Parties Interested in Accounting Information

Parties Interested in Accounting Information:

Learning Objectives:

1. Explain, who may be interested in accounting information of a company or firm?
2. Name the parties interested in accounting information and state their basic interests therein.
3. Why managers are interested in providing accounting information?

There are a number of parties who are interested in the accounting information relating to business. Accounting is the language employed to communicate financial information of a concern to such parties. The following are the groups who like to make use of the accounting information.

Owners:

The owner provides funds or capital for the organization. They want to know whether their funds are being properly used or not. They need accounting information to know the profitability and the financial position of the concern in which they have invested their funds. The financial statement prepared from time to time from accounting records tell them the profitability and the financial position.

Management:

Management is the art of getting things done through others. The management should ensure that the subordinates are doing work properly. Accounting information is an aid in this respect because it helps a manager in appraising the performance of the subordinates. Accounting information provides “the eyes and ears to management”.

Creditors:

Creditors are the persons who supply goods on credit or bankers or lenders of money. They want to know the financial position of a concern before giving loans or granting credit. They want to be sure that the concern will not experience difficulty in making their payment in time i.e., liquid position of the concern in satisfactory. To know the liquid position, they need accounting information.

Employees:

Employees are interested in the financial position of a concern they serve particularly when payment of bonus depends upon the size of the profits earned. The demand for wage rise, bonus, better working conditions etc. depends upon the profitability of the concern and in turn depends upon financial position. For these reasons, this group is interested in accounting information.

Government:

The government is interested in accounting information because it wants to know earnings or sales for a particular period for the purpose of taxation. Government also needs accounting information for compiling statistics concerning which in turn helps in compiling national accounts.

Consumers:

Consumers need accounting information for establishing good accounting control so that cost of production may be reduced with the resultant reduction of the prices of goods they buy. Sometimes, prices for some goods are fixed by the government, so it needs accounting information to fix reasonable prices so that consumers are not exploited.

You may also be interested in other articles from “bookkeeping chapter” chapter:

1. Definition and Explanation of Bookkeeping
2. Important Bookkeeping Terms
3. Double Entry System of Bookkeeping
4. Single Entry Vs Double Entry System of Bookkeeping
5. Definition and Explanation of Accounting
6. Branches of Accounting
7. Functions of Accounting
8. Parties Interested in Accounting Information
9. Systems of Accounting – Cash System of Accounting and Accrual System of Accounting
10. Bookkeeping Vs. Accounting/Difference Between Bookkeeping and Accounting
11. Accounting Cycle

Other Related Accounting Articles:

• Functions of Accounting (accounting functions)