and external users specifying their objectives and consequent information requirements. Name Internal/ Objective for participating Accounting Information requirements External in business users Current Internal To make investment in the Likes to know extent of profit in the owners business and wealth grow. last accounting period, current position of the assets/liabilities of the business. Manager Internal For a career.
They essenti- Accounting information in the form ally act as the agent of of financial statements is like their owners (their employers). report card and they are interested in information about both profits and financial position. Government External Its role is regulatory and Its concerns are that the rights of all tries to lay down the rules stakeholders are protected. Since the in the best public interest.
government levies taxes on the business, they are interested in information about profitability in particular besides lot of other information. Prospective External He is expecting to make He is interested in information about owner investments in the business past profits and financial position as with a view to make his indicative of likely future performance. investment and wealth grow. Bank External Bank is interested in safty Bank is interested in adequacy of of the principal as well as profits only as an assurance of the the periodic return return of principal and interest back (interest).
in time. Bank is equally concerned about the form in which the assets are held by the business. When more assets are held in cash or near cash form, the aspect is knnown as liquidity. Fig.
. : Analysis of various users of accounting information Box Accounting Process (up to Trial balance) : . Identify the transactions, which that are recorded. .
Record transactions in journal. Only those transactions are recorded which are measured in money terms. The system followed for recording is called double entry system whereby two aspects (debit and credit) of every transaction are recorded. Repeated transactions of same nature are recorded in subsidiary books, also called special journals.
Instead of recording all transactions in journal, they are recorded in subsidiary books and the journal proper. For example, the business would record all credit sales in sales book and all credit purchases in purchases book. The other examples of subsidiary books are return inwards book, return outwards book. An other important special book is cash book, in which all cash and bank transactions are recorded.
The entries, which are not recorded in any of these books, are recorded in a residual journal called journal proper . . The entries appearing in the above books are posted in the respective accounts in the ledger. .
The accounts are balanced and listed in a statement called trial balance . If the total amounts of debit and credit balances agree, accounts are taken as free from arithmetical errors. . The trial balance forms the basis for making the financial statements, i.e.
trading and profit and loss account and balance sheet.