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Financial Accounting Case Study

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QUESTION 1 Financial Accounting is an accounting system that tries to meet the needs of the various user groups especially for external users. It’s overall purpose is to construct financial reports that provide information about a firm's performance to external parties such as investors, creditors, and tax authorities. Types of financial reports used are Statement of Financial Position, Statement of income and Statement of cash flow. Users of the information are stockholders, government, investors and tax authorities. Management Accounting is an accounting system is used for internal decision making. It’s overall purpose is to contribute managers with financial and statistical information which will help them carry out their…show more content…
Users of the information are managers, owners and partner. Both financial and management accounting provide financial information to their users. They also report upon the activities and success of the enterprise to interested parties. Both evaluate what the management has done with the money invested in the business. Financial…show more content…
Bookkeeping always helps a business owner to have more understanding of how much progress the business has made. (David, 2015) Meanwhile, on the other hand, financial statement is also important for every business for a couple of reasons. Company's financial statements provide important information about its financial health. These statements are arranged based on day-to-day bookkeeping that tracks funds flowing in and out of the business. The information the statements provide offers benchmarks and feedback that help the company make minor adjustments and also determine its overall direction. Financial statements are useful for making decisions regarding expansion and financing. They also figure into marketing decisions, giving data specifying which aspects of company operations provide the best return on investment. (Gartenstein, 2015) The accounting cycle is a common practice in financial accounting that allows an organization to record and calculate its financial activities. The cycle consists of a number of steps, each of which depends on earlier steps to collect data and organize it in a meaningful way. Small businesses, which shortage of full-time accounting departments, rely on the accounting cycle