USERS OF ACCOUNTING INFORMATION

Users of Accounting Information

The purpose of Accounting is to provide information to the users of Financial Statements. A classification of users into various categories and why they need it may be summarized as follows.

MANAGEMENT

Management is the first and most important group of users who receive and use the accounting information to run the business of the Company in most efficient way. They may need the support of Accounting information for an analysis of revenues and expenses, or for budgeting and cash flows, or for a decision on make-or-buy, or for any decision making for future planning.


SHAREHOLDERS AND POTENTIAL SHAREHOLDERS

This group makes the most use of financial information as they have to decide whether to continue their investment in the Company or to make investment in the Company. They evaluate the current performance of their investment from the available information in financial statements.


EMPLOYEES

This group uses accounting information to assess the potential performance of the Company. They form a view about future prospects and promotions in the Company and employee benefits that are going to be offered due to favorable results. This brings confidence and enthusiasm among employees.


LENDERS

This group includes those who have financed the Company over a long period (Long term loans from Banks, Leasing Companies and other Financial Institutions), and those who have provided short term finances like banks, and also those who have supplied raw materials, etc. on credit (Trade Creditors). They are primarily interested in the security of their finances and use the accounting information to work out whether the Company will be able to repay their credits on due dates and also the markup thereon. So they normally use the information to work out the Liquidity position of the Company.


GOVERNMENT AGENCIES

Various government agencies also use the Accounting Statements for their statistical purposes. The tax authorities also use it for annual assessment of income tax etc.


BUSINESS CONTACT GROUP

This group includes the Customers of the Company and also the competitors of the Company as they want to assess the viability and future prospects of the Company and also for comparison of data.


THE PUBLIC

Other groups from the general public may also use the Accounting information for different purposes depending upon their specific interests.