Here are the Users & Uses of Accounting Information:
Accounting information serves various users and purposes within and outside an organization.
The users of accounting information may broadly be classified into two groups:
Internal Users:
Internal users are individuals or groups within the organization who use accounting information for decision-making and management purposes.
Some of the internal users are:
Board of directors (BOD):
The Board of Directors is a group of elected or appointed individuals who represent the shareholders’ interests and oversee the management of the company. They use accounting information for various purposes, including: Strategic Decision-Making, Performance Monitoring, Risk Management etc.
• It formulates plans and policies for both short-run and long-run.
Managers:
Managers at various levels within an organization use accounting information for day-to-day operations, planning, and decision-making. Their use of accounting information includes: Budgeting and Planning, Performance Evaluation, Decision-Making etc.
Accountant and Others:
Accounting professionals within an organization, including accountants, controllers, and finance staff, play a crucial role in generating, analyzing, and interpreting accounting information. Their responsibilities include: Recording Transactions, Financial Reporting, Analysis and Interpretation etc.
External Users:
External users are individuals or entities outside the organization who rely on accounting information to make decisions or evaluate the financial health and performance of the entity.
Some of the external users are:
Investors/shareholders:
Investors and shareholders are external parties who have invested capital in the company. They use accounting information to assess the company’s financial health and make informed investment decisions.
Lenders:
Lenders, including banks and financial institutions, use accounting information to evaluate the creditworthiness of a company before extending loans or credit.
Suppliers:
Suppliers use accounting information to evaluate the financial stability and creditworthiness of their customers. Suppliers may offer favorable credit terms or adjust payment terms based on their assessment of the customer’s financial position, which can be derived from financial statements.
Customers:
Customers may use accounting information to assess the financial stability and reliability of the businesses they engage with. They may prefer to establish relationships with financially stable suppliers to ensure a reliable and consistent source of products or services.
Government:
Government agencies use accounting information for regulatory and taxation purposes. They may also be interested in the economic impact of businesses on the broader economy. They use financial statements to verify the accuracy of tax returns and ensure that companies comply with taxation regulations.
