Accounting has played a role in the satisfaction of user needs. There are two types of user using financial statement to make measurement. There are internal users and external users. Internal and external users divide to several users as follow:
Employees are internal users. As such, they are interested in information about salary and retirement benefits and employment opportunities that employer provide. They are also interested in information about whether employers are stability and profitable. This means as an employee, they would like to stay in a company can survival in the society and pay for their salary in time, and able to pay the pension funds. There are kind of evidence shows in China, some of factory cannot find out internal risk in time, it leads to bankruptcy and employees cannot receive their payment.
As Alexander and Nobes 2010 P4 said, managers are the people who have to take decisions, both day-to-day and strategically, about how the scarce resource within their control are to be used. Management is the people who making judgments and decisions including in organization as they would receive many information which helps them to make judgments and decisions. Management would take responsibilities to information they received to meet their target of business, and the management ought to be provided a high quality with understandable. For example, as Solomon said, accountants is to provide information as free from bias as possible that will be useful to decision-makers (possibly including accountants themselves) who may be concerned with social and economic issues. In my opinion, management whether can make a better or worth decision, it depends on the qualitatively of accountants make the relevance to society and economic.
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Suppliers as external users, they supply goods and service to the company. They are interested in information which can show them the company's liquidity and Profit and Loss account, to see whether the company has ability to pay for their goods and service in the future business. The information shows on the balance sheet which the amount is paid to suppliers call trade payable and account payable. In addition, according to Alexander and Nobes 2010 P5, suppliers are likely to be interested in an entity over a short period than lenders, unless they depend upon the entity as a major continuing customer. Suppliers should not only check the company they supply to, they usually need to check who the company supplying for the goods and service to. For example, if the company is producing goods base on the product (second tractions for goods) from suppliers. They have to find out what normally market share they have got, and what the market demand on the product is.
Trade creditors supply goods and service to the company as supplies. But they usually at class unsecured creditors, which mean they have less protection than supplies if the company's asset cannot cover the liability. Trade creditors are not necessarily only interested in information provided from accounting, they might obtained by other information to make a measurement whether the company is able to pay in the future or how many percentage of non-payment exist.
According to Alexander and Nobes 2010 P5, customers need information about the continuance of an entity, especially when they have a long-term involvement with the entity. Customers as external users they are more interested in further information of what goods and service the company will provide, and the warranties and guarantees for goods and service. They would continue interested in the price of products, whether the price they paid is worth or not, how much they paid for the quality of the products and how much they paid for the good services from profession staffs or sellers.
Governments are interested in the allocation of resources and, therefore, in the activities of entities. They also require information in order to regulate the activities of entities, assess taxation and provide a basis for national income and economic statistics. Base on the behalf of UK government's Treasury Department, HMRC will according to the business's profit and loss account and other cannot be deduct issues to collect taxes.
Bank is the one of the most important for the company. Bankers would think deeply for the future development of the business. A good development business for the future will reduce risk for the bank that can get less interest rate in financing. This means the banker would more likely to look at the location and the future government policy, and what is the long-term and short-term investment the company is making. They might interest in the internal policy the company has been made or will make.
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Competitors are more interested in how much have the company put into the research and development and the company has new ideas of goods and service. As the financial statement shows, they would measure whether they spent much than the company and make a measurement of which part of business they have been making a wrong decision.
Lenders are interested in information that enables them to determine whether their loans, and the related interest, will be paid when due. Lenders would like to make some conditions to control the risk cannot be estimated, to make sure the company is following the contract and prove some evidence to show in the financial statement that the loan agreement state has been met. For example, they would test the company's economic permanence and weakness, and ask the company have to make some statement to show the company's performance.
According to Alexander and Nobes 2010 P5, a large entity may have many investors who are not the managers of the entity. Some investors are owners (the shareholders). Shareholders as external users, they usually interested in company's cash flow and balance sheet statements based on the limited information the company provide. Shareholders are those people, company or institution owns at least one share in a company. As they are external users, shareholders always get limited information from the company, based on those information, they have to find out that how the company corporate under the market competition and government policy. In addition, shareholders may pay attention to the society influence in the market and brand rather than that information show on the financial statement. This is because some of them may not know what the statement shows information for them; they do not have knowledge to understanding the statement.
The list shows information for each group of people needs from statement. It displays accounting playing different roles base on different users. Thereof, the accounting is not only has one role which is to satisfy user needs, and it shows the different of internal and external users for using information and limitation of getting information. Internal users always get more information than external users. Beside, investors, bank and lenders have to consider whether the company has well internal control risk, and how the company's cash flow trend to. In addition, accountants might sometimes provide some information that users cannot understand, and they have to provide evidence to readers to prove what and why they do it. To provide evidence they might using source of knowledge, it develop as seven words, which are Perception, Introspection, Memory, Reason, Faith, Intuition and Testimony. First of all, perception is the ability to see, hear, or become aware of something through sense, which shows what accountants though of the trend of society and economic influence to the company. Secondly, introspection is to find out yourself when you search yourself, which can point out what is the weakness of the company. Thirdly, memory is the way we use our memories can be share and to prove our perception, it is kind of evidence to prove what the report said. Fourthly, reason is figuring something out, using reasoning, calculation and understanding facts arrive new facts. Fifthly, faith is something that is believed especially with strong conviction. Sixthly, intuition is knowledge or belief obtained neither by reason nor by perception which it is the experience of what they have done and what they have seen before. Lastly, testimony is always second-hand knowledge which is the record from the past that we cannot repeat.
On the other hand, source of knowledge cannot always works, for example, reason is figuring something out using reasoning, calculation and understanding to prove evidence, but however, how do we know it's a great solution for the report? Moreover, whether intuition depends on the knowledge but experience cannot expect the trend of the future.
In conclusion, as shows above, accounting is not only playing one role of satisfying users. Accounting has to indicate to all internal and external users; it provides information to users to making decision and helps what the company's benefits to customers, bank, and employment act. And it also provide what insufficient during the development to the manager. At last, accountants should provide understanding information based on source of knowledge to prove what the information shows in society to meet users' needs.
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