- Explain the major advantages of a business owner with minimal accounting experience maintaining the company’s book. Then explain the disadvantages.
- Analyze the major impact to the users of accounting statements if the statements are prepared in error.
- Provide support for your position.
REPOND TO THIS STATEMENT ALSO
Explain the major advantages of a business owner with minimal accounting experience maintaining the company’s book.
By a business owner maintaining the company’s book, they are able to have full access to financials at all times, without having to go through another person and wait on them. The owner would not have to worry about the actions of another person possibly making mistakes or stealing money.
Then explain the disadvantages.
Without much accounting experience, the owner has a decent chance of making errors in the books. The negatives about this are listed below. In addition, owners may be unable to gather a full picture of the business, and properly analyze its status.
Analyze the major impact to the users of accounting statements if the statements are prepared in error.
“Good decision making depends on good information” (Weygandt, Kimmell, & Kieso, 2013, p. 3). If the statements are prepared in error, it can cause negative repercussions to users, as the wrong information would be conveyed. This information is important to both outside and inside users. Outside users, such as investors, use the statements to determine if they should invest in the company, or sell their shares. Bankers can look at statements to determine if they will give the company a loan. Internal users, such as managers, rely on the data to effectively run the business. Some of the things they look at statements for is to see if they have money to give employees a raise, do they have enough money to pay stockholders, what price they should charge for products in order to earn a profit, and whether or not the product is worth producing. If the information is wrong, the wrong decisions can be made, which would have negative consequences for the company.
Introduction to Financial Statements by Else Grech. Retrieved from https://youtu.be/nR0HqJ2TaWM
Weygandt, J., Kimmel, P., & Kieso, D. (2013). Accounting Principles, Volume 1 Hoboken, NJ: Wiley & Sons.