1.2 Stakeholders and their decision-making needs

Question 1

Define ‘stakeholders’.

Answer 1

Users of accounting and non-accounting information of a business for decision making OR groups of people (interested parties) who will make use of information about the business to make decisions.

Question 2

State the stakeholders who are interested in the affairs of the business and make use of the accounting information for decision-making.

Answer 2

1. owners and shareholders
2. managers
3. employees
4. lenders
5. suppliers
6. customers
7. government
8. competitors

Question 3

State examples of accounting information needed by shareholders and investors for decision making.

Answer 3

Profit, assets and liabilities. The amount received in return for the investment made.

Question 4

State examples of accounting information needed by managers for decision making.

Answer 4

All information, i.e. all types of financial information to make decisions on how to plan, control, monitor and operate the business. E.g. whether to open another store next year; whether to buy more inventory.

Question 5

State examples of accounting information needed by employees for decision making.

Answer 5

Profit and cash.

E.g. is the business profitable enough so that they can evaluate their career prospects with the business and whether to expect any bonuses? Does the business have sufficient cash to pay their salaries promptly?

Question 6

State examples of accounting information needed by lenders (e.g. banks) for decision making.

Answer 6

Profit, assets and liabilities

Question 7

State examples of accounting information needed by suppliers for decision making.

Answer 7

Profit, cash and liabilities.

Question 8

State examples of accounting information needed by customers for decision making.

Answer 8

Profit

Question 9

State examples of accounting information needed by the government for decision making.

Answer 9

Income and profit.

Question 10

State examples of accounting information needed by competitors for decision making.

Answer 10

Income and profit.

Question 11

State examples of non-accounting information needed by owners and managers of a business when deciding which legal form of business to set up.

Answer 11

Page 10 of Text Book: Examples of Non-Accounting Information

Which legal form of business to set up

• owner / owner’s expertise
• nature of business
• capital commitment for initial set-up
• risk
• level of control desired
• lifespan
• transferability of ownership

Which goods to buy

• ​types of storage
• nature of product
• consumer preference

Credit worthiness of customer

• economic outlook
• specific industry outlook
• reputation of customer
• customer’s history of repayment

Etc.

Question 12

State examples of accounting information needed by owners and managers of a business when deciding which goods to buy (Chapter 9 Inventories).

Answer 12

• cost of inventory
• storage cost
• gross profit margin
• rate of inventory turnover (times)
• day sales in inventory (days)

Question 13

State examples of accounting information needed by owners and managers of a business when deciding on the credit worthiness of the customer. (Chapter 10 Trade Receivables)

Answer 13

• trade receivables balance
• credit terms and cash discount
• number of days trade receivables are overdue
• existing customer’s history of repayment
• rate of trade receivable turnover (times)
• trade receivable collection period (days)

Question 14

State examples of non-accounting information needed by owners and managers of a business when deciding on the credit worthiness of the customer. (Chapter 10 Trade Receivables)

Answer 14

• economic outlook
• specific industry outlook
• reputation of customer
• customer’s history of repayment

Question 15

State examples of accounting information needed by owners and managers of a business when deciding whether to buy or rent non-current assets.

(Chapter 11 Non-current Assets - O Level)

Answer 15

• business’ current financial situation
• cost of ownership versus renting

Question 16

State examples of non-accounting information** needed by owners and managers of a business when deciding **whether to buy or rent non-current assets.

(Chapter 11 Non-current Assets - O Level)

Answer 16

• Advantages and / or disadvantages of buying or renting

Question 17

State examples of accounting information** needed by owners and managers of a business when **deciding which non-current assets to buy.

(Chapter 11 Non-current Assets - O Level)

Answer 17

• price of non-current assets
• installation cost
• cost of maintaining the non-current assets
• related repair cost

Question 18

State examples of non-accounting information needed by owners and managers of a business when deciding which non-current assets to buy.

(Chapter 11 Non-current Assets - O Level)

Answer 18

• purpose of the non-current assets
• features of the non-current assets
• customers’ reviews of the non-current assets
• warranty

Question 19

State examples of accounting information** needed by owners and managers of a business when **deciding which supplier to buy from.

(Chapter 12 Trade Payables)

Answer 19

• cost of inventory
• credit terms
• cash discount
• cost of supplies
• cost of non-current assets
• delivery charges
• trade discount
• cost of services

Question 20

State examples of non-accounting information** needed by owners and managers of a business when **deciding which supplier to buy from.

(Chapter 12 Trade Payables)

Answer 20

• local or overseas supplier
• after-sales service
• return policy
• online vs brick and mortal supplier
• reputation of supplier warranty

Question 21

What does accounting information refer to?

Answer 21

Information usually generated by the accounting information system and is largely information that can be extracted from journals, ledger accounts and financial statements.

Question 22

What does non-accounting information refer to?

Answer 22

Information about the operation of a business not found in journals, ledger accounts or financial statements. Non-accounting information refers to qualitative factors that may reflect current or future trends and fundamentals of a business but are not captured by the accounting information.

Question 23

Explain why stakeholders of a business are interested in accounting information.

Answer 23

They make use of information about the busines to make decisions, i.e. they rely on the accounting information for decision making purposes.

Question 24

Explain why owners and managers of a business are interested in non-accounting information.

Answer 24

Making decisions with only accounting information may cause stakeholders to leave out important business-related factors that are not shown on the financial statements but may affect decisions.