Users of financial information and their informational needs Essay
Users of financial information and their informational needs
Users of accounting information are either internal or external to the organization. These users need information to help them make informed or reliable decisions or judgements with regards to the organization. Different groups have different demands for the financial information contained in a set of accounts. Information needs of internal users
Management; This category is made up of the senior employees who run the organization on a day- to- day basis. They are interested in information such as, Finance of the organization (working capital)
The growth prospects (value of shares and dividends)
Employees ; This is the group of workers in the organization made up of existing potential and past employees. The members of this group are concerned with job security and future prospects. Therefore, they need information to assess the company’s profitability, liquidity and growth prospects. Employees need information about The financial state of the organization ( for their salaries) The growth and stability of the organization ( new investments ) to ensure continuity of employment. Profitability.
Others are informational needs of external users including
Customers; Those who buy from the organization either for cash or on credit are interested in; The profitability
The growth and stability ( new product lines)
Customers will also need information or price so they can assess whether the company is overcharging them or not.
General public; This group includes the taxpayers, the consumer, social groups such as environmental societies and pressure groups such as the media
organizations. Each individual group informational needs depend on its own particular interests. They require information on; Annual Reports (including financial statements) social costs to ascertain the effects and influence of operations on the society and the environment.
Governments; This group includes all government or government linked authorities such as tax authorities ( internal revenue service ) local authorities and the department of Trade and Industries. The investment regulatory body are also included in this group. This group requires information to assess whether companies have complied with the relevant legislation and also to generate statistical measures to help them to assess and form macroeconomic policies. They require information such as;
Financial statements Payroll summaries Income tax deductions and social security contributions.