Users of Accounting Information

Users of Accounting Information

Many stakeholders use accounting information. Each of these stakeholders utilizes this information for different purposes based on their needs. It is important, therefore, to design the accounting information system of a company in a manner that generates reports satisfying the information needs of each of the interested stakeholders. The users of accounting information are broadly divided into two groups-external users and internal users. Some of the internal users of accounting information include the business owners and the business managers. External users, on the other hand, include employees and customers, the general public, government agencies, suppliers of goods, creditors of funds, and investors. The category of internal users utilizes a mix of financial and management accounting information (Bushman & Smith, 2001).

One of the internal users of accounting information is the company's management. Managers of a company utilize accounting information when they want to evaluate and analyze financial position and performance; and when they want to take appropriate actions and important decisions for improving the company's performance in terms of cash flows, financial position, and profitability (Van der Veeken & Wouters, 2002). Because it is possible to analyze accounting information in different ways and use the accounting information for different purposes, managers begin using accounting information by identifying the type of decision that they want to make. After identifying the type of a decision, the managers can now gather the correct accounting information and analyze it to make the best decision. If the management wants to lure investors, the accounting information that they will rely on includes cash flow forecasts and cash flow statements, a balance sheet, and the income statement (Van der Veeken & Wouters, 2002). On the other hand, if the management wants to apply for funding, they will most likely focus on such financial ratios as debt to equity ratio or service coverage ratio. Management plays the role of setting procedures and rules that the company can use to attain organizational goals. Therefore, management utilizes information generated by the managerial and financial accounting system of the company. The other internal user of accounting information is the company owners. These are the people who invest funds for starting and running a business with the main objective of earning profit. Owners of a company require accurate financial information so that they can know the amount they have lost or earning during a particular accounting period. With the accounting information, business owners can decide their future course of actions like contraction or expansion of business (Asrida, 2019).