Users of an Accounting Information
Accounting information provides financial and economic information of an organization to managers and other users. It includes information in financial statements, profit and loss accounts, and balance sheets.
Internal users of accounting information are concerned with management. They are involved in different management functions of an organization, for example, sales manager, production manager, finance directors, and other company staff. They need accounting information to perform management activities such as planning, organizing, staffing, directing, controlling, and running a business smoothly. Accounting provides internal reports such as financial comparison of operating alternatives, income projection from new products, and forecasting of cash needed for coming years to the internal users.
The external users are not associated with the management and operation of a business concern. However, they need accounting information as they need to know processes of business concern since they are closely associated. Some external users they need accounting information are:
- Current Stockholder:
The stockholder needs accounting information to decide whether to continue holding or selling the stock.
- Potential Shareholder:
Potential shareholder needs the accounting information to choose stock among competing alternative investments.
- Bondholders, bankers, and other creditors:
A potential bondholder wants to be ensured that the company will be able to pay back the amount owed at maturity and the periodic interest payments. Similarly, a bank needs financial information that will help it determine the company’s ability to pay the principal and interest.
- Government agencies:
The government needs financial information to decide on permitting the contraction or expansion of business, import/export, etc. Therefore, in many cases, it becomes mandatory for the company to submit its financial information to different government agencies as prescribed by law.
The public needs accounting information about employment opportunities and discharge responsibility toward society.
The employees are also interested in accounting information since their present and future are associated with the concern.
When the suppliers sell the goods on credit, they want to pay on time. Hence, they are interested in the accounting information of the concerned organizations.
The customers want to know whether the concern can supply goods continuously or not.
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