The Uses of Accounting Information

Accounting information is put into different uses as explained below.

Accounting information is useful to predict and evaluate company’s cash flows which creditors, loan providers and those in similar category can relied on.

The use of accounting information helps in business analysis especially when there is need to predict, evaluate and compare financial performance of a company

Accounting information provides the required essential financial information that is useful for making economic decisions at different levels for individuals and organisations.

Accounting information is used to determine financial ability of company’s management. This explains and reveals how the company’s resources are channelled towards the firm objectives.

Accounting information is used by the government to determining the tax payable by companies on their profits, and for individuals such as pay as you earn, and other tax payable such as VAT. All these are used by the government to formulate fiscal policy.

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Accounting information is used by company’s management for daily and routine planning and control of the company’s resources to achieve the company’s objectives.

The activities of organisation as it affects the public are reported using accounting information.

Investment decisions by shareholders and future investors are based on accounting information provided at a particular period of time.

In summary, accounting information are the records, reports and statements prepared by financial and management accountants for different organisations. 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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