Users of accounting information


Users of accounting information

Users of accounting information are the various parties who need accounting information in order to make decisions, which are then communicated to others. It is for this reason that accounting is often described as the "language of business" because it is the medium of communication between the various parties interested in operational and financial activities of a business.  Following is a description of information interests of the different groups of users of accounting information.

Owners/Shareholders

This group's interest in accounting information lies in the fact that it is their money which is invested in the firm.  They would like to ensure that they are getting a good return on their investment.  This is assessed by how much profit the firm is making and whether their investment is increasing in value.  For shareholders in companies this means they will get good dividends and the market value of their shares will increase and they can make capital gains if these were sold.

Management

Boards of Directors and Managers use accounting information for making internal decisions and in planning business operations.  They are responsible to the owners/shareholders in carrying out policies and directives, and in running the business efficiently and effectively.

Banks/loan companies

This group is interested not only in the firm's profitability but also in its ability to repay loans.  They rely on the financial reports as the basis of assessing the firm's liquidity position and the firm's long term likelihood of survival.

Employees

They are part of the organization and feel that their efforts contribute to a firm's profits.  Accounting information will be their basis for claiming bonus and salary increases.  A stable financial position of the firm also gives an indication of job security.

Suppliers

Suppliers usually extend credit to the firm for goods supplied and they want to be assured of timely payments of accounts due.  Their interest in accounting information will be similar to that of the banks and loan companies, that is, has the firm sufficient funds to pay its maturing obligations?

Customers

The regular customers of the firm usually rely on it for steady supply of their merchandise for re-sale or of raw materials in case of manufacturing firms.  Therefore, they are interested to know if the firm is able to continue its operations on a long-term basis and is capable of meeting its customers' demand for goods.

Prospective Investors/Analysts

These are interested in a firm's profitability and potential for growth.  Prospective investors rely on accounting information in making their investment decisions. In giving advice to prospective and existing investors, analysts also make use of accounting information.

Government

Various government ministries and departments have interest in firms' accounting reports as the basis for taxation, enactment of laws for the industry and provision of social services to the public. The government may also want to ensure that the firm complies with laws on for example, wage payments and employee benefits.

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