Accounting is one of the most primary disciplines involving the blend of hard work, mathematical skills, and a healthy communication system. Not every information that we see on the accounting books today is a valid and reliable one. As an accountant, one needs to judge the entries with a lot of facts and figures. This section deals with accounting information, it's used for various users and the qualities of accounting information. Accounting information serves under various facets of the business. A valid accounting information can be used for decision making, writing goals, forecasting loss and profit, taxation, etc. The accounting information serves owners, management, potential investors, creditors, lenders, general public, employees, government, etc. Various people need different accounting information and it is for this purpose, classifying the information will make it easy for usage. Some of the important types of accounting information are as follows.
Qualitative Characteristics of Accounting Information
Accounting information must have the characteristics of reliability, relevance, understandability, and comparability.
Reliability is to provide trustworthy information and the uses must be able to depend on the information. A reliable information should be genuine, no errors, and should represent what is meant to represent.
Relevance means it should available in time, accurate, must help in prediction and feedback, and must be a tool to influence decisions.
Understandability means when the decision-makers are able to interpret the accounting information in the same sense as it is prepared and conveyed to them. In other words, the document is clear, legible, straight forward. A message is said to be effectively communicated when it is interpreted by the receiver of the Message in the same sense in which the sender has sent.
Comparability means when the users of the reports are able to compare various aspects of an entity over against carried time period and also with other entities. It must have a simple, common unit of measurement and format of reporting.
Accounting information required by various people
Accounting information is the language of business necessitating information for both the internal and external players.
Internal users are Chief Executive officers, Financial Officers, Board of presidents like Vice President, Business Unit Managers, Plant Managers, Store Managers, Line Supervisors, etc.
External users include investors, and shareholders, Creditors (Banks and other Financial Institutions, Debenture holders and other Lenders), Tax Authorities, Regulatory Agencies (Department of Company Affairs, Registrar of Companies, Securities Exchange Board of India, Labor Unions, Trade Associations, Stock Exchange and Customers, etc.