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Unformatted text preview: Intermediate Accounting – ACC2100 Chapter One Solutions Q1-2 The users of financial information can be divided into two major categories: external users and internal users. These two groups do not have the same decision making information needs because of their differing relationships with the company providing economic information. External users need information for three basic decisions--whether to buy, to hold, or to sell (or in the case of creditors, whether to extend credit, maintain the credit relationship, or not extend credit). These users rely mainly on financial statements in their decision processes. Internal users (i.e., a company's management) need information to make planning and operating decisions, and may request any information they need which the accounting system is capable of providing. Q1-3 Financial accounting is the information accumulation, processing, and communication system designed to provide investment and credit decision- making information for external users of accounting information. Financial accounting information is communicated through published financial statements, and must follow the pronouncements of several policy-making groups. Managerial accounting is the information accumulation, processing, and communication system designed to provide decision-making information for internal users. Managerial accounting information is communicated via internal company reports and is not subject to the policy standards for externally communicated information. It is constrained by how useful the information is for a specific decision and by the cost of providing that information. Q1-4 Financial reporting is the process of communicating financial accounting information about a company to external users. An important way a company's financial accounting information is reported is in its annual report ....
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This note was uploaded on 02/25/2009 for the course ACC 101 taught by Professor Fried during the Spring '09 term at Coastline Community College.
- Spring '09
- Decision Making