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| 1. |
Who are the users of accounting information? |
| Answer» Users may be categorised into internal users and external users.(A) Internal Users\tOwners: Owners contribute capital in the business and thus they are exposed to maximum risk. So, they are always interested in the safety of their capital.\tManagement: Accounting information is used by management for taking various decisions.\tEmployees: Employees are interested in the financial statements to assess the ability of the business to pay higher wages and bonus.(B)\xa0External Users\tBanks and financial institutions:\xa0Banks and Financial Institutions provide loans to business. So, they are interested in financial information to ensure the safety and recovery of the loan.\tInvestors:\xa0Investors are interested to know the earning capacity of business and safety of the investment.\tCreditors:\xa0Creditors provide the goods on credit. So they need accounting information to ascertain the financial soundness of the firm.\tGovernment:\xa0The government needs accounting information to assess the tax liability of the business entity.\tResearchers:\xa0Researchers use accounting information in their research work.\tConsumers:\xa0They require accounting information for establishing good accounting control, which will reduce the cost of production. | |