Fundamentals of accountancy business and management 1 LESSON 2.2 PRESENTATION.pptx

fundamentals of accountancy business and management 1

1. Decisions of External and Internal Users Lesson 2.2 1 Fundamentals of Accountancy, Business, and Management 1 Accountancy, Business, and Management

2. 2 What are the essential factors you would consider in your prospective employer?

3. When considering a prospective employer, essential factors include: Company Culture A positive, inclusive, and supportive work environment that aligns with your values. Career Growth Opportunities Availability of training, mentorship, and pathways for professional development and advancement.

4. Compensation and Benefits Competitive salary, health insurance, retirement plans, and other perks that meet your financial and personal needs. Job Security and Stability The company’s financial health and market position to ensure long-term employment. Work-Life Balance Flexible schedules, remote work options, and policies that support personal well-being.

5. Reputation and Values The company’s reputation in the industry and its commitment to ethical practices, sustainability, and social responsibility. Role and Responsibilities Clarity about job expectations, alignment with your skills, and opportunities to make meaningful contributions.

6. Leadership and Management Effective, approachable, and supportive leadership that fosters growth and collaboration. These factors ensure a fulfilling and sustainable professional relationship with the employer .

7. Many job applicants overlook one significant factor: business sustainability . 7

8. Business sustainability: Is the company profitable? Can it meet its obligations to its employees? 8

9. 9 After graduating from senior high school under the Accountancy, Business, and Management strand, David started working for XYZ Company. Some of his friends cautioned him with speculations that the said company is not performing well since it started operating five years ago. David did some research and discovered the following accounting information: What Should David Do?

10. Year Net Profits 1 ₱250,000 (Net of Tax) 2 3% increased from Year 1 3 5% increased from Year 2 4 2% increased from Year 3 5 4% increased from Year 4 Table 1. Net Profits of Company XYZ 10 What should David do?

11. Why do you think the information on XYZ Company’s net profits is relevant to David? How will you describe the financial performance of Company XYZ for the past five years? If you were David, would you stay with XYZ Company? Why or why not? 11 Questions to Ponder

12. 1. Why do you think the information on XYZ Company’s net profits is relevant to David? The information on XYZ Company’s net profits is relevant to David because it provides insights into the company’s financial health and profitability. Understanding the net profits helps David assess whether the company is financially stable, growing, or struggling, which directly impacts his job security, career growth, and the overall sustainability of the company.

13. 2 . How will you describe the financial performance of Company XYZ for the past five years? The financial performance of XYZ Company over the past five years can be described based on its net profit trends. If the company has been consistently profitable or showing growth in profits, it suggests positive financial performance. However, if the net profits have been declining or unstable, it indicates potential challenges in maintaining profitability, which could affect its long-term viability.

14. 3. If you were David, would you stay with XYZ Company? Why or why not? If I were David, my decision to stay with XYZ Company would depend on the findings of my research. If the company is experiencing consistent financial decline or instability, I would consider seeking opportunities elsewhere for better job security and career growth. However, if the company shows potential for recovery, growth, or has a clear plan for improving its financial performance, I might stay and contribute to its success. Ultimately, the decision would depend on balancing the company’s prospects with my career goals and financial stability.

15. 15 At the end of this lesson, you should be able to do the following: Identify the decisions made by internal and external users of accounting information. Demonstrate how accounting information can be used. Analyze situations that require decisions from internal and external users of accounting information.

16. 16 Does accurate financial information guarantee sound decisions?

17. Accurate financial information is essential for sound decisions but must be complemented by proper analysis, strategic thinking, and consideration of external factors.

18. outside of the organization indirectly access accounting information from the organizations of their interest part of the reporting entity utilize the accounting information to come up with useful decisions for the company Internal Users External Users 18

19. whether operations are efficient budgeting, forecasting, analysis of management accounting reports investment ventures ensuring compliance with law Decisions by Management Decisions of Internal Users 19

20. monitoring investment and returns assessing business performance and financial position Decisions by Owners Decisions of Internal Users 20

21. whether to continue the contract for employment, or collectively bargain based on: sustainability and security of remuneration Decisions by Employees Decisions of Internal Users 21

22. David is an employee of XYZ Company. He is a primary user of accounting information. He needed to decide whether to stay with XYZ Company or not. Based on the facts he gathered, he discovered that the company’s financial performance is doing well, despite the fact that it is a pioneering start-up in their location. David’s Decision 22

23. David decided to stay with the company and his decision was supported by objective financial information. The information on the business's profitability was used in David’s decision. David’s Decision 23

24. What could happen if the decisions of the internal users are not informed by accounting information? 24 1 Answer area

25. If the decisions of internal users, like David, are not informed by accounting information, it could lead to poor decision-making, such as staying with a financially unstable company, which may result in job insecurity or missed career opportunities. Without accurate financial data, internal users may mismanage resources, set unrealistic goals, or fail to identify financial risks, ultimately affecting the company's performance and long-term sustainability.

26. interested in putting capital to earn profit investment decisions based on appropriate use of equity risks and returns Decisions by Investors Decisions of External Users 26

27. whether to extend credit lending decisions based on: creditworthiness liquidity solvency profitability Decisions by Lenders Decisions of External Users 27

28. whether to confirm compliance or impose penalties based on: accuracy of reports and declarations payment of taxes Decisions by Regulatory and Tax Authorities Decisions of External Users 28

29. whether to buy goods or services based on: stability and pace of production Decisions by Customers Decisions of External Users 29

30. whether to supply and set a credit limit based on: liquidity capacity to pay obligations Decisions by Suppliers Decisions of External Users 30

31. diverse ways and varying interests consumer decisions based on information about the market trade environment financial status of the nation Decisions by the Public Decisions of External Users 31

32. David is now the purchasing officer of the XYZ Company. The company targets an increased pace in production and distribution by next month. David was tasked to look for businesses that could supply the materials needed for production. A Customer’s Decision 32

33. David must choose a company that could provide a steady and consistent supply. He looked into the financial statements of prospective companies to find out their production capacity and history. In examining the financial performance of supplier companies, David is an external user of accounting information. A Customer’s Decision 33

34. What is the difference between the decisions made by internal users versus decisions made by external users of accounting information? 34 2 Answer area

35. The difference between the decisions made by internal users and external users of accounting information lies in their roles and the focus of their decisions: Internal Users: These users, like David in his role as a purchasing officer, make decisions that directly impact the company's operations, management, and strategy. Their decisions focus on improving internal processes, managing resources, and ensuring operational efficiency. For example, David uses financial information to choose suppliers that will ensure a steady supply of materials for production, which directly affects the company’s operations.

36. External Users: External users, such as investors, creditors, and regulatory agencies, make decisions based on the company’s financial health, profitability, and risks, but their decisions do not directly impact the company's daily operations. For example, an investor might use financial information to decide whether to invest in the company, while a creditor would assess the company’s ability to repay loans .

37. 37 Accounting information is produced and presented based on the specific needs of its users. These users are grouped as internal users and external users.

38. 38 Decisions by internal users are made to benefit the company that they work for. Examples of these decisions are: management decisions, owner/shareholder decisions, and employee decisions.

39. 39 Decisions by external Users are made based on their varied interest in the reporting organization. Examples of these decisions are investing decisions, lending decisions, compliance and regulatory decisions, and customer and consumer decisions.

40. 40

41. True or False: Identify whether the statement is correct or incorrect. Management is one of the external decision makers of accounting information because they decide on the direction of a company. 41 Answer area

42. True or False: Identify whether the statement is correct or incorrect. Owners are interested in the return of their capital when they look into the accounting information of a business. 42 Answer area

43. True or False: Identify whether the statement is correct or incorrect. When a customer wants to decide whether to continue a business with his/her supplier or not, he/she should look into his/her supplier's profitability. 43 Answer area

44. True or False: Identify whether the statement is correct or incorrect. Suppliers need to check their customer’s repayment ability in order to decide the credit limit and payment terms to be given to their customers. 44 Answer area

45. True or False: Identify whether the statement is correct or incorrect. Decisions made based on accounting information are the same for all users. 45 Answer area

46. Answer the following questions. Give an example of how your parents can use accounting information in making decisions. 46 Answer area

47. Answer the following questions. Give an example of how you, as a student, can use accounting information in making decisions. 47 Answer area

48. Read the scenario and answer the questions that follow. ABC Company is a manufacturer of computers in the Philippines. Most of its raw materials are procured from suppliers except for the keyboard, which they manufacture within their capacity. Every year, the company produces 10,000 units of these keyboards. The average cost to build the keyboard is as follows: ₱250.00 for raw materials per unit, ₱210.00 for direct labor per unit, and ₱180.00 for factory overhead per unit. 48

49. Read the scenario and answer the questions that follow. Later in the year, a supplier offered to supply keyboards of the same quality as ABC Company for ₱625.00 per unit. Historically, the supplier’s record shows that their average annual keyboard production roughly runs up to 750,000 units, supplied to their 50 regular customers with an average annual demand of 12,000 units per customer . 49

50. Answer the following questions based on the scenario presented earlier. Which would be more cost-effective for ABC Company: to produce their own keyboard, or to buy a keyboard from a supplier? Support your answer. 50 Answer area

51. Answer the following questions based on the scenario presented earlier. Do you think the supplier can meet ABC Company's demand of 11,000 units of keyboard per year? Support your answer. 51 Answer area

52. Man Thinking Cartoon by VideoPlasty is licensed under CC BY-SA 4.0 via Wikimedia Commons .