Internal and external users' influence on company short and long-term success

External Users

How can your role as an accountant ensure that the information presented do not include errors and how would you support your claims?

The best way to make certain that all information is correct is to have different facts and calculations double checked. At the same time, the balance sheet will show these transactions in the total figures that are presented. This means that if there are any errors, they can be identified through conducting simple mathematics (i.e. addition, subtraction, multiplication and division). The best way to support any kind of claims is to include the actual documentation with these figures. Then, any possible research reports would be provided to illustrate future projections from these activities. ("Accountant's Guide to Financial Management," 2006)

How can information on past transactions be used to predict future cash flows? Explain.

Past transactions can be utilized to determine the impact of changes in the economy and customer demand on the bottom line results of the firm. These shifts can give actuaries insights about future trends and their effect on the company's free cash flow. This helps managers in providing guidance about future events. ("Accountant's Guide to Financial Management," 2006)

What are the advantages and disadvantages of the single-step income statement?

The advantages of a single income statement include: they are easy to create, understand and the net income is clearly stated. The drawbacks of this system include: not as much detailed information is communicated and the activities of the firm are harder to understand. (Adams, 2012)

What two types of comparison may external uses make in their financial decision making? Why is knowledge of these comparisons important to accountants?

Two external uses that would improve their financial decision making includes: accurately valuing the price of the common stock / bonds and understanding how the firm is managing its liquid assets. The ability to accurately compare these areas will determine the way the firm will deal with adverse situations (over the short to medium term). ("Accountant's Guide to Financial Management," 2006)

What specific principles must a company apply to the reporting of inventories in it interim financial reports?

When reporting any kind of inventories there must be consideration for: the amount of time a particular resource has been sitting and its effect on the operating results. ("Accountant's Guide to Financial Management," 2006)

Explain the time value of money. Is it important for accountants to have an understanding of compound interest, annuities, and present and future value concepts? Why?

The time value of money is when it will be worth more in the future by: investing into something that can produce interest or growth. Yes, it is important for the current and future valuation of interest / debt orientated instruments. The reason why is because, the amount of income could be several million dollars a year. Understanding these concepts will help to accurately predict the value of select assets in the future. ("Accountant's Guide to Financial Management," 2006) ("Understanding the Time Value of Money," 2012)

Elaborate on the nature of interest. Clarify the distinction between "simple interest" and "compound interest."

Simple interest is the amount that is paid on the original principle of the loan. While compounding interest, is when the original principle and the interest received are calculated together. ("Simple vs. Compound Interest," 2008)