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BUS FP3061 McAndrewVanessa Assessment4 Attempt1 part 2

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BUS-FP3061 Assessment 4, Part 2 Template
BUS-FP3061 Fundamentals of Accounting
Introduction
Financial statements have both external users that rely on them to make sound decisions. The
financial statements discussed here include income statement, balance sheet and statement of
cash flow. The role of ethics will also be discussed. Ethics ensures that these parties know the
truth about the company's finances because this information is critical to sound investment
decisions. Some of the guiding conventions applied in preparation of financial statement and
how debit and credit entries on each account type are also looked at. .
Question 1: Internal and External Users of Accounting Data
Internal Users
They are the primary users within the organization structure who rely on accounting data to
make decisions that will influence the operations of the company. They include managers and
owners.
Managers use financial information to gauge organization’s performance so as to take
appropriate measures to improve on results.
The owners of the company have invested in the company meaning that the performance of the
company affect their net worth. They use financial information to analyze the viability and
profitability to determine any future course of action.
External Users
They include external entities that use financial data to guide on their relationship with the
company. They have different reasons for interacting with a company hence different financial
information they require guiding on their future relationship. For example:
Creditors use financial data to determine the credit worthiness of the organization so as to set the
terms of credit. They include suppliers as well lenders of finance.
Potential investors use financial data on a company to analyze the feasibility of investing in a
company because they want to make a reasonable return on their investment.

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Question 2: Role of Ethics in Operation of an Accounting System
Businesses have an ethical role to play when relaying financial accounting information to
relevant stakeholders. Stakeholders include investors, customers, partners, government,
employees, and any other party that is affected by the accounting information. They require full
and objective data when reviewing business operations and making critical decisions. Ethical
standards ensure information is reported in full and without bias whether the information is
positive or negative. Ethics ensures that these parties know the truth about the company's
finances because this information is critical to sound investment decisions. A customer is entitled
to know whether the company is financially healthy if they enter into a transaction that depends
on longevity of the company. Hence, ethics ensures that integrity in financial reporting is
upheld. Case Example:
i) Accounting of Sales
Sales made at the end of a financial period should be reported fully in that year and
not the following period. Attempt to this means that the accountant is understating
sales to evade some form of tax liability. Ethics advocates for honesty when reporting
incomes.
ii) Extent of reporting
When a company is making a loss, the loss should be reported. In case the company is
entangled in a legal suit it is the obligation of the account to report it as notes to the
financial statement. Ethics requires full disclosure without bias.
Question 3: Accounting Conventions
i) Consistency
Transaction treatment in an accounting system should be consistently continuous over the years.
This is to make it easy to compare financial data and results of different years and of different
companies. For example, if a company chooses cost or market price whichever is lower method
for stock valuation then this should be followed consistently and continuous.
ii) Full Disclosure

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BUS-FP3061 Assessment 4, Part 2 Template BUS-FP3061 Fundamentals of Accounting Introduction Financial statements have both external users that rely on them to make sound decisions. The financial statements discussed here include income statement, balance sheet and statement of cash flow. The role of ethics will also be discussed. Ethics ensures that these parties know the truth about the company's finances because this information is critical to sound investment decisions. Some of the guiding conventions applied in preparation of financial statement and how debit and credit entries on each account type are also looked at. . Question 1: Internal and External Users of Accounting Data Internal Users They are the primary users within the organization structure who rely on accounting data to make decisions that will influence the operations of the company. They include managers and owners. Managers use financial information to gauge organization’s performance so as to take appropriate measures to improve on results. The owners of the company have invested in the company meaning that the performance of the company affect their net worth. They use financial information to analyze the v ...
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