Lenders offer loans and other credit facilities on terms that are based on the assessment of financial health of borrowers. Poor liquidity, low profitability, lack of assets that can be secured and an inability to pay liabilities on time demonstrate poor financial health of borrowers.
Just like lenders, suppliers need accounting information to assess the credit-worthiness of its customers before offering goods and services on credit. Some suppliers only have a handful of customers. These customers could be very large businesses themselves. Suppliers need accounting information of its key customers to assess whether their business is in good health which is necessary for sustainable business growth. Industrial consumers however need accounting information about its suppliers in order to assess whether they have the required resources that are necessary for a steady supply of goods or services in the future.
Continuity in supply of quality inputs is essential for any business. Tax authorities determine whether a business declared the correct amount of tax in its tax returns. Occasionally, tax authorities conduct audits of the tax returns filed by businesses in order to verify the information with the underlying accounting records.
Tax authorities also cross reference accounting information of suppliers and consumers in order to identify potential tax evaders. Government defines and monitors accounting thresholds such as sales revenue and net profit to determine the size of each business for the purpose of ensuring that it complies with the relevant employee, consumer and safety regulations.
External auditors examine the financial statements and the underlying accounting record of businesses in order to form an audit opinion. Investors and other stakeholders rely on the independent opinion of external auditors on the accuracy of financial statements. General public may also be interested in accounting information of a company. These could include journalists, analysts, academics, activists and individuals with an interest in economic developments.
Skip to content. Play Video. Internal Users of Accounting. Internal users are the primary users of accounting. Accounting information is helpful when they assess the stability of the overall business and prepare future courses of action. The managers are those individuals who are authorized by the owners to operate the business.
Information about the financial stability and profitability of the employer is much important for the employee. It enables them to determine the job security and the ability of the employer to pay higher wages or provide more job opportunities in the future.
External users are individuals and organizations outside a business entity who need financial information about the business entity. The two most common types of external users are investors and creditors. External users are secondary users of accounting information. They need accounting information to support their decisions. Here are a few examples of questions asked by external users. Investors are the providers of capital in the business. They need information so that they could make investment decisions.
They use accounting information to decide whether to buy, hold, or sell ownership shares of a business entity. Their decisions might depend on the analysis of past financial performance of the company and its financial position. They are the parties that provide alternative capital sources to the organizations.
While the owners provide equity capital, lenders usually provide the organization with debt capital and usually get a return in the form of interest. Examples of lenders include debenture holders in companies, banks and other financial institutions that grant loans. The need to have real-time accounting information on the economic performance and financial position of organizations is in order to assess whether the entities are sufficiently profitable to pay the interest on loans and whether the organizations possess enough resources to pay back the principal amount when the amount becomes due Mintz, The Users of Accounting Information and their Needs.
Musbau Kolawole Kayode Author. Add to cart. Users of Accounting Information and their Needs The objectives of accounting information directly correlate to the decision-making requirements of the users. These users and their specific needs include: 1. Owners These are the investors in the business and are the parties that are the titleholders to the organization or institution.
Suppliers These are the parties responsible for providing the organizations and institutions with the products or services necessary for operation and sustenance. Similarly, the information that confirms this to the suppliers is the capacity of the organizations or institutions to continue operations as a going concern 4.
Managers The managers are regarded as the agents of the owners of the organizations since they are in charge of the day-to-day activities of the establishments. The Lenders They are the parties that provide alternative capital sources to the organizations. Sign in to write a comment. Read the ebook. Modellierung von Accounting-Signalen. Les Technologies de l'information Verhaltensbeeinflussung durch das Man International Accounting Standards un Management Accounting Systeme - Freed Human Ressource Accounting zur Unters Die bilanzielle Behandlung von Leasin
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