Informational Requirements of External users of Accounting

Informational Requirements of External users of Accounting

Informational Requirements of external users of Accounting

There are a variety of external users of accounting who require accounting information for assessment making, asset planning and to evaluate the monetary position of the business. The diverse external users are given below.

Creditors- These are persons and organizations to which a company owes capital on account of credit purchases of goods and receiving services; hence, the creditors need information about credit value of the company.

Government- It requirements information to decide national income, GDP, industrial development etc. The accounting information help the government in the formulation of diverse policies procedures and to deal with diverse economic problems like employment, poverty etc.

Investors and possible investors- They invest or arrangement to invest in the business. Hence, in order to appraise the feasibility and prospectus of their speculation, creditors require information about productivity and solvency of the business.

Banks and other financial institutions- Banks provide investment in form of loans and advances to assorted businesses. Thus, they require information concerning liquidity, creditworthiness, solvency and prosperity to precede loans.

Consumer- Every business tries to build up reputation in the eyes of customers, which can be created by the supply of better quality products and post-sale services at reasonable and affordable prices. Business that has transparent financial records, assists the customers to know the correct cost of production and accordingly assess the degree of reasonability of the price charged by the business for its products and thus helps in repo building of the business.

Public- Public is eagerly interested to distinguish the quantity of the earnings that the business spends on assorted public wellbeing schemes; for example, generous hospitals, support schools, etc. This information is also exposed by the profit and loss account and balance sheet of the business.

Tax authorities- They require information about sales, revenues, profit and taxable income in order to decide the tariff various types of tax on the business.