Accounting function

 Accounting function:

 In decision- facilitating decision that help manager:

- Optimizing production: to determine the optimal sales for a company’s products and from that identify the breakeven point.

- Identifying the bottlenecks: The negative impact created by bottlenecks in production and how they effect on the company’s revenue and profit.

- Capital budgeting: In relation with making a decision about capital expenditures.

- Inventory and product costing: To analyze about the necessary fees to uphold the inventory as well as cost of goods sold of a company.

-Forecasting and analyzing trend: Predicting about the production cost and the appearance of unexpected variances.

 Toward the Shareholders and employees: Managers need to figure out the value of a firm as present value of free cash flows with risk- adjusted rate for capital employed and profit to make sure that they are available for distributing a particular amount to shareholders under the form of dividends and meet the salaries of employees.

  

   

Regarding internal stakeholders:

The only objectives of owners of a firm are to seek to maximize the firms’ financial value (Rappaport, 1986) and other objectives such as social and environmental care is just regarded as the mean of creating profit (Stadler, Matzler and Hinterhuber, 2006)

  The information has emerged to direct the managers as well as executives to make a decision to meet the firm’s responsibility is to make profit (Milton Friedman, 1962) and the decision- facilitating information is aimed to diminish the decision uncertainty of the managers. So gathering the information is really an investment than an input for a specific decision (Hall, 2010) and the condensed form of information is considered as strength of accounting in making decision

In terms of external stakeholders:

Toward outside stakeholder. The information of a particular firm plays a key role in making decisions. To publish the information to the outside, the managers need to condense all the information and transactions that they have during a particular period and take them under the form of financial statement. Based on this financial statement, external stakeholders can keep track of the firm’s operations and understand the financial position as well as health of this firms. But one thing that happened is it only depend on one side and can be biased and lack of obviosity and the information can be manipulated. Therefore, the stakeholder needs the third party such as CPA or external auditing firm to be representative of this information.

Toward the investors and creditors: they need the obvious information to comprehend the firm’s financial health and make a decision whether or not they should invest or lend.

In terms of individual investor: they need to catch the data of financial statement and calculate the ratios such as ROI, ROE, ROA, P/E, dividend yield, EPS, interest coverage,…. to make a decision.

In terms of brokerage firms, investment banks, institutional investors: they also need to calculate the value of a firms via financial modeling such as DCF, CCA through financial statement and sells them to other parties or invest.

Creditors: They need to conduct credit analysis such as 5Cs of credit and value them via credit score. Moreover, they also need to calculate some ratio such as debt/equity ratio, solvency ratio, …

Government: the major purpose of government toward financial statement is taxation as well as assure that the firms pay enough tax. Moreover, government need to assess the future performance of the firms because all of the economic plans can be affected if something that happen unexpectedly.

Supplier: Because supplier also the trade creditors of firms, they need to understand the cash flow and the current ratio (ability to meet short term liabilities) and also factor in the future cash flow and the strategies to determine whether they should associate