Posted by Chester Morton / Saturday, 30 April 2016 / No comments
Those who use accounting information
USERS OF ACCOUNTING INFORMATION
These are the group of people who are interested in the
accounting information of a business.
The users of accounting information are also called interest
groups, interest holders or stakeholders. They are under- listed:
Owners or shareholders
They are the owners of the business who provide the risk or
equity (owners) capital of a company. They want information about the
profitability of the business, share prices and dividend payable.
Management
They are responsible for the day-to-day activities of the
company. They need information about the current and future situation of the
business to ensure effective and efficient decisions.
Lenders
These are the providers of loan capital to the business. They
need information about the liquidity of business that shows the ability of the
business to pay interest and the repayment of the principal when due.
Employees
This refers to the labour force found in every business
organization. They work for a reward called wages and salaries. Their interest
in a business organization is to know the type and kinds of bonuses and other
incentives available to them. They are much more concerned with the salary
structure of organizations. They are also interested in growth and
profitability.
Customers
This group of interest holders patronizes (purchase) goods
and services produced by business organizations. In other words, they are those
that goods produced by businesses are sold to, most of the time, on credit.
They need information such as trade and cash discounts available, delivery
periods, payments terms and other trading conditions.
Suppliers and other trade creditors
This group of users sells goods or renders services to
business organizations. That is to say, business organizations buy from these
group of people, most of the time on credit. They, therefore, need information
that will help them to determine the ability of firms or business organizations
to pay back their debts as and when they fall due.
Financial analysts
They need accounting information to be able to measure the
financial strength and the weakness of business organizations.
Government and their agencies
They are interested in assessing the tax payment abilities of
business organizations. They for that matter investigate whether businesses
have actually fulfilled their right tax obligations.
The public or students
These people sometimes need accounting information for their
research works. The public may be interested in knowing their social obligation
of businesses towards society.
Banks and other financial institutions
These are the providers of loan capital to the business. They
need information on the liquidity of businesses that show the ability of the
business to pay interests and the repayments of the principal when due.
SAMPLE QUESTION(S)
1. a. What is financial accounting?
b. Highlight five
categories of people who use financial information.
