57
learning outcomes
1
Describe the users of accounting information
2
Describe the fields of accounting
3
Compare the different forms of business
organization
4
Discuss the qualitative characteristics of financial
information
5
List and apply basic accounting assumptions and
principles
6
Illustrate the similarities and differences between
ASPE and IFRS
7
Explain the importance of ethics in accounting
Users of Accounting Information
The fundamental objective of accounting is to prepare financial statements that a wide variety of
users can use to make decisions. Readers of financial statements rely on accurate information about
an organization to make appropriate decisions. Users of accounting information can be divided
into two categories.
1.
Internal users
, people who own the business and/or work in the business
2.
External users
, people or organizations outside the business, such as suppliers, banks and
external accountants
Internal users rely on financial statements to manage the business efficiently.They assess the busi-
ness by examining the financial results on a regular basis. To an internal user, financial statements
serve the same purpose as a scoreboard does to a sports team.
Typically, external users need financial statements to ensure that their investment in the business
is protected, whether they provide loans or supply products or services on credit. If a business is
poorly managed or is not operating profitably, external users can decide whether or not to associate
themselves with the business.They want to ensure that their loans can be repaid or that they receive
a sufficient return on their investment.
There are also indirect external users of financial statements. For example, tax authorities look at
the financial statements to ensure that the business is paying the appropriate amount of taxes.
Indirect external users include customers and trade unions.
Chapter 3
The Accounting Framework
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