Question

The most serious problems with accounting systems appear to occur when managers attempt to use accounting information that was developed for ______________ decision making.

Answer 1

Answer:

External Decision Making

Explanation:

Accounting Information refers to economic information about the true state of an organisation and the end purpose of an accounting information is to provide relevant, dependable and timely information that can aid users of the information in decision making.

However, every accounting information created, is created with specific users in mind. Defining the users whether internal (management) or external (shareholders, potential investors, government among others) determines the information to include.

For instance, for a manufacturing organisation, information provided for external users will not contain details on issues including adherence to pre-determined standards, it will contain majorly information on the profitability of the business. Such information cannot be used by the managers of the company for monitoring and control functions because it does not contain the specifics of production input, output and then detailed variances from standard set.

Therefore, when managers attempt to use external users' accounting information for  decision making it leads to a serious problem of not been detailed enough for such a purpose.