Users of Accounting Information

Topics: Financial statements, International Financial Reporting Standards, Balance sheet Pages: 5 (1672 words) Published: March 3, 2013
inAccounting information helps users to make better financial decisions. Users of financial information may be both internal and external to the organization. Internal Users of accounting information are those individuals directly involved in managing and operating an organization and users within the company. They include managers, internal auditors, sales staff, budget officers, controllers, officers, directors, and other important internal decision makers. Internal users make the strategic and operational decisions for the business or organization. The internal role of accounting is to provide information to help improve the efficiency or effectiveness of an organization in delivering products or services to the marketplace. Accounting information is presented to internal users usually in the form of management accounts, budgets, forecasts and financial statements. Internal users or users directly affiliated with the company use managerial accounting, which includes in-depth reports used to determine financial strengths as well as weak points. These reports help aid in the decision making process within the separate departments of a company. For example, Human Resource managers have to ensure the rights of their employee by using wage information along with other data. On the other hand, a Sales Manager may need to review financial statements to assess sales people are making their quota and so on. Internal users of accounting information include the following: * Management: for analyzing the organization's performance and position and taking appropriate measures to improve the company results. A company's top leadership is the primary users of corporate financial statements. Senior executives view accounting reports as strategic tools to assess the economic viability of their businesses. Specifically, senior personnel compare past and current data, identifying nonperforming business units. This comparison is essential, as it provides management information necessary to correct past mistakes and draw up adequate strategies for long-term operating activities. Understanding that failure is the mother of success, department heads and segment chiefs identify weaknesses in their operations and provide effective mitigating plans. A company's balance sheet and statement of profit and loss indicate corporate profitability and net worth to management. They also act as agents of the owners. The managers, whether owner or hired, regularly face economic decisions – How much supplies will we purchase? Do we have the cash? How much did we make last year? Did we meet our targets? All those, and many other decisions, require analysis of accounting information. * Employees: for assessing company's profitability and its consequence on their future remuneration and job security. Employees have an interest in financial statements because they need assurances for job retention. Employees can also have an interest in their company's stock price, which has a close relationship to the company's accounting information. Employee stock options may increase or decrease precipitously based on the company's financial health. Employees need this information to determine if they should buy more or hold their current investment level.

The internal users of financial statements include accounting personnel, department heads, corporate auditors, business-unit leaders and top management. These reports are relevant to each constituency because they provide specific, varying data. For accounting personnel, the overarching objective is to prepare and present accurate, complete data in accordance with norms. Department heads and segment leaders bring fresh eyes to financial issues by delving into accounting reports. For internal auditors, accounting reports shed light on the tools a company uses to comply with rules. Top management sifts through financial statements to understand the overall situation of the company, as well as what it would take...
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