It is easy to say that anyone who needs to make a financial decision for a business, or about a business, will need to see the accounting information. Like duh, man. But let’s get more in depth about who those people are with the help of Horngren’s Accounting Volume One. So…who uses accounting information?
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The individuals that will use accounting information are those employees or owners that:
- deal with the day-to-day management of the bank accounts.
- evaluate the job prospects and chase after them.
- make the investments for the business.
- decide whether to buy or lease equipment, machinery, or vehicles for the business.
- set the goals for the business.
- track the progress made toward the financial goals of the business.
- make changes in order to meet the financial goals for the business.
- track the costs and revenues earned from separate jobs.
Investors and Creditors will need to see your accounting information to determine:
- how much money they can invest or loan to your business.
- how much money the business is producing.
- your ability to pay a return on investment to your investors.
- your ability to repay any loans from your creditors.
The Government and other regulatory bodies will use the accounting information from your business to calculate:
- the business income tax or your personal income tax payable (depending on what type of ownership organization your business has been set up under).
- any provincial sales tax (if applicable) that is collected from customers and paid to suppliers.
- goods and sales tax that is collected from customers and paid to suppliers.
- any harmonized sales tax (if applicable) that is collected from customers and paid to suppliers.
- when shares in your business are sold to the public your business will need to disclose its financial information.
Other users of accounting information can be employees or labour unions that may make wage demands due to their employer’s reported income. Even non-profit organizations need to be able to access their accounting information when it comes to making any financial decisions regarding their organization. Some examples of non-profit organizations are churches, hospitals (in Canada), government agencies, and colleges.
One of the most important aspects of business is having accurate and timely financial information at your finger tips. Expenses and revenues need to be tracked and recorded and this can be done by your employees, yourself, or an off-site accounting firm. Knowing where you have been will help you determine where your business can go and estimate your monthly revenues. If you do not enjoy numbers I recommend that you find someone that does. Best wishes for the future of your business.
The Other Half