Accounting data is exceedingly vital in decision-making since it reflects what is transpiring in an organization. The data elaborate the profitability of an entity. On the determination of profitability, the management makes certain decisions. The decisions culminate from the calculation of profitability. The management will institute specific measures if the entity generates losses. The measures will seek to change the fortunes of the entity. The measures will primarily aim at reducing cost and boosting revenues. These decisions result from the findings that resulted from accounting data. Conversely, if the profitability of such an entity is good, then the entity may seek to expand its operations to capture additional clientele. Accounting data is imperative in decision-making in entities. Similarly, if an entity wants to offer its share in the exchange, there are specific conditions that it ought to fulfil. The conditions include consistent profitability in the last half a decade. The management analyzes the profitability of the entity via accounting data and consequently applies for listing of the entity at the exchange (Vasarhelyi, 2005).
Related accounting terms
Auditing
Auditing denotes evaluation of accounts to establish if they make an apt representation of the entity affairs. This is an imperative undertaking that boost the credibility of records. Additionally, it unravels fraud and illegal dealings (Vasarhelyi, 2005).
Qualified report
This term denotes auditor’s opinion on the records prepared. The auditor issues this opinion when he/she discovers that the records do not reflect an organization’s affairs credibly. This may result from material errors and inadequate disclosures of items (Vasarhelyi, 2005).
Unqualified report
This opinion signifies auditor’s satisfaction with the reporting in the entity. Additionally, it reveals adoption of appropriate disclosures and the going concern basis (Vasarhelyi, 2005).
References
Vasarhelyi, M. (2005). Artificial Intelligence in Accounting & Auditing: International Perspectives. New Jersey, NJ: Markus Weiner publisher.