Recording : transactions must be recorded as they occur in order to provide up-to-dat e information for management.
Summarizing: the transactions for a period are summarized in order to provide inform ation about the company to interested parties.
☆Types of accounting
Financial accounting vs management accounting
Accounting reports users include:
●Management: Need information about the company’s financial situation as it is curre ntly and it is expected to be in the future. This is to enable them to manage the business efficiently and to make effective decisions.
●Investors: The providers of risk, capital and their advisers are concerned with the ris k inherent in, and return provided by, their investments. They need information to help th em determine whether they should buy, hold or sell.
●Trade payables/ Suppliers: Suppliers and other trade payables. Suppliers and other tr ade payables are interested in information that enables them to determine whether amounts owing to them will be paid when due. Trade payables are likely to be interested in an enterprise over a shorter period than lenders unless they are dependent upon the continuanc e of an enterprise as a major customer.
●Shareholders: Shareholders are also interested in market value of shares as well as information which enables them to assess the ability of the enterprise to pay dividends.
●Lenders: Lenders are interested in information that enables them to determine wheth er their loans, and the interest attaching to them, will be paid when due.
●Customers: Customers have an interest in information about the continuance of an e nterprise, especially when they have a long term involvement with or are dependent on, th e enterprise.
●Government and their agencies: Governments are their agencies are interested in the allocation of resources and, therefore, the activities of enterprises. They also require infor mation in order to regulate the activities of enterprises, determine taxation policies and as the basis for national income and similar statistics.
●Employees: Employees and their representative groups are interested in information a bout the stability and profitability of their employers. They are also interested in informati on which enables them to assess the ability of the enterprise to prove remuneration, retire ment benefits and employment opportunities.
●General public: Enterprises affect members of the public in an variety of ways. For example, enterprises may make a substantial contribution to the local economy in many ways including the number of people they employ and their patronage of local suppliers. Financial statements may assist the public by providing information about the trends and recent developments in the prosperity of the enterprise and the range of its activities.
☆The business entity concept
The business entity concept
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