QUESTION 3 Explain why and in what ways the information need

QUESTION 3 Explain why, and in what ways, the information needs of owners, lenders and employees of a company vary. (20 marks) QUESTION 4 Explain what an accounting convention is and expand this explanation by discussing the nature of, and problems with, the business entity, historic cost, and going concern conventions (20 marks) OIESTIONS

Solution

ANSWER: The information needs of owners, lenders and employees of a company may vary due diverse purposes, thus, the purpose of information is to cater for the requirement of the users that could lead them to conclude better financial decisions

--Owner: Owners use the accounting information for analyzing the success, profitability and viability of their investments. It enables them to assess the ability of the company to pay dividends. It also result to determine any future course of action

--Lenders: Lenders of funds such as banks and other financial institutions wants to know the company’s ability to pay liabilities upon maturity

--Employees: Employees are interested in the stability and profitability of the company. The information helps to find out the financial health, amount of profitability and sales of business to determine their job security, retirement benefits, the possibility of future remuneration, and job opportunities. Employees may also be interested in its financial performance and position to assess business expansion possibilities and career development opportunities.