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