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Providing Accounting Information to its Users

The accounting information generated by the accounting process is communicated in the form of reports, statements, graphs and charts to the users who need it in different decision situations. As already stated, there are two main user groups, viz. internal users, mainly management, who needs timely information on cost of sales, profitability, etc. for planning, controlling and decision-making and external users who have limited authority, ability and resources to obtain the necessary information and have to rely on financial statements (Balance Sheet, Profit and Loss account). Primarily, the external users are interested in the following:

• Investors and potential investors-information on the risks and return on investment;

• Unions and employee groups-information on the stability, profitability and distribution of wealth within the business;

• Lenders and financial institutions-information on the creditworthiness of the company and its ability to repay loans and pay interest;

• Suppliers and creditors-information on whether amounts owed will be repaid when due, and on the continued existence of the business;

• Customers-information on the continued existence of the business and thus the probability of a continued supply of products, parts and after sales service;

• Government and other regulators- information on the allocation of resources and the compliance to regulations;

• Social responsibility groups, such as environmental groups-information on the impact on environment and its protection;

• Competitors-information on the relative strengths and weaknesses of their competition and for comparative and benchmarking purposes.

Whereas the above categories of users share in the wealth of the company, competitors require the information mainly for strategic purposes.

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