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Explain ways accounting data is used for business decisions

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You have been hired as the CFO of a new company and are determining the company's accounting needs.

1. Explain to your staff at least 2 ways in which accounting data are used to make business decisions.
2. Explain at least three related accounting terms or theories.

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Solution Summary

Your tutorial is 363 words and discusses budgeting, product cost, and attributes of financial statements (reliability, relevance, historical cost). The discussion shows how the three attributes of financial statements are related.

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1. Explain to your staff at least 2 ways in which accounting data are used to make business decisions.

There are many ways that accounting data are used to make business decisions.

One way is by studying the differences between budget and actual amounts. Budgets are the plan and imply authorized levels of spending. When the actual spending differs, we ask managers to explain the variances. This helps us to know if our understanding of costs may have changed, whether the manager did a good job containing costs, and whether all the activities were authorized within the budget parameters. The variances also typically tell us whether things have ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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