decisions on the company.
  • Customers uses the reports to buy the business goods and services.
  • suppliers uses the information for assessing the credit-worthiness of the comapny
  • Lendors- they uses the reports to know the repayment capacity ( creditworthiness) of the business.

jeff jeffy answered 1 year ago
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