Accounting Is an Information System That Identifies

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A objectives and the roles of financial accounting
“Accounting is an information system that identifies, records, and communicates the economic events of an organization to interested users.”1. The basic objective of accounting is to provide information to the interested users to enable them to make business decisions and “Financial statements are the primary means of communicating financial information to parties outside the business organization.”2. Moreover, accounting can give the essential information, especially for the “external users, is given in the basic financial statements: Profit and loss statement and Balance sheet.”3 On the other hand, accounting can give addition information to the internal user: for example the marketing managers, the supervisor of production, finance directors, and the officers of company.

Now, I would like to discuss the people who are using the financial reporting. I had said this on the the above paragraph. There are external and internal users. First, I would like to introduce the external users. Investors or those owners will be examples of external users. They need to rely on the financial accounting report to make a correct decision to buy, hold or sell stock. And other external user will be the creditors. Suppliers and bankers for examples. They use the financial report to calculate the chance of giving credit or borrowing cash. The supplies and bankers will ask some questions: “Is the enterprise earning satisfactory income?” or “Is the company profitability when compare with the competitors which are in the similar size?” or “Will the company get enough ability to pay its?”. All the question can be answered by the financial report. Therefore, the financial report gives a strong confidence to those supplies and the bankers. Furthermore, taxing authorities will be another external user. Because of the IRS(Internal Revenue Service), need to find out whether the companies obeys “the tax laws. Regulatory agencies, for...
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