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Questions and Answers
Who are the users of financial information working within the company?
What is the main purpose of accounting in an organization?
Which category of users utilizes financial information for investing or granting credit to the company?
What are the three common branches of accounting mentioned in the text?
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Which level of management is considered part of the internal users of financial information?
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How does accounting contribute to decision-making in an organization?
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Which branch of accounting focuses on determining the cost of producing goods or services?
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What is the main purpose of decision making in the context of accounting?
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In the planning phase of decision making, what helps decision makers answer important questions?
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What is the primary role of controlling in decision making?
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Which phase of decision making involves identifying the current problems or issues in an organization?
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What is the key aspect that decision makers aim to achieve through controlling?
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Study Notes
Accounting: An Overview
- Accounting is a systematic process that provides financial information to support decision-making in an organization or unit.
Users of Financial Information
- Internal users: employees within the company who use financial information for planning, controlling, and making decisions to improve company operations.
- Examples: senior management, middle management, low-level management.
- External users: individuals or entities outside the organization who use financial information to make decisions, such as investing or granting credit.
- Examples: investors, creditors, financial analysts.
Branches of Accounting
- Financial accounting: provides financial information to external users.
- Management or managerial accounting: provides financial information to internal users for planning and decision-making.
- Cost accounting: provides financial information to internal users for costing and controlling production.
Decision-Making Process
- Involves selecting the best course of action among competing alternatives.
- Rooted in the primary pillars of accounting: planning and controlling.
- Planning phase:
- Setting goals and objectives.
- Identifying current problems and issues.
- Determining short-term and long-term objectives.
- Enumerating alternative courses of action.
- Controlling phase:
- Gathering responses and feedback on the plan.
- Evaluating and monitoring progress.
- Ensuring goals are met.
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Description
Test your knowledge about the users of financial information in accounting, both internal and external. Understand how accounting supplies financial information to users for decision-making purposes.
