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Importance of accounting - Essay Example

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The advantage of these systems, compared to the traditional forms of accounting, is their ability to provide to their users access to a wide range of organizational (or personal) financial…
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Download file to see previous pages It is proved that accounting systems can highly influence the decision-making process and that the mode of intervention of these systems in the above process is not standardized. Under these terms, it can be assumed that the view of Thaler on accounting systems, as presented above, is justified.
In order to understand the role of accounting system in the decision-making process it would be necessary to refer to the involvement of accounting information in critical decisions. Indeed, accounting systems affect the decision-making process through the data they incorporate, i.e. through the accounting information. Drury (2007) notes that accounting is used for ‘communicating information to people who have an interest in the organization, i.e. shareholders, employees or even the government’ (Drury 2007, p.4). It is assumed that the primary role of accounting is to provide to individuals critical information in regard to various business activities. Nikolai et al. (2009) note that accounting information has a different role in decision-making. For example, investors use accounting information, as incorporated in a company’s financial reports, in order to decide the level of their investment in the particular organization (Nikolai et al. 2009, p.7). Moreover, stock exchanges also review the accounting information in order to take decisions related to ‘listings, cancellations or rule-making’ (Nikolai et al. 2009, p.7). Accounting information is also valuable in negotiations between employers and trade unions. The latter need accounting information in order to get informed on the financial status of the employer involved and decide on their position and their financial claims (Nikolai et al. 2009, p.7).
According to Hall (2010) accounting information is quite critical in the development of strategic decisions. It is explained that strategic managers have to review their firm’s financial data before taking any decision (Hall ...Download file to see next pagesRead More
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