Accounting Information and Its Use

In this article, we will learn in-depth about accounting information, including its definition,
sources, users, how users use it, and much more.

What is Accounting Information?| Us...

What is Accounting Information?| Users of Accounting Information| Sources of Accounting
Information.
Table of Contents
1. What is Accounting Information?
2. Sources of Accounting Information
3. Who are the Users of accounting information?
1. Internal users:
2. External Users:
4. How they use Accounting Information?
1. Internal Users
2. External Users

What is Accounting Information?

Accounting is known as an information system. Accounting provides the necessary
information to the interested users. Thinking about the internal and external users of
accounting, reports and records of transactions are kept and statements are published.

Accounting information is the consolidated statement of all financial information of a

business organization.

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Business transactions are the main source of accounting information. From the business
transaction, various accounting statements are prepared and published.

The company’s accounting department prepares and publishes reports of the company’s
financial operations.

Different individuals and organizations use accounting information to suit their needs.

Sources of Accounting Information

The following statements could be referred to as the source of accounting information.

1. Comprehensive Income Statement

2. Balance Sheet or Financial Position Statement
3. Owner’s Equity Statement
4. Cash Flow Statement
5. Notes and Explanation

Who are the Users of accounting information?

Accounting provides valuable information about the financial condition of a firm.
Stakeholders take an important decision based on this information.

So we can divide the users of accounting information into two groups-

Internal users: 
Internal users of accounting information are those who plan, organize and run the
business. Internal users include:

Owners
Manager
Internal Auditors
Production Supervisor
Finance Directors
Company officers
Line manager
Board of Directors
Top-Level Officers
Treasurer
Company Officers
Marketing Manager

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External Users: 
External users are individuals and organizations or institutions outside a company that
wants financial information about the company. External users Include:

1. Suppliers
2. Banks
3. Customers
4. Investors
5. Potential investors
6. General Public
7. External Auditors
8. Tax Authorities
9. Regulatory Agencies
10. Labor union
11. Researchers
12. Economic Planner
13. Financial Institutions
14. Securities Exchange Commission
15. A prospective Buyer

Users of Accounting Information

How they use Accounting Information?

Internal Users

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Owners:

The main purpose of the business is to make a profit. Owners are keen to know the profit
rate on their invested money and the security information of their invested money.

They can get a good idea about this from the accounting information.

Management Authority:

There are different types of financial information needed to manage a business

organization. Accounting information helps managers to prepare different types of plans
and budgets.

Internal Auditor:

Internal auditors use various accounting information and take important decisions in the
organization.

Accounting Department:

The Accounting Department also acts as an important user of accounting information.

Based on this information, they make different decisions.

External Users
Government:

The government imposes various taxes directly and indirectly on the income, sales, etc.
of the organization.

Accounting information helps the government to impose various types of taxes on the
income of an organization.

Lenders:

The Business institution relies on lenders to collect additional money. The lenders want to
check the financial statements of the company before making a loan.

They use accounting information for making their decision.

Investors:

Investors thoroughly examine the financial statements of an organization before investing

in it and make investment decisions based on the information of that company.

Why accounting is called the language of business?

Qualitative characteristics of accounting information

Consumers:

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Consumers use accounting information to determine the consumer rights are protected or
not.

Consumers also use this information to determine that companies are doing their
business fairly.

Researcher:

The financial statement of the institution is the image of the organization.

Therefore, researchers use accounting information to help improve the quality of research
in various fields.

Chamber of Commerce:

The Chamber of Commerce can find out the financial status of the organization by using
accounting information.

The Association uses accounting data to make decisions on various issues of interest.

Again, they use the accounting information to determine the contribution of the merchant
association and to collect the contribution.

General Public:
The general public of society uses accounting information to know the financial status of
the institution.
The general public uses accounting data to analyze whether business organizations are
operating well and whether prices are increasing for inefficient management.

Creditor:

The creditor is created for the purchase of goods. Before deciding whether to sell the
product under the creditor, creditors use the accounting information.

External Auditors:

External auditors disclose the mistakes and frauds of the accounts by properly examining
the accounts.
The auditor needs accounting information to perform these tasks.

Stock Exchange:

The stock exchange can use accounting information to maintain stability in the capital
markets and to know the financial status of any company.
Therefore, the usefulness of accounting information is very important to both internal and
external users.
However, all users use accounting information from their location and where they need it.

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