Thursday, July 11, 2013

Determining information needs and Cost of producing Acc info

Determining information needs and Cost of producing Acc info

Determining information needs:

The types of accounting information that a company must develop vary with such factors as the size of the organization, whether it is publicity owned, and the philosophy of management. The need for some types of accounting information may be prescribed by law. For example, income tax regulations require every business to have an accounting system that can measure the company’s taxable income and explain the nature and source of every item in the company’s income tax. Federal securities laws require publicity owned companies to prepare financial statements in conformity with generally accepted accounting principles. These statements must be filed with the securities and exchange commission, distributed to stockholders, and made available to the public.
Other types of accounting information are required as matters of practical necessity.
For example, every business needs to know the amounts receivable from each customer and the amounts owed to each creditor.
 Although much accounting information clearly is essential to business operations, management still has many choices as to the types and amount of accounting information to be developed. For example, should the accounting system of a department store measure measure separately the sales of each department and of different types of merchandise?
The answer to such questions depends on how useful management considers the information not be and the cost of developing the information.

Cost of producing Accounting information:
Accounting Systems should be cost-effective-- that is, the value of the information produced should exceed the cost of producing it, management has no choice but to produce the types of accounting reports required by law, in other cases, however, management may use cost-effectiveness as the criterion for deciding whether or not to produce the information.
In recent years, the development and installation of computer-based accounting systems have increased greatly the types and amount of accounting information that can be produced in a cost-effective manner.
Educational institutions information

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