Concept explainers
Identify the following characteristics as primarily related to financial accounting (FA) or
Identify whether the financial accounting or the managerial accounting to help the creditors for make the lending decisions.
Answer to Problem 1TI
Financial accounting is helpful to creditors for making lending decisions.
Explanation of Solution
Financial accounting: Financial accounting is the process of measuring the business activities of an organisation and communicating those measurements to investors, creditors and other external parties who depend upon the accounting information for making investment and lending decisions.
Managerial accounting: Managerial accounting is the process of interpreting the financial information, and communicating it to the internal users, and managers in order to help them in the decision making process to achieve the goals of the organization.
Primarily the users of financial accounting are the external users, such as stockholders, government, and creditors, whereas the primary users of managerial accounting are internal users, such as managers, and employees of the company.
Therefore, financial accounting helps the creditors to make the lending decisions.
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