Q3RQ. - Horngren'S Financial And Managerial Accounting

Question

Describe the various types of individuals who use accounting information and how they use that information to make crucial decisions

Step-by-Step Solution

Answer

Various individuals are individuals, businesses, investors, creditors, and taxing authorities.

Step 1: Explanation on individual

Individuals use accounting information to estimate the current cash holding and the future cash requirement for retirement, children's education, marriage, etc.  

Step 2: Explanation on businesses

Businesses use accounting measures to set objectives and measure progress to achieve a predetermined goal. 

Step 3: Explanation on investors

Investors use accounting information to evaluate the attractiveness or profitability of the proposed investment proposal. 

Step 4: Explanation on creditors

Creditors are the persons or business to whom the company owes money. They use the accounting information to evaluate the company's credibility to provide or extend credit terms. 

Step 5: Explanation on taxing authorities

Taxing authorities such as federal, local, or state governments use accounting information to estimate the tax liability for the business or the individual.