Question

What types of individuals and entities need accounting data? Why?

Answer 1

Solution:

Accounting process provides various financial data to individual and entities and they use these accounting information differently. The primary user of accounting data are internal users and external users.

Internal Users:

Internal users of accouting data are managers and owners of the company. They use accounting data to take various financial decisions like decision of expansion or downsizing; decision regarding additional borrowing or investing surplus funds etc.

External Users:

Accounting data are used by external users for various purposes. Some of external users of accounting data are as under:

1. Creditors and lenders: These users requires accouting data to establish that whether company is able to pay their dues on time or whether a loan could be granted to the company.

2. Employees:These user needs financial information to know that whether company is having ability to increase salaries or company can provide long term employment for its employees.

3. Customers: These users wants to know that product of company is qualitative and at reasonable price. Whether company can honor the warranty provided on products.

4. Governments: Governments use financial accounting data to get the information regarding correct direct and indirect taxes were paid by company to government on the basis of income and Turnover.