Fundamentals of accountancy business and management 1 LESSON 2.1.pptx

fundamentals of accountancy business and management 1

1. Identifying the Users of Accounting Information Lesson 2.1 1 Fundamentals of Accountancy, Business, and Management 1 Accountancy, Business, and Management

2. 2 Accounting provides financial information so that users can make sound decisions.

3. 3 Accounting continuously evolves to accommodate the needs of a wider range of users.

4. 4 Who are these users of accounting information?

5. 5 The objective of accounting is to generate timely and relevant financial information to a wide range of users based on their specific needs. Get to know the users of accounting information: Who am I? What’s the use?

6. 6 I examine the company's financial information to help me decide future goals of the organization . Who am I? What’s the use?

7. 7 I examine a company’s financial information to help me determine whether to invest or not . Who am I? What’s the use?

8. 8 I examine a company’s financial information to help me decide whether to extend them credit or not . Who am I? What’s the use?

9. 9 I want to examine the financial information of the company I’m working for to know if it will give me long term stability . Who am I? What’s the use?

10. 10 Financial information of a company is presented to me to check whether the company is complying with the rules and regulations and paying the right amount of taxes. Who am I? What’s the use?

11. Why is it important to know who the users of accounting information are? How can the decisions of these users significantly affect the organization? What happens if these users are not provided with accurate and complete accounting information? 11 Questions to Ponder

12. This lesson aims to target the following DepEd competencies: Define external users and give examples (ABM_FABM11-IIIa-7) . Define internal users and give examples (ABM_FABM11-IIIa-8) . 12

13. 13 In this lesson, you should be able to do the following: Define external and internal users of accounting information. Illustrate scenarios when accounting information is crucial to the decision-making of users. Analyze situations where different users utilize accounting information.

14. 14 Why is it crucial for the users of accounting information to be informed about the company’s financial activities and overall financial well-being?

15. The Process of Accounting recording 15 1 2 3 4

16. The Process of Accounting Classifying recording 16 1 2 3 4 classifying

17. The Process of Accounting Classifying recording 17 1 2 3 4 Summarizing summarizing classifying

18. The Process of Accounting Classifying recording Mars 18 1 2 3 4 Summarizing summarizing classifying interpreting

19. The Process of Accounting Classifying recording Mars 19 1 2 3 4 Summarizing summarizing classifying interpreting Users

20. 20 internal users users of accounting information Classification of Users external users

21. secondary users does not belong to the reporting organization not involved in internal decisions but could still significantly affect the entity primary users belongs to the reporting organization decisions affect the entity directly Internal Users External Users 21

22. 22 internal users Internal Users of Accounting Information owners and stockholders employees management

23. provide financial assets and resources interested in keeping track of the performance of the company to determine the value of their investments Owners, Investors, and Stockholders Internal Users 23

24. Owners, Investors, and Stockholders Examples: sole owners partners shareholders Internal Users 24

25. administers tasks within the organization interested in evaluating the company’s progress to make organizational and operational decisions Management Internal Users 25

26. Examples: executives heads of departments, sections, regional operations supervisors and frontline managers Management Internal Users 26

27. works for an organization under a contract of employment interested in fair wage, job security and stability Employees Internal Users 27

28. Examples: managers rank-and-file Employees Internal Users 28

29. Why are internal users considered as primary users of accounting information? 29 1 Answer area

30. 30 external users External Users government creditors potential Investors

31. provides funds in exchange for interest earnings does not acquire ownership to the enterprise Creditors External Users 31

32. uses financial information to determine if an organization can pay its obligations examples: banks and financial institutions Creditors External Users 32

33. legislates and enforces tax policies and other laws uses accounting information to determine compliance Government External Users 33

34. Examples: BIR, SEC congressional committees judicial courts Government External Users 34

35. interested in buying stocks uses financial information to determine a reasonable rate of return Potential Investors External Users 35

36. examples: individuals companies investment banks Potential Investors External Users 36

37. 37 Differentiate the two classifications for users of accounting information. 2 Answer area

38. Oplan Kandado 38 The Bureau of Internal Revenue recently launched Oplan Kandado, a tax policy that imposes heavy penalties on tax violations ranging from temporary suspension to closure of business. Violations include failure to: register for value-added tax (VAT) issue receipts or invoices file VAT returns and pay tax due declare accurate taxable sales Katherine Joy Capales, “Unlocking the BIR’S ‘Oplan Kandado’ Program,” Business World, June 27, 2018. https://www.bworldonline.com/economy/2018/06/27/168571/unlocking-the-birs-oplan-kandado-program/ , last accessed on May 18, 2023.

39. Oplan Kandado 39 How does BIR detect and investigate these violations? They: receive information from their agents; send a notice to the business concerned; conduct 10 to 30 days surveillance check financial statements compares them to actual transactions Katherine Joy Capales, “Unlocking the BIR’S ‘Oplan Kandado’ Program,” Business World, June 27, 2018. https://www.bworldonline.com/economy/2018/06/27/168571/unlocking-the-birs-oplan-kandado-program/ , last accessed on May 18, 2023.

40. Oplan Kandado 40 Accounting not only provides useful information to the business owners or potential investors, but aids in nation building and economic prosperity of a country. Katherine Joy Capales, “Unlocking the BIR’S ‘Oplan Kandado’ Program,” Business World, June 27, 2018. https://www.bworldonline.com/economy/2018/06/27/168571/unlocking-the-birs-oplan-kandado-program/ , last accessed on May 18, 2023.

41. 41 Accountants interpret financial information based on the needs of specific users. These users of accounting can be classified into two categories: internal users and external users.

42. 42

43. 43 Internal users are the primary users of financial information. They are part of the reporting entity and they need the accounting information to guide their decisions concerning the operations of the company. External users are the secondary users of financial information. Although they do not take part in the internal decision-making process of the reporting entity, their decisions could still affect the organization.

44. Examine the following problems and identify whether the user faced with the decision is an internal user or an external user. 44 Question User Does the company have the ability to pay increased salaries and wages? Should an investment be made in this company? Does the company charge a fair rate for its goods and services? Should I lend money to the company? What is the company’s progress?

45. Perform a spontaneous skit that presents a scenario that demonstrates how the following users of accounting information utilize financial information in their decision making. creditors Potential investors management 45

46. Answer the following questions: The board of directors of XYZ Company has already approved the expansion plan and investors were already secured. However, if the expansion pushes through, transfer taxes should be considered and must be disclosed to the Bureau of Internal Revenue. Which users of accounting information are involved in this scenario? Explain your answer. 46

47. 47 Answer area

48. Answer the following questions: If XYZ Company, through its financial statements, exhibits a stable and healthy financial performance as well as utmost compliance with the tax requirements and other pertinent laws, how would it affect the company? Explain your answer. 48

49. 49 Answer area

50. Accounting Tools, Inc. “Users of financial statements”. Last modified December 11, 2021. https://www.accountingtools.com/articles/users-of-financial-statements.html Capales, Kathrine Joy. “Unlocking the BIR’S ‘Oplan Kandado’ Program.” Business World. June 27, 2018. Accessed May 25, 2023. https://www.bworldonline.com/economy/2018/06/27/168571/unlocking-the-birs-oplan-kandado-program/ . 50