Users of Accounting Information - Essay Example

Finance & Accounting al Affiliation) Users of Accounting Information Accounting is the art of collecting, recording, summarizing and reporting accounting information in form of financial statements to various stakeholders both internal and external (Schneier, 2013). These financial statements include the statement of financial position which informs the user of specific accounts the company contains and what the balance is in each account, income statement which tells the user the quantity of money the company has made or lost and statement of cash flow which shows what contributed to revenue and expenses (Schneier, 2013). There are also retained earnings, which tell the user the portion of the net income reinvested in the company. The Generally Accepted Principles should be followed in provision of reports to be used by external persons. Accounting has some divisions i.e. cost accounting, managerial accounting, and financial accounting. Management accounting aims at providing information to the company management for the purpose of management decision. Cost accounting is the formation of financial plans, average costs, and actual costs of operation for production or processes and determining the variances on the desired results.Variuos users of accounting information have different interests in the information (Schneier, 2013). These users are internal and external. Internal users of accounting information Firstly, the owners and investors of the business have a keen interest in the accounts kept by the business. Business owners are interested in knowing whether their funds are being misappropriated and not used in the desired manner (Leitner, 2012). The accounting information aids them in knowing the profitability and the financial status of the business in which they have invested their capital. Investors are concerned about risk and return in relation to their investment (Leitner, 2012). This helps them in making a decision on whether to continue investing in the business. It is also helps assess whether the business will be able to pay off dividends. Managers are also users interested in the accounting information. In small businesses, the management may comprise owners also. However, in large businesses, the management is made of employed experts who are delegated with responsibility of carrying out the business or a portion of it. The accounting information helps the managers in the performance measurement. The outcomes of the appraisal are then used to correct any discrepancies (Leitner, 2012). Managers are encountered with economic decisions that should be made regarding the business which require analysis of accounting information. Employees of the organization are another group of users of accounting information. They can obtain the real information about the financial position of the organization with the aid of financial accountants who prepared the accounts. Their interest is majorly on the company’s constancy and profitability to ascertain whether the company is able to pay salaries and providing employee benefits. Some may asses the company’s expansion potential and career opportunities. Internal auditors are regulators of activities to inhibit fraud. They enhance proficiency, worth and compliance with of the accounting information to the set standards and laws and regulations. They inspect the records to ensure accuracy and make sure that that controls are put in place to prevent fraud and waste. External users of accounting information The accounting information has external users also just like there are internal users; these external users have different interests in the accounts. Customers often get interested in the business’ capability to continue its presence and its permanency of operations when there is a long-term connection contract with the business. This always happens when the customer exclusively depends on the organization. For instance, a reseller, this is the customer in this case and depends on the company to produce for him or her to get the items that he purchases for resale. The critical element in business control and planning is the competitor analysis and accounting. Getting a proper understanding of the company’s competitor performance and some of the way to know their performance is by checking their accounts. It will benefit the company in several ways including industry bench marking, learning from the competitors, positioning, and identification of opportunities and threats. Governments are also keen observers of the accounts of the organization. Administration bodies of the state specifically the tax authorities are concerned with the financial information of the organization for taxation and other supervisory drives. For instance, the Competition Commission and the Environment Agency necessitate evidence that back decisions about seizures and endowments. The state will be interested in knowing how much the taxpayer is making to determine the tax to be paid. Investment analysts are another vital group of users precisely for the companies quoted on the stock exchange. Comprehensive financial and other information is required in order to examine the competitive performance of an organization. The bigger section of the desired information is provided by thorough accounting disclosures needed at the stock exchange (Collier, 2012). Other financial information is availed to analysts through formal company updates and interviews. Public is also interested in the accounting information. There are various groups in the public have specific interests in the activities and performance of businesses. Lenders are banks and other financial institutions that provide money to business that later pay back the principle amount plus the agreed interest. Therefore, they require information that aids them ascertain whether loans and interest will be paid when due. It also helps them on decision making on issues such as increase, decrease or maintain the level of loans, or the regaining of the credits and loans contracted and termination of any association with the firm. Suppliers and other trade creditors are concerned with the solvency of the entity to ascertain whether the amounts outstanding will be paid at maturity (Collier, 2012). Moreover, it aids them decisions such as upholding, increasing, or reducing trade associations, introducing commercial contacts, granting or cancelling commercial facilities. External auditor’s obligation is to give an opinion as to whether the presentation of the financial statements has been fairly presented by the management (Collier, 2012). In auditing, the financial statements are appraised by the auditor who has a detailed understanding of auditing, accounting, and financial reporting matters. Additionally, the auditor maintains objectivity during the audit. The auditor carries out an assessment to gauge whether the evidence to raises doubt about the capability of the client to carry on as a going concern in the future. Conclusion The accounting information has huge impact on the company due the many users that make several decisions about the firm by viewing the accounts. The success of the firm to a greater extend depend on the appearance and the content of the financial statements. It is therefore vital for firms to keep proper records. References Schneier, B. (2013). Economics of information security and privacy III. New York, NY: Springer. Leitner, S. (2012). Information quality and management accounting a simulation analysis of biases in costing systems. Berlin: Springer. Collier, P. (2012). Accounting for managers: Interpreting accounting information for decision-making (4th ed.). Hobo Romney, M., & Steinbart, P. (2006). Accounting information systems (10th ed.). Upper Saddle Mancini, D. (2013). Accounting information systems for decision making. Berlin: Springer. River, N.J.: Pearson Prentice Hall. ken, N.J.: Wiley. Simkin, M., & Rose, J. (2013). Accounting information systems (12th ed.). Singapore: Wiley. Collier, P. (2003). Accounting for managers interpreting accounting information for decision-making. West Sussex, England: J. Wiley. Hall, J. (2001). Accounting information systems (3rd ed.). Cincinnati, Ohio: South-Western College Pub. Read More