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Extra info for Accounting: An Introduction, 4th Edition

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When assessing the value of accounting information we are confronted with similar problems. The provision of accounting information can be very costly; however, the costs are often difficult to quantify. The direct, out-of-pocket, costs such as salaries of accounting staff are not really a problem to identify, but these are only part of the total costs involved. There are also less direct costs such as the cost of the user’s time spent on analysing and interpreting the information contained in reports.

What kinds of business ownership exist? The particular form of business ownership has important implications for accounting purposes and so it is useful to be clear about the main forms of ownership that can arise. There are basically three arrangements: ● ● ● sole proprietorship partnership limited company. Each of these is considered below. Sole proprietorship ➔ Sole proprietorship, as the name suggests, is where an individual is the sole owner of a business. This type of business is often quite small in terms of size (as measured, for example, by sales revenue generated or number of staff employed), however, the number of such businesses is very large indeed.

However, the various sources of information identified are not really substitutes for accounting reports. Rather, they are best used in conjunction with the reports in order to obtain a clearer picture of the financial health of a business. Evidence on the usefulness of accounting ➔ There are arguments and convincing evidence that accounting information is at least perceived as being useful to users. Numerous research surveys have asked users to rank the importance of accounting information, in relation to other sources of information, for decision-making purposes.

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