Parties interested in accounting information

Accounting information is of interest to various persons who are directly or indirectly concerned with an enterprise.

Owners:

Although owners initiate in contributing fund to the business yet they are the last to receive their claim on equity's return on their investment. This is true not only in repaying but also in rewarding their capital. After meeting all the charges including employees' salaries and lender's interest profit if any can be distributed as a reward on capital. Naturally, the owners are interested in the safety of their capital as also for a reasonable return thereon, which rest on the concern' s stability
and prosperity. Accounting reports (annual) not only appraise the past performance but also assist in assessing future prospects of the entity. Such information is also very important for would-be-owners.

Management:

A small business is generally carried on by the sole trader or by the partners. But a large business is usually conducted by an incorporated company which separates management from ownership. Managers' responsibility is to operate the business efficiently and maximize the return on capital without jeopardizing the fund.

Management needs accounting information in

(i) selecting out of alternative proposals;

(ii) controlling acquisition and maintenance of inventories (stock) cash receipts and payments;

(iii) planning or budgeting for the future

(iv) appraising the performance and

(v) devising remedial measures for the deviations of the actual results from the budgeted targets.

Creditors:

May be short-term viz, suppliers of goods, lenders of temporary advance or long-terms viz. mortgages, debenture holders etc. Although both are interested in the stability and earnings of the debtor firm yet the former specially looks to its short-term solvency i.e. liquidity whereas the latter is interested in long-term solvency of the firm.

Employees:

Steady employment and stability of business go together. Again trade unions are interested in sharing the profit of the firm in the form of bonus. Therefore, the employees are naturally interested in the accounting information provided by the annual accounting reports.

Government:

Many products now-a-days are subject to excise-duty and sales Lax. Also the government regulates the prices of essential goods e.g.. drugs, vegetables, oil etc. So the Government is interested to know the costing information to administer excise duties and to regulate the prices of products. Government is also interested in the accounting information on the profits for income tax purposes.

Consumers:

Price-increase is disfavored in almost all the quarters. Accordingly, a producer endeavors to reduce his product cost as also its selling price. Recently consumer protection associations have been formed to exercise control on the business and industry and also to make them aware of the "Social responsibility" towards society. Thus consumers also need accounting information.

Researchers:

The financial statements, being a mirror of business conditions are of inestimable value for research into business affairs. These statements are therefore of great interest to scholars undertaking research in accounting theory as well as business affairs and practices.

The nature of business income

One of the main objectives of financial accounting is to ascertain whether the business operations have been profitable or not. Accounting enables us to find out whether a business has earned profits or suffered losses during the accounting period.