| The people, who make decisions in accounting, | | | | Over the years the shift of people who used |
| make it based on three categories. First, people | | | | accounting information has varied drastically. Now, |
| who manage a business, second, the external | | | | it is heavily used by governmental agencies, and in |
| people of a business who have a direct financial | | | | matter of fact taxes is the main source of |
| interest to a business, and third the people and | | | | income for government. According to the rules |
| organizations that have an indirect effect on a | | | | and regulations of federal, state, or even local |
| business. This applies to non profit organizations as | | | | laws, individuals and companies are required to |
| well. Management refers to the group of people | | | | pay a variety of taxes. These include but are not |
| who are in charge for operating a business and | | | | limited to, sales tax, excise tax, social security |
| for measuring up to the profitability and liquidity | | | | tax, federal, state, payroll, and city income taxes. |
| goals. If a business is extremely large, then the | | | | Each tax requires there own rules and regulations |
| management will most often require more than | | | | which can be very confusing at times. Reporting |
| one person, and the people are hired to perform | | | | your taxes is a law and a very meticulous and |
| their job. Managers need to answer important | | | | tedious process. For example, The Internal |
| questions such as what was the company's net | | | | Revenue Code contains over a thousand rules for |
| income, and if they have a substantial rate of | | | | delivering accounting information in federal income |
| return. Does the company have enough assets, | | | | taxes. Also, most companies generally have to |
| and which products bring in the most money? | | | | report to one or more regulating agencies in the |
| When making a decision, managers usually follow | | | | United States. All corporations must answer to |
| a systematic approach. Even though larger | | | | the Securities and Exchange Commission or SEC |
| businesses require a more concrete analysis, they | | | | (To find out more information visit there website |
| follow a similar pattern to small businesses. | | | | at This is set up by the government to insure and |
| Financing a business: Financing for a company is | | | | protect the public by regulating the buying and |
| critical, because they need that money to | | | | selling of stocks. Companies that are listed on the |
| continue their operations. Here is a nice website to | | | | Stock exchange must adhere to the rules and |
| find out more information about financing a | | | | regulations. |
| business. | | | | Some other groups such as labor unions analyze |
| Investing in a business: Companies invest in their | | | | the financial statements of corporations to help |
| current assets so that it will make money for | | | | negotiate a contract. The income of a company |
| them in the future. | | | | plays a major role in forming these contracts. The |
| Producing goods or services: Operations and | | | | individuals who give advice to investors and |
| production management is responsible for | | | | creditors such as brokers and financial analysts |
| developing and producing goods and services that | | | | have an indirect financial interest in a business. The |
| the company can sell. | | | | amount of inertest in the financial health of |
| Marketing: Learning marketing and advertising skills | | | | corporations has been growing by consumer |
| so that they can distribute goods and services | | | | groups such as customers and the public. They |
| more efficiently. | | | | are also concerned about how the corporation will |
| Managing workers: Human resource management | | | | affect the social patterns of the environment and |
| requires the hiring of qualified employees, and also | | | | of the people that reside in that area. The |
| paying them. | | | | President's Council of Economic Advisers and the |
| Providing information: The information | | | | Federal Reserve Board use accounting information |
| management retrieves data about the company | | | | to set economic policies and programs. |
| such as how much they made in the last month, | | | | It's interesting to note that about thirty percent |
| and organize the information in a way so that it | | | | of the businesses in the United States consist of |
| can be used. It also releases information to | | | | non profit organizations. Some examples of non |
| managers, and to important people outside the | | | | profit organizations (NPO) include hospitals, and |
| business. | | | | universities. Some well known non profit |
| Another group of individuals that needs knowledge | | | | organizations include Red Cross, YMCA, Better |
| in accounting is those you have a direct interest in | | | | Business Bureau, and WWF(World Wildlife Fund, |
| the business, go figures. They use the information | | | | was formerly in a lawsuit and won against WWE |
| to analyze how a business is performing. Most | | | | World Wrestling Entertainment, which was |
| businesses generally publish their financial report | | | | originally known as World Wrestling Federation). |
| which shows how well they meet their profitability | | | | You may think that the managers of these |
| and liquidity goals. These statements display how | | | | organizations don't need to know their accounting |
| well a company did in the past and probably most | | | | skills but they do. They still have a budget and |
| important, how well they will do in the future. | | | | needs to raise money just like any other business. |
| However, many people outside the business also | | | | They raise money by collecting it from creditors, |
| study the financial reports. They are the investors | | | | donors, and even investors. They also need to |
| and the creditors. | | | | have a nice plan and to pay creditors back in an |
| The investors are the individuals that invest in a | | | | efficient manner, and they also have to follow the |
| business and will keep a part of the ownership. | | | | tax rules. So even though businesses and non |
| They are concerned with their past success and | | | | profit organizations have different agendas they |
| failures, and also will like to know the potential | | | | both generally follow the same basic rules. |
| earnings. A concrete analysis of the financial | | | | Accounting is a systematic information system |
| statement will help prospective investors base | | | | that measures, process, and communicate |
| their decisions. Once they finish investing they | | | | information, particularly financial. When an |
| must continue to study a business financial | | | | accountant is making a measurement they must |
| statement. Next, the creditors are the companies | | | | answer four simple questions. First, what is being |
| that lease money to businesses for short or long | | | | measured, second when should a measurement |
| term needs. Creditors are the people that deliver | | | | be made, third how much money should be |
| money or provide services for companies in | | | | placed on what is being measured, and last how |
| advanced before getting paid. Their main concern | | | | the measurement should be classified. These four |
| is whether a business will have the money to | | | | questions deal with the basic rules of accounting, |
| repay the money with interest in an approximate | | | | and the answers help establish what accounting is |
| time. Some of the things they study before they | | | | and what it is not. Accountants in different fields |
| make their decisions are a company's liquidity, | | | | challenge these questions every day, and |
| cash flow, and profitability. Some examples of | | | | therefore the answers are changing often so |
| creditors are banks, mortgage companies, and | | | | that's why it's a good idea to keep to date with |
| insurance companies. | | | | some of the trends. |