Recording Business Transactions - Accounting Assignment

This article discusses the advantages and disadvantages of profit-making businesses and the users of accounting information. It also covers the importance of accounting information for internal and external stakeholders.

Recording Business Transactions
ACCOUNTING ASSIGNMENT

Table of Contents
Assessment 1...................................................................................................................................3
Part 1............................................................................................................................................3
Part A: Advantages and disadvantages of profit-making business..........................................3
Part B: Users of Accounting information................................................................................5
References........................................................................................................................................8

Assessment 1
Part 1
Part A: Advantages and disadvantages of profit-making business
Advantages
A majoradvantage of the profit-making business it that they take pleasure if they successfully
earn money for its proprietor. Further description of such advantages is enumerated as below:
Money
Major Advantage of a for-profit company is the opportunity of making money. Profit-making
businesses are capable of making profits from a wide collection of business actions that includes
the sale of various kinds of services and products. Owner of the profit-making industry as well
generally have more control over the decisions of trade and investment which are made for their
companies at the time of making money (Wilson, and Wilson, 2017). Further, it can be used for
reinvestment in the corporation for development and expansion.
Ownership and Liability
In addition to the financial rewards, the proprietor of for-profit corporation are their own bosses.
Yet again, the reward and drawback of the same is based on the model of ownership. This form
of business provides the ability to the one person to make independent decisions for the
corporation for its sustainable development (Santos, Pache and Birkhol 2015).
Liquidity of assets
In situations where trade actually goes south, the ultimate advantage for a for-profit company is
that its possessions are extremely liquid (Burns, 2016). Further, after the trade goes low, the
proprietor can still sell the assets of the company for example office equipment, buildings and
industrial equipment to resolve debts or for benefit of business.
Disadvantages

It is not very easy for the profitable business to survive easily as it needs various financial
modelling skills and resources to maintain and develop it (FOOK, 2016). Description of such
disadvantages is enumerated as below:
Unrealistic Revenue Targets
In a profitable venture, aprediction based on impractical assumptions regarding the business
environment typicallygenerateunapproachable revenue targets. This can further cause a severe
cash shortfall for the corporation. Therefore in the world of bigbusinesses, it is referred to as
containing adreamprediction which was not grounded in actuality that iscompetition faced by the
company, the condition of the financial system and apart from the available potential of human
resources (Groesser, and Jovy 2016).
Uses Too Much Time
Too much time and attention are taken in the process of the planning process.A small-business
owner mightdiscover that the planning tasks, for example, gathering knowledge regarding the
financialsurroundings and rivalry, inventivepolicies and making the ensuingmonetary forecast
and following activities take up too much management team and associates time. Therefore for
managing a profitable business needs lots of time.
Taxability and decisions
The main difficulty of a profitable trade is that they have to give taxes on the income earned in
business. However, that’s the major reason because of which various businesses are industrious
in trying to use all obtainable trade income tax deductions. Profitable trades are obliged to make
hard decisions for example rather or not to invest their earnings for extra expansion or to deal out
with investors during dividend payments. Profitable businesses, in addition, have to deal with
sharp 21st-century outlook so that they can balance proceeds with environmental and social
responsibility (Piperopoulos, 2016).

Part B: Users of accounting information
Accounting information is helpful for various stakeholdersto serve their purposes according to
their requirement. People who use of accounting information can be a category within two
groups that are as follows external users and internal users (Libby, 2017). Proprietors and
executive of the organizations are internal users and on the other hand customers and employees,
investors, the general public and employees, creditors of funds, government agencies, are
external users
Internal users include the following users-
Management
Accounting information is used by the management for assessing andexamining financial
performance and position of the organization and for taking vital decisions and suitable actions
for managing activities of commence for better productivity, success and cash flows (Collier,
2015). One of the most important roles of an organization is to set regulations and processes
toattainthe organizationalobjectives. Managementutilizes information produced by financial and
managerial accounting system of the association for such reason.
Owners
Accurate financial information is required by the owners to make further investment decisions.
For this, proper facts are required to estimate the costand the profit occurred during financial
year. Appropriate information helps to decide the future course of actions (Obaidat, 2016).
External usersinclude the following users
Investors
In business, the possession is frequently alienated from the organization. Usually, investors
give resources and further organization helps the business to grow. The secretarial information is
exercised by both actual as well as potential investors. Information is used by actual investors to
identify how their finances are used by the organization and what is the probable performance of
trade in future for its productivity and enlargement. With the help of such information,they make
decision regarding increasing or decreasing investment in business. Potential investors make use

ofofficial information to make decision about a particular corporationwhether it is appropriate for
their investment requirements or not (Andon, Baxter, and Chua, 2015).
Lenders
Lenders are financial institutions or a person’s that usuallyprovide funds to business and make
interest income on it. They require accounting details toevaluate the economic performance and
situations to have a realisticguarantee that the trades to which they are lending money are
capable of returning the major amount in addition to pay interest on it.
Suppliers
Organizations and business individuals are the suppliers that normally sell their products and
goods or raw materials to different companies on credit (Susanto, 2015). Accounting information
is helpful in getting an idea regarding the future credit worthiness of commence and to make a
decision whether or not to carry on providing goods on credit.
Government agencies
For the reason of imposing taxes and regulations, financial information is used by Government
agencies (DASÍ GONZÍLEZet al., 2018).
Customers
Customers get information regarding the current position of a business organization,and with
that, they can predict their future prospects. They can be categories as manufacturers, retailers
and wholesalers.

References
Andon, P., Baxter, J. and Chua, W.F., 2015. Accounting for stakeholders and making accounting
useful. Journal of Management Studies, 52(7), pp.986-1002.
Burns, P., 2016. Entrepreneurship and small business. Palgrave Macmillan Limited, United
kingdom.
Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for decision
making. John Wiley & Sons, United Kingdom.
DASÍ GONZÍLEZ, R.O.S.A., GPMNO RUÍZ, A.M.P.A.R.O., BARGUES, V. and MANUEL, J.,
2018. The Recent Reform of Spanish Local Governmental Accounting: A Critical Perspective
from Local Governmental Accountants as Internal Users of Budgeting and Financial Accounting
Information. Lex Localis-Journal of Local Self-Government, 16(3).
FOOK, Z., 2016, June. Business & Economics. In 24th Annual Beacon Conference June 3,
2016 (Vol. 113, p. 64).
Groesser, S.N. and Jovy, N., 2016. Business model analysis using computational modeling: A
strategy tool for exploration and decision-making. Journal of Management Control, 27(1),
pp.61-88.
Libby, R., 2017. Accounting and human information processing. In The Routledge Companion to
Behavioural Accounting Research (pp. 42-54). Routledge, United Kingdom.
Obaidat, A.N., 2016. Accounting Information: Which Information Attracts Investors Attention
First?. Accounting and Finance Research, 5(3), p.107.
Piperopoulos, P.G., 2016. Entrepreneurship, innovation and business clusters. Routledge, United
Kingdom.
Santos, F., Pache, A.C. and Birkholz, C., 2015. Making hybrids work: Aligning business models
and organizational design for social enterprises. California Management Review, 57(3), pp.36-
58.

Susanto, A., 2015. What factors influence the quality of accounting information —
InternationalJournal of Applied Business and Economic Research, 13(6), pp.3995-4014.
Wilson, C. and Wilson, P., 2017. Make poverty business: increase profits and reduce risks by
engaging with the poor. Routledge, New York.