Importance of Accounting Information

Published: 2021-09-13 13:15:10
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Importance of Accounting Information

Accounting is called the language of business. It is a process of recording, summarizing, reporting and analyzing the economic or financial transaction.

Accounting Information:
It is very important to report and communicate accounting information in an effective and efficient manner because it helps in making informed business decisions.

Users of Accounting Information:
Below mentioned are two types of users of accounting information, who use accounting information to make informed decision.

1. Internal Users of Financial Information
2. External Users of Financial Information

1. Internal Users:
Internal users are primary users, following are some example of internal users;

a) Organizational Management:
It is very common user of accounting information, management of organization uses the information check the efficiency of business and to make batter decision in best interest of the organization, they also use forecasted information to achieve their Budgeted target or desired organizational goal and objectives. Or to protect the organization from sessional variations and any adverse movement in environment.

b) Employees:
Mostly employees use this information to analyze the Going Concern, profitability and Existing and forecasted position of an organization and its effect on their futures.

c) Owners:
Owners normally use the accounting information to measure the profitability and efficiency of business and to assess the existing position of the organization and to assess the forecasted results are align with owner interest.

2. External Users:
External users are secondary users of accounting information, following are some examples of external users.

a) Creditors:
Determination of organization’s credit worth is very important, it reflects the financial health of the organization. It includes vendors and lenders of finance for example banks.

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