Users of Accounting Information
Accounting information consists of sets of financial statements which is useful for internal users (primary users) of an organisation as well as external users (secondary users).
Internal Users (Primary Users)
Following are some of the primary users of accounting system:
Management – Organization’s management requires accounting information for analyzing the performance and actual position of the business. Accounting information helps the management to arrive at an evaluated decision. It helps with cost determination, investment decisions, helps to identify warning signals in case of a down fall etc.
Owners/Partners – Owners are more concerned on the returns they get out of their investment in the organisation and this purpose if fulfilled through the accounting information. Not only do they want their capital safe they are also interested in knowing the profit earned or loss incurred by the business time to time.
Employees – Employees are interested to know the accounting details of their organisation so that they are aware about overall profitability of the company which has a direct impact on their remuneration and job security.
External Users (Secondary Users)
Following are some of the secondary users of accounting system:
Investors – Similar to owners, external investors are concerned about their ROI (Return on Investment) from the organisation. Since investors do not have a direct control over the business operations they use accounting information to find out how their money is being spent by the managers. It helps them in decision-making such as whether to increase, decrease or hold their investments.
Banks & NBFCs – They are a crucial part of any business environment since they advance both short & long-term loans to a business. Accounting information helps them in determining the credit worthiness of the organisation. Based on financial health of an organisation, the future terms and conditions of credit are assessed by the Banks and NBFCs.
Regulatory and Tax Authorities – Regulatory Authorities including the govt. agencies ensure that the accounting information is prepared based on the accounting principles, standards and rules & regulations governing the organisation. The primary objective is to protect the interest of the stakeholders of the organisation. Correct tax evaluation is also done by the authorities after analyzing the financial statements.
Customers – They are a complex group which include producers at every level of processing, wholesalers and retailers & the end users. Good financial health shows that customers at each level are comfortable with continuous inflow of stock from the business. Customers use the accounting information for assessing the financial position of its suppliers which is essential for maintaining stable source of supply in future.
Suppliers – Other businesses which supply goods to an organization on credit would also want to assess the repaying capacity of that organization before providing any form of credit. Accounting information play a crucial role in this case.
Public – General public would want to know the financial health of a business to get a fair idea of the firm’s niche & overall economy of the nation. It can help to analyze employment trends, general financial stability of a country etc.