-Harsha Lal- ACW Accounts at Edumarz
Answer- Accounting provides information to those users who have an interest in it. The data is communicated in the form of reports, statements, graphs and charts. It helps them to form good financial decisions. Accounting uses are –
Internal users- These people run , manage and operate the day-to-day activities of an organization. They’re inquisitive about the inner matters of the organization. They’re directly related to the organization. Such as- Owners, employees, Mainly management, who need timely information on cost of sales, profitability, etc. for planning, controlling and decision-making.
External users- These people aren’t directly involved with the organization, but they’re the people working outside the organization and aren’t a part of the organization’s administrative process. Mainly the external users are peculiar in the following:-
Investors – information on the risks and return involved on investment.
Unions and employee groups– information on the soundness , profitability and distribution of wealth within the business.
Lenders and financial institutions- information on the creditworthiness of the firm and its ability to repay loans and interest.
Suppliers and creditors– information on, if the amounts owed are going to be repaid when due, and on the continued existence of the business.
Customers– information on the continued existence of the business and thus the expectation of a continued supply of products, parts and after sales service.
Government and other regulators- information on the allocation of resources and therefore the compliance to regulations.
Social responsibility groups, like environmental groups- information about the impact on the environment and its protection.
Competitors– information on the relative strengths and weaknesses of their competition and for comparative and benchmarking purposes.