ACCOUNTING INFORMATION AND ITS IMPORTANCE
Management of Accounting research can largely be examined through the use of accounting information system in relation to various decision-making strategies from top managers.
According to Tuquib (2012) Accounting can be describe as a function that provides quantitative information that is primarily financial in nature and it about economic entities and this is intended to be useful in taking the economic decisions.
Above mentioned can be considered as few of the definitions that explains the importance of accounting in the different fields but accounting as its own basis and there are certain characteristics of accounting that broadens the horizon of this field.
Norton and Porter (2012) describes different characteristics of account and states that Economic events in broader terms are defined as some activity taking place in the business entity which is resulted by other activity. The activity can be external and internal in nature where external events transfer of value in the form of financial or non financial item between two or more entities defined as transactions. The examples of such transfer in business are:
- Sales of dresses by a fashion designer house to a customers
- Salary payment to the employees by the company
- Rent payment to the builder
- Payment to the supplier for the raw material and receiving payment for delivery of the same raw material to the buyer.
- Movie ticket purchase through online banking
Any financial or non financial transaction that takes place within an organization, company, shop or bank is known as internal event for example, supply of the raw material from the store to the builder, or transfer of stock of shoes from company’s one shop in one city to another shop in another city.
WHY ACCOUNTING INFORMATION IS PRODUCED:
Parikh (2009) explains that primary concern of the accounting is to collect, analyze and communicate any financial data but the existence of account data is for particular reasons and purpose and it is there to provide end users with better information to make their decision making process easier. This financial information of the company also provides a better picture of the business entity. Different investors including the managers and the shareholders along with external users who have decision in hand that whether they should:
- Provide Credit facility to the company
- To have a contractual relation for purchasing
- Invest in the business for ownership purpose
- Lend money for the business
There are several rules and regulation for financial information and the way the manager should record and display the information for the end users. Hence in order to produce and present services to the end users, financial institution should comply by the rules put forward in the companies act and should possess certain quality including reliability, comparability and clear understanding hence the information should be free of any significant error and help the user to make decisions easily.
EXTERNAL AND INTERNAL USERS OF INFORMATION:
Dilipchandra (2005) provides a list of internal and external users who use information to take certain decisions. Internal Users use this information in the form of management accounts, forecasted accounts, budget and annual and semiannual financial statement. Internal users include management which uses this information to
business is complying by the law set for such companies.
TYPES AND USERS OF ACCOUNTING INFORMATION:
Accounting-simplified.com (2010) explains that there are different types of account information and they are several users of the same
Financial Information:
Tax Information:
USE OF ACCOUNTING INFORMATION BEYOND THE DIRECT USE OF ACCOUNTING:
Lungu and Caraiani et al (2009) in their accounting information system journal articles explains the new dimension of account information which is more important than accounting information itself. As per the article, different surveys and environmental reporting show that importance of quality and quantity of reporting is increasing but quality of reporting is more important than the quantity of the information provided to all the stakeholders. Martínez De Anguita and Wagner (2010) describes that Managers who create social and environmental reports nowadays are more conscious and provide confirmation that their reports are effective as per the demand of new segment i.e. the increasingly environmentally aware financial community. This new segment demands for more consistency in the process of social and environmental issues being handled at the company’s level, measured and then reported.
POWER OF ACCOUNTING:
Warren and Reeve et al (2007) defines Accounting as the most powerful tool and interesting because it helps in capturing the reality about any company or firm and this subject is intellectually very difficult to handle and challenging. Highered.mcgraw-hill.com (2008) describes that there are many function in any organization, small or big and all the process are fairly chaotic where many systems are working at the same time and things of different range of importance are going on at once for example, financial activities, human resource management, manufacturing, frauds and many more.
CONCLUSION:
Accounting is a language which is understood by all the stakeholders whether they are internal users or external. It is important because it is the language of any business as it interprets the operations and finances of the company through a systematic display of information. This is a very important tool for any business as it guides the management to make sound decisions and work in a focused course of action to reach the objective of the venture. It is also really important it directs the venture to move to a next level of the business as it gives proper control and helps to pinpoint any flaws or frauds.
The importance of accounting information system research not only is clearly vital in any business but it plays its due part on individual investors as well. For the above reasons and many more it is clear that accounting is the most important field in business of any sort and will remain to be in the future.
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References
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- Lungu, C., Caraiani, C., Dascalu, C., Guse, R. and Sahlian, D. 2009. Corporate social and environmental reporting: Another dimension for accounting information. Available at SSRN 1447247.
- Martínez De Anguita, P. and Wagner, J. 2010. Environmental social accounting matrices. Milton Park, Abingdon, Oxon: Routledge.
- Norton, C. and Porter, G. 2012. Introduction to using financial accounting information. Mason, Ohio: South-Western.
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Warren, C., Reeve, J. and Duchac, J. 2007. Accounting. Mason, OH: Thomson/South-Western.
