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Fundamental Accounting Principles

At the moment I am currently studying financial accounting techniques, my tutor gave me this question for pre exam work however I am having difficulty understanding the topic in general. the question he has given to the class is ' What is the purpose of producing accounting information and describe the main users of this information'. you probably find this easy but all i manage to understand is that the main users are shareholders and directors. Apart from that I cant understand why they use them fully. Please help me if you can and also please add some clear examples so I can understand the question. I appreciate your help.

Kind Regards

Solution Preview

Hi there,
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<br>I will do my best to elaborate on your original thought:
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<br>Why do people need and want accounting information?
<br>The more and better info or knowledge a person has a bout a situation, the better decisions he can make. Without info or knowledge, a decision is nothing more than a guess. For example, suppose you wanted to take a vacation over the winter. You see an ad in the newspaper promoting a country as a fabulous destination. Assuming that you have never been to that country before and know little about it, would you simply accept the ad at face value? Most people would not. You would probabl want to find out what the country was like and whether it suited your requirements for a vacation. You would want to know what the weather would be like, etc. Some people might not do all this research on their own. They might consult with expert sources that specialize in gathering travel info. For example a travel agent of a travel guide.
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<br>Not all info is equal. In making a decision you will generally place more weight on the info that is the most reliable and most relevant to your needs. As a practical matter, it is usually not possible to colect all information on a subject, as gathering info is costly. At some point the benefit of obtaining more info is not worth the cost. This ...

Solution Summary

This question involves the fundamentals of accounting

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