Accountancy is the process of communicating financial information about a business entity to users such as shareholders and managers.
Users of Accounting Information:
1. External Users
2. Internal Users
1. External Users: Individuals/entities that have a financial stake or interest in the organization that are NOT directly involved in the managing and operating the organization.
Creditors: For determining the credit worthiness of the organization. Terms of credit are set by creditors according to the assessment of their customers' financial health. Creditors include suppliers as well as lenders of finance such as banks.
Tax Authorities: For determining the credibility of the tax returns filed on behalf of the company.
Customers: For assessing the financial position of its suppliers which is necessary for them to maintain a stable source of supply in the long term.
Regulatory Authorities: For ensuring that the company's disclosure of accounting information is in accordance with the rules and regulations set in order to protect the interests of the stakeholders who rely on such information in forming their decisions.
Investors: For analysing the feasibility of investing in the company want to make sure they can earn a reasonable return on their investment before they commit any financial resources to the company.
Members of Non- profit Organisations: Members of non-profit organisations, such as school, colleges, hospitals, club, charitable institutions etc., need accounting information to know how their contributed funds being utilised.
Government: Central and state government are interested in the accounting information because they want to know earnings or sales for a particular period for purposes of taxation.
Research Scholars: Accounting information, being a mirror of the financial performance of a business organisation, is to immense value to the research scholar who wants to make a study into the financial operation of a particular firm.
2. Internal Users
Management: For analysing the organization's performance and position and taking appropriate measures to improve the company results.
Employees: For assessing company's profitability and its consequence on their future remuneration and job security.
Owners: For analysing the viability and profitability of their investment and determining any future course of action.
Internal Auditors: An auditor who is an employee of the company whose records are audited and who provides information to the management and board of directors
Budget Officers: A budget officer is a trained professional who works to keep the budget balanced for a company over a set period. The budget officer is responsible for verifying how the funds are being spent and that the annual report for the company is created with truthful and reliable figures.
