Question

QUESTION 4. Explain why the following stakeholders use accounting information.

a. Creditors

b. Debtors

c. Employees

d. Analysts

e. Public

Answer 1

Gone are those days when the stakeholders was confined to only shareholders now a days it also includes debtors, customers, creditors, government etc.All require the information as per their usage. Now let us discuss their use for above mentioned stakeholders one by one-

1. Creditors - They are always interested in accounting information to analyse the financial performance or credit worthiness of the business to decide various things such as credit terms for the business, whether to provide the goods on credit or not. The accounting information helps them to analyse the financial wellness and credibility of the business organisations.

2. Debtors - They are also interested in accounting information because they want to know the financial soundness of the business to ensure that they are able to maintain strong long term relationship with the company. They analyse accounting information to decide whether they will be able to get apt supply as per their requirement and whether the sale will be available on credit as per the liquidity condition of the company. All these things are interpreted by analysing accounting information.

3. Employees - They are the one who are most affected by it. They are the ones whose present cand future is tied with the success and failure of the company so they are always interested in accounting information tovknow about the financial well being of the company to ensure their job satisfaction, future incentives and financial stability.

4. Analysts - Analysilts are the ones who prepare various reports and analyse financial information on various market trends. They also require accounting information to draw various conclusion regarding preparation of their reports and make comparative reports based in market trends and draw meaningful interpretation for the use of various investors and shareholders.

5. Public - They are also interested in the accounting information in their own way to know the market credibility of the company to ensure that their favourite organisation is performing better to keep in touch with those companies. Their purchasing decisions are also influenced by those information and they are also interested in accounting information for the investment purposes also.