11 Users of Accounting

11 Users of accounting information

In this lesson we learn about users of accounting information.

Accounting helps users in making better financial decisions.

But you may be wondering:
• Who are the users of accounting information?
• What information do the users need?

Users of accounting are both internal and external to the organization.

Internal users include owners, managers and employees of the business.

Owners

Owners need to know how well their business is performing. Owners assess the profitability and risk of their investment from financial statements.

Managers

Managers require accounting information to prepare budgets that specify how an organization plans to use its limited resources. Managers also need accounting information to monitor the performance of the organization and to make business decisions.

Employees

Employees are interested in knowing how well a company is performing as it could have implications for their job security and income. Employees working in the finance department prepare, summarize and report accounting information for other users.

External users of accounting include investors, lenders, suppliers, customers, tax authorities, government, auditors and public.

Investors

Investors need to know how well their investment is performing. Investors rely on financial statements to assess the profitability, risk and worth of their investment.

Lenders

Lenders require accounting information of borrowers to assess their credit worthiness.

Suppliers

Like lenders, suppliers also need accounting information of customers to assess their credit worthiness.

Customers

Industrial customers need accounting information of suppliers to assess their ability to deliver goods and services on a reliable basis in the future.

Tax Authorities

Tax authorities review accounting information of businesses to determine whether they declared the correct amount of tax in their tax returns.

Government

Regulatory agencies of government review accounting information of organizations to monitor compliance with accounting and financial regulations.

Auditors

Auditors inspect the financial statements and accounting records of organizations to determine their accuracy.

Public

General public may also be interested in the accounting information of a company. These could include journalist, analysts, academics, activists and other individuals with an interest in economic developments.

Additional Reading:
https://accounting-simplified.com/fin...