Accounting is the process of recording, classifying, selecting, measuring, interpreting and communicating financial data of an organisation to enable users make decision. Although every business needs accounting, there are specific people who needs accounting information the most.
Who Are The Users Of Accounting Information?
The principal users of accounting information include:
- Tax authorities
I will discuss the users of accounting information in details
These are people who manage the affairs of the business for the owners. In a limited liability company, they are the members of the board of directors and other management staffs. They need accounting information to get the efficiency of the policy they formulate and to plan and control the resources of the business.
They need accounting information to enable them decide how secure their job is and the ability of the business to pay good salaries and provide good welfare facilities.
They are interested in the affairs of the company. They want to know what the organization owns (assets), and what it owes (liability). They are also in profits made by the organization which guarantees a dividend at the end of the financial year.
These are customers that sell things on credit to the organization. They use accounting information to determine if the organization has the potential to redeem the payment on maturity.
5. Banks And Other Financial Institutions
The financial statement enable them to decide whether more credit facilities can be granted and whether the company will be able to pay interest and principal when are due. They are interested in the reliability, profitability of underlying assets
They make use of accounting information in other for them to fix their own prices to fix their own prices and determine their position in the market.
7. Financial Analysts
They help investors and potential investors to evaluate investments in a particular business. Accounting information assists in the selection of appropriate investments for their clients.
8. Tax Authority
Profits determine the tax payable by the company and its employees.
Government uses accounting information to keep the statistics of the economic development to discover the rate of growth of the national economy within a specific period of time.