USERS OF ACCOUNTING INFORMATION

USERS OF ACCOUNTING INFORMATION

According to Walter B. Meigs (1997) Accounting is commonly referred to as the language of business since the basic function of a language is to serve a means of communication, the above statement applied in business situation means that accounting is used to communicate matters relating to various aspect of business operations.

As individual enterprise keeps their account separately the attempt to communicate is essentially from a business enterprise to various individual groups and institution which are interested in the operation of that organization. Now although accounting is commonly identified with business, the business enterprise is not the only type of statement of financial position.

USERS OF ACCOUNTING INFORMATION

The users of accounting information are many and diverse such user are as follows:

1. Owners: Owners of the business have an obvious interest in the information provided by the accounting system; they assume the primary risk of the business by investing their money. They are naturally interested in obtaining accounting information that tells them something about the operation of their business and how much it is earning.

 Owners use accounting information to measure performance, compare their company with competitor and make decision to increase or decrease their ownership.

2. Creditors: A creditor is an individual or institution that provides parts of an organization resources by lending it money. Creditors earn income by providing resources to business, so their activities represent investment although creditors are not owners of the business to which they lend money, creditors are interested in analyzing the organizational financial statement to determine or ensure that their investment is safe, that interest due to them can be paid and that their money can be repaid as at when due.

3. MANAGERS: Accounting reports are clearly important to managers who must ensure that the organizations satisfy the long range goals of producing profits.

In addition to external financial statements managers need more detailed internal report broken down by operating division within the organization area of responsibilities.

4. GOVERNMENT: Numerous government agencies depending on accounting information of business. They need to determine that business are meeting their legal obligation in terms of paying taxes, contributing to social security, benefit for their employees and satisfy federal and state regulation such as those concerning the registration and trading of their stocks.

5. EMPLOYEES: The employees of large organization are virtually interested in the result of organizational operation. They use financial statement to determine if they are obtaining a fair share of the resources distributed by organization to bargain for wages and fringe benefit and to counter management claims during such bargaining prospective employment frequently instigate organization to accept a position by examining its financial statement in order to learn something about the organizations operation growth prospect and profitability.

6. FINANCIAL ANALYST: Many investment decision are made on the advice of financial analyst who are experts in analyzing accounting report, security analysts employed by stock brokerage firms frequently advice clients on buying and selling stocks of corporation. Many banks pension trustee, educational institution and other institutional investors employ their own financial analyst staffs who analyze financial statement and express their judgment on the performance of business.

7. INVESTORS: This is another set or group which make use of accounting information whether or not they employ security analyst for investment advice. According to Walgan Bach (1988) investor depends on accounting information for making investment decision prior to committing their resources to a business in form of loan or ownership, investor need to make careful investigation to determine that particular business represent an investment appropriate for their needs. The most significant aspect of such investment is an investor do not seek a controlling interest when they buy stock, instead they interest with expectation of earning a return on their investment. The return on stock investment has two components.

When considering an investment of this type, the investor has the problem of predicting the future income and growth of the business; investors are interested in enterprise growth increase. The income statement provides significance information for the investors such as revenue from products income and earning per share.