Users of Accounting Information

Accounting information is produced in form of financial statement. These financial statements provide information about an entity financial position, performance and changes in financial position.

Financial position of a firm is what the resources the business has and how much belongs to the owners and others. The financial performance reflects how the business has performed, whether it has made profits or losses. Changes in financial positions determine whether the resources have increased or reduced.

The users of accounting information have an interest in the existence of the firm. Therefore the information contained in the financial statements will affect the decision making process.

The following are the users of accounting information:

• Owners: They have invested in the business and examples of such owners include sole traders, partners (partnerships) and shareholders (company). They would like to have information on the financial performance, financial position and changes in
  financial position. This information will enable them to assess how the managers of the business are performing whether the business is profitable or not and whether to make drawings or put in additional capital.
• Customers: Customers rely on the business for goods and services. They would like to know how the business is performing and its financial position. This information would enable them to assess whether they can rely on the firm for future supplies.
• Managers: The managers are involved in the day-to-day activities of the business. They would like to have information on the financial position, performance and changes in financial position so as to determine whether the business is operating as
  per the plans. In case the plan is not achieved then the managers come up with appropriate measures (controls) to ensure that the set plans are met.
• Lenders: Lenders are long term providers of capital to the firm. They have provided loans and others sources of capital to the business. Such lenders include banks and other financial institutions. They would like to have information on the financial
  performance and position of the business to assess whether the business is profitable enough to pay the interest on loans and whether it has enough resources to pay back the principal amount when it is due.
• Government and its agencies: The Government is interested in the financial performance of the business to be able to assess the tax to be collected in the case there are any profits made by the business. The other government agencies are interested with the financial position and performance of the business to be able to come with National Statistics. This statistics measure the average performance of the economy.
• Financial Analyst and Advisors: Financial analyst and advisors interpret the financial information. Examples include stockbrokers who advise investors on shares to buy in the stock market and other professional consultants like accountants. They are interested with the financial position and performance of the firm so that they can advise their clients on how much is the value their investment i.e. whether it is profitable or not and what is the value. Others advisors would include the press who
  will then pass the information to other relevant users.
• Employees: They work for the business/entity. They would like to have information on the financial position and performance so as to make decisions on their terms of employment. This information would be important as they can use it to negotiate for
  better terms including salaries, training and other benefits. They can also use it to assess whether the firm is financially sound and therefore their jobs are secure.
• Members of the Public: Institutions and other welfare associations and groups represent the public. They are interested with the financial performance of the firm. This information will be important for them to assess how socially responsible is the
  firm. This responsibility is in form the employment opportunities the firm offers, charitable activities and the effect of firm’s activities on the environment.
• Suppliers They supply goods or services to the firm. The supplies are either for cash or credit. The suppliers would like to have information on the financial performance and position so as to assess whether the business would be able to pay up for the
  goods and services provided as and when the payment falls due.