Users & uses of accounting information

The information developed by the accountant's information system can be useful to:

Ø  Managers in planning, controlling, and evaluating their organization's activities

Ø  Owners, directors, and others in evaluating the performance of the organization and determining operating, compensation, and other policies

Ø  Union, governmental, regulatory, taxing, environmental, and other entities in evaluating whether the organization is conforming with applicable contracts, rules, laws, and public policies and/or whether changes are needed;

Ø  Existing and potential owners, lenders, employees, customers, and suppliers in evaluating their current and future commitments to the organization

Ø  Accounting researchers, security analysts, security brokers and dealers, mutual-fund managers, and others in their analyses and evaluations of enterprises, capital markets, and/or investors

What is accounting?

“Accounting is the art of recording, classifying and summarizing in systematic manner and in terms of money, transactions and events which are, in part at least, of a financial character and interpreting the results thereof.”

(AICPA-FASB Terminology)

Accounting was regarded as “the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information” by the American Accounting Association (AAA). 

“Accounting is a service activity. It’s function is to provide quantitative information, primarily financial in nature about economic entities that is intended to be useful in making economic decision, in making reasoned choices among alternative courses of action. Accounting includes several branches, for example, financial accounting, managerial accounting and governmental accounting.”

                                             (The Accounting Principles Board (APB) of the AICPA)

Accounting in modern age is also defined as modern language of business, an information system and a service activity.

Communication Process Model (Why communication is called double way or two communications?)

Definition of Communication

v  Pitter little defines in his book "Communication in Business" - Communication is the process by which information is transmitted between individuals and / or organization so that an understanding response results.

v  According to W.H. Newman and CF Summer “Communication is an exchange of facts, ideas, opinions, or emotions by two or more persons”.

v  Communication is the process by which a source sends a message to a receiver by means of a channel to produce a response (effect), in accordance with the intention of the source (feedback).