10 Users of Accounting Information You Must Know

The users of accounting information.Accounting is a language that communicates economic information to people who have an interest in an organization – managers, shareholders and potential investors, employees, creditors and the government. Managers require information that will assist them in their decision-making and control activities; for example, information is needed on the estimated selling prices, costs, demand, competitive position and profitability of various products that are made by the organization. Shareholders require information on the value of their investment and the income that is derived from their shareholding. Employees require information on the ability of the firm to meet wage demands and avoid redundancies.

Accounting information is not confined to business organizations. Accounting information about individuals is also important and is used by other individuals; for example, credit will only be extended to an individual after the prospective borrower has furnished a reasonable accounting of his private financial affairs. Non-profit-making organizations such as churches, charitable organizations, clubs, and government units such as local authorities, also require accounting information for decision-making, and for reporting the results of their activities.

For example, a cricket club will require information on the cost of undertaking its various activities so that a decision can be made as to the amount of the annual subscription that it will charge to its members. Similarly, local authorities need information on the costs of undertaking specific activities so that decisions can be made as to which activities will be undertaken and the resources that must be raised to finance them and the resources that must be raised to finance them.

The foregoing discussion has indicated that there are many users of accounting information who require information for decision-making. The objective of accounting is to provide sufficient information to meet the needs of the various users at the lowest possible cost. Obviously, the benefit derived from using an information system for decision-making must be greater than the cost of operating the system.

10 Users of Accounting Information You Must Know.

Based on this, the classification can be performed by accounting information systems.

• Financial Accounting
  • Based on external users of a company such as: customers, suppliers, investors, unions, etc.
• Administrative or management accounting
  • Based on the internal team of a company such as managers, partners and owners.

This being the case, the nature of the users of financial information depends on the type of data being analyzed. Each type of user requires specific information, according to the needs for their decision-making or the relevant financial process. Users can be identified as:

• Investors
  • Which are looking for specific information to help them calculate the risk or return of their operations, for example: the ability of a company to pay dividends.
• Customers
  • This is typically a long-term, involved consumer who is interested in data on the continuity of an organization.
• Owners or partners
  • They wait for exact results about your business to know your profits and the performance of your company.
• Employees
  • The trade union groups and the employees themselves need information on the financial situation of the company.
• Public administration
  • Government entities interested mainly in the development of companies and monitoring of workers for the distribution of their own resources.
• General public
  • Not all people consult financial information but it is a fact that all are directly or indirectly impacted by what they can seek to be aware of their labor sector and the companies in it.

The users of the information are very diverse and each one needs specific data to make decisions , for this reason it requires accurate and timely information on the solvency, liquidity, operational efficiency and financial risk of the organization.

You must be selective about the information, so it is important to consider that the financial statements of an entity include: the financial position, operating activity, cash flows and other accounting policies.