SU (SelviaUtama): Users of Accounting Information

Accounting information that is communicated externally to investors, creditors, and other users, must be prepared in accordance with standards that are understood by both the preparers and users of that information. We call these standards generally accepted accounting principles, often shortened to GAAP.

Today, the most authoritative source of generally accepted accounting principles is the Financial Accounting Standards Board. The FASB is an independent rule-making body, consisting of seven members from the accounting profession, industry, government, and accounting education. Lending support to these members are an advisory council and a large research staff.

External Users of Accounting Information:

Owners

According to the Commercial Code, a business owner is a person registered in the Commercial Registry, a person who conducts a business on the basis of a valid business license, a person who conducts a business on the basis of a permit other than a business license according to special regulations, a physical person who works in the agriculture production and is registered according to special regulations.

The advantages of a sole proprietorship include:

Owners can establish a sole proprietorship instantly, easily and inexpensively.
Sole proprietorships carry little, if any, ongoing formalities.
A sole proprietor need not pay unemployment tax on himself or herself (although he or she must pay unemployment tax on employees).
Owners may freely mix business or personal assets.

The disadvantages of a sole proprietorship include:

Owners are subject to unlimited personal liability for the debts, losses and liabilities of the business.
Owners cannot raise capital by selling an interest in the business.
Sole proprietorships rarely survive the death or incapacity of their owners and so do not retain value.

Creditors

A creditor is any individual or institution that has lent a firm money. Usually, creditors are banks. Banks use the accounting statements put out by a company to assess the company's lending risk. If creditors find too many liabilities or debts on a firm's balance sheet, they may be less prone to lending large sums of money to the firm.

Potential investors

An individual who commits money to investment products with the expectation of financial return. Generally, the primary concern of an investor is to minimize risk while maximizing return, as opposed to a speculator, who is willing to accept a higher level of risk in the hopes of collecting higher-than-average profits.

Labor unions

A labor union or trade union is an organization of workers. The union, through its leadership, bargains with employers on behalf of union members and negotiates labor contracts. This may include the negotiation of wages, work rules, complaint procedures, rules governing hiring, firing and promotion of workers, benefits, workplace safety, and policies. The agreements negotiated by the union leaders are binding on the union members, the employer and in some cases on other non-member workers.

Governmental agencies

An administrative unit of government. Publicly owned companies whose shares trade on one of the stock exchanges must provide annual financial reports to the Securities and Exchange Commission (SEC), a federal agency that regulates the trade of stock. Companies must also provide financial information to local, state, and federal taxing agencies, including the Internal Revenue Service.

Suppliers

Suppliers are individuals or businesses that provide goods or services to vendors in return for the agreed upon compensation. Some suppliers choose to make the discount a little simpler by applying a fixed discount that applies to any order quantity over a certain number of units. Other suppliers prefer to go with discounts issued to customers who are willing to enter into contracts that feature a duration of two to five years and commit the vendor to order a minimum number of units between the beginning date and ending date specified on the contract. Should the vendor fail to purchase that minimum number of units during the life of the contract, the supplier has the option of going back and charging penalties of some type.

Customers

Customers need accounting information to determine a company's financial health and to project its future financial solvency. While the individual consumer may not be looking often at a company's accounting methods and results, other firms that do business with a company do.

Trade associations

Trade associations are formed from a membership of companies operating in a particular area of industry and exist for their benefit. They can promote common interests and improvements in quality, health,safety, environmental and technical standards. This can be through various appropriate means. For example, the publication of guidelines, information notes, codes of practice, and regular briefing notes on technical issues and regulatory developments.

General public

It is pertaining to the people; relating to, or affecting, a nation, state, or community living within a definite territory that composes the nation- state. welfare of the general public (in contrast to the selfish interest of a person, group, or firm) in which the whole society has a stake and which warrants recognition, promotion, and protection by the government and its agencies Despite the vagueness of the term, public interest is claimed generally by government in matters of state secrecy and confidentiality. It is approximated by comparing expected gains and potential costs or losses associated with a decision,policy, program, or project.

	THE ACCOUNTING PROCESS

Exhibit 1–1 illustrates how economic activities flow into the accounting process. The accounting process produces accounting information used by decision makers in making economic decisions and taking specific actions. These decisions and actions result in economic activities that continue the cycle.

Internal Users of Accounting Information:

Internal users are the persons who manage the business, i.e. management at the top, middle, and lower levels. Their requirement of information is different because they make different types of decisions. The top level is more concerned with strategic planning; the middle level is concerned equally with operational planning and control; and the lower level is considered more with execution and controlling operations.

Exhibit 1–2 The information created and used by various employees will differ widely. All enterprises follow rules about the design of their accounting information systems to ensure the integrity of accounting information and to protect the enterprise’s assets.

Board of directors

A body of elected or appointed members who jointly oversee the activities of a company or organization. Elected by the stockholders to represent their interests, and is responsible for maintaining the integrity of the company's financial reports.

The size Board of directors the total number of the directors in the board, there could be large and small size of the board of directors based on its number. the board independence reflects the extent to which the board is independent of the company management. The independency is referred as the number of the outside non-executive directors on the board of directors.

Chief executive officer (CEO)

The highest ranking executive in a company whose main responsibilities include developing and implementing high-level strategies, making major corporate decisions, managing the overall operations and resources of a company, and acting as the main point of communication between the board of directors and the corporate operations. The CEO will often have a position on the board, and in some cases is even the chair.

Chief financial officer (CFO)

Oversees the financial operation of a company or organization.The CFO's job is to coordinate effective financial, accounting and tax strategies to maximize shareholder value and will usually be in charge of several other accountants who handle both managerial and financial accounting. Sometimes the CFO has a seat on the company's boards of directors.

Vice presidents

The Vice President will specifically monitor and oversee the overall the general operations of the Business Office departments.

Business unit managers

As a business unit manager, you must be willing to take risks to drive the strategies and effectiveness of your unit. A background in the sales and marketing department is a plus, as this background will help you develop skills in external industry analysis, which in turn makes your team more effective in delivering company objectives. Your leadership abilities and sales and marketing background must be coupled with direct knowledge of your functional area to ensure overall business unit success.

In your role as business unit manager, you will develop and communicate vision and expectation levels to unit members. Your strategy must be reliant upon the strategic direction of corporate vision and company goals. You are tasked to empower, select, coach and retain qualified staff that contributes to unit and company goals. On a group scale, you integrate different team functions and ensure the highest quality performance through feedback and training and development. Coordinating with other managers and directors, you report and integrate policies and objectives.

Plant managers

is responsible for directing and coordinating the daily operations of a manufacturing plant. This includes developing efficiency strategies to ensure the plant meets production goals and standards at minimal manufacturing costs. The plant manager works directly with department heads to coordinate purchasing, production and distribution operations. Duties include instituting policies and procedures, training supervisors and administrators, maintaining a production schedule, giving performance reviews and motivating staff to meet production goals.

Store managers

Store managers are responsible for supervising employees and running their store at a profit.Retail store managers are responsible for running their store or department. This involves managing employees, hiring new employees and training. Retail store managers must also write schedules that fit employee availability and mediate any disagreements that may arise among employees. They also ensure that employees follow store policies.

Line supervisors

Line supervisors generally work in manufacturing plants and facilities although they may also work at restaurants, banks and several other types of organizations. Line supervisors are responsible for supervising the employees' immediate work on the line, schedules and quality control. They act as the managers eyes and ears on the line during operations. Supervisors do not perform high-management duties beyond process supervision.