The Main 6 Users of Accounting Information
The reports generated by the financial and management accountants are useful to different groups of people depending on what they need from the report. This article focuses on the uses of accounting information and users of accounting information such as business owners, government, suppliers, employees, loan providers, and investors.
Users of Accounting Information
The users of accounting information can be grouped into two categories. The first category is the direct users while the second category is indirect users.
The direct users are members of the organization that relied on the accounting information to make daily, routine, and other decisions. These users are the shareholders, managers, etc.
The indirect users are the third party to the organization who relate with the company either directly such as suppliers and customers, or indirectly such as financial analysts and prospective investors and tax authorities.
The main users of accounting information are discussed below.
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1. Shareholders
Shareholders are the owners of a company and they are interested in the performance of the company, which includes the profit earned, dividends to be paid, and net worth of the business. They also like to compare the performance of the company with a similar organization.
2. Government
The government is interested in accounting information to determine the company income tax to be paid, and compliance with government rules and regulations governing the operation of the business. And also to ensure that the interests of the public are protected within the company’s activities.
3. Employees
Employees aim to be sure of the continuous existence of the organization which will guarantee their employment. They also use the financial statement to compare their remuneration in total with other comparable companies in the same industry.
4. Investors
Investors are those who intend to invest in a company and they will compare the returns on their investments and shareholders’ funds with companies of the same nature before investing their money in such a company because they want to maximize wealth.
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5. Loan Providers
Loan providers are banks and other financial institutions. The liquidity position of the company is of paramount importance to this group to ensure the repayment of their loans as when due. The liquidity position of a company is derived from accounting information.
6. Suppliers
Companies rely on suppliers for different inputs such as raw materials, work-in-progress and finished goods on credit. The concern of the suppliers is to know how stable the company is financially to meet their bills and invoices when due.
They want to be sure that their debt will be paid at the required time by the company.
In summary, accounting information is the records, reports, and statements prepared by financial and management accountants for different organizations. The information is useful to different groups of people depending on what they need from the report.
There are direct users of accounting information such as shareholders and managers etc., and indirect users of accounting information such as government and financial analysts, etc.
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