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Steven, M.Acc.
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In your own words, how would you describe financial accounting?

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In your own words, how would you describe financial accounting? Select two users, one internal and one external, who you think benefit the most from accounting. Explain why and how you think they benefit.
Submitted: 5 years ago.
Category: Business and Finance Homework
Expert:  Steven, M.Acc. replied 5 years ago.
Do you have a required number of words for this assignment?
Customer: replied 5 years ago.
about 150--it is a discussion question
Expert:  Steven, M.Acc. replied 5 years ago.
No problem. I'll have a response for you shortly.
Expert:  Steven, M.Acc. replied 5 years ago.
In your own words, how would you describe financial accounting? Select two users, one internal and one external, who you think benefit the most from accounting. Explain why and how you think they benefit.

I would describe financial accounting as the process of collecting, recording, summarizing, and presenting an entity’s financial transactions and other pertinent financial information to internal and external users of that information, usually in accordance with generally accepted accounting principles. Two users, one internal and one external, who I think benefit most from accounting are managers and investors, respectively.

Among internal users, managers benefit most from accounting in many ways. First, it provides them with the basis to make informed business decisions. Managers are better equipped to direct the various aspects of the firm for which they are responsible when they have access to relevant, timely accounting information. Business decisions include, but are not limited to, purchasing new equipment or facilities, expanding existing operations, and utilizing different economic resources. Similarly, accounting can help managers make investment decisions. Second, managers often use accounting information to create budgets. Historical financial information is a great source of information when companies are developing their financial road map for the future. Third, accounting can help managers measure the performance of a firm’s operations. A detailed analysis allows management to compare current performance indicators against those of previous accounting periods, and against those of its industry and its competitors.

Investors benefit most from accounting in much the same way that managers do. By and large, it provides them with the basis to make informed investment decisions. First, investors use accounting information to ascertain a firm’s financial health and operational profitability, and, ultimately, to determine its value. Investors tend to shy away from investment options that are grossly overpriced. Second, investors can utilize financial information to compare an entity’s current performance against its past performance, and against that of its industry and its competitors. Third, investors can use financial information to help determine the future profitability of a firm based on things like risk and past performance. Overall, since investors are concerned with financial risk, accounting information provides indications as to whether a business is a prudent investment decision.
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Expert:  Steven, M.Acc. replied 5 years ago.
Please let me know if you have any questions!

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