Accounting is important for managers because it allows them to keep track of the financial situation of their company, its income and expenses, making predictions. Being responsible for the company’s financial success, managers are also responsible for filing financial statements timely and appropriately, so that all the performance of the company is correctly and truthfully reflected in them. Knowledge about accounting ensures that managers do not make mistakes which may dangerous consequences to all stakeholders within the firm. It also ensures that managers correctly interpret the information contained in financial statements, which is crucial for decision making within the firm. There is even a special type of accounting, called management accounting. It is defined as “the process of identifying, measuring, analyzing, interpreting, and communicating information for the pursuit of an organization’s goals” (Investopedia 2016), and it is different from financial accounting in that it is intended for the internal use within the organization (Drury 2007).I had to use financial statements on several occasions. First of all, I used them during the project in my finance class where I was asked to conduct a financial analysis of Apple Inc. So, I had to analyse both an income statement and a balance sheet of the company which I retrieved from Yahoo Finance. Secondly, my elder brother and I have made an investment in a portfolio of stock which included equities of large manufacturing companies such as Ford and General Motors. Before making the investment, we had to analyse financial position of several companies which entered the portfolio. As a matter of fact, we have studied the past financial performance of three or four companies based on their financial reports, and made predictions on their future performance using this historic information and capital asset pricing model (CAPM).
- Drury, C. (2007). Differences between management accounting and financial accounting. Management and Cost Accounting, p. 7
- Investopedia. (2016). Managerial Accounting Definition. Available at http://www.investopedia.com/terms/m/managerialaccounting.asp#ixzz42Nblyn2i
