THE MEANING OF ACCOUNTING INFORMATION

THE MEANING OF ACCOUNTING INFORMATION

Accounting Information – Every organization has financial system of some kind. The basis of this system is the flow of money through the organization. The financial system is largely concerned with recording, documentary, internal and historical monetary inflation financial information that provide for total protections.

According to Walter B. Meigs (1997) Accounting is commonly referred to as the language of business since the basic function of a language is to serve a means of communication, the above statement applied in business situation means that accounting is used to communicate matters relating to various aspect of business operations.

As individual enterprise keeps their account separately the attempt to communicate is essentially from a business enterprise to various individual groups and institutions which are interested in the operation of that organization. Now although accounting is commonly identified with business, the business enterprise is not the only type of statement of financial position.

TYPES OF ACCOUNTING INFORMATION

Among the most important type of accounting information is the financial statement. According to Aderike Janet (2000) financial statements are used by main source of financial information parties outside the business enterprise.

FINANCIAL STATEMENT

These statement are the summary of the business transaction for a specific period such as a month or a year, financial statement shows the financial position of the business as at the time of the report.

The basic purpose of financial statement is to assist investors and creditor in evaluating the financial strength, profitability and future prospect of the business entity.

The financial statement is made up of statement of financial position.
Financial statement provides information to both managers and other parties external to the business including shareholders to the business including shareholder, bankers and other creditors, government agencies and general public.

The shareholder go through financial statement provided by the management to know whether is satisfactory or not if not they (shareholders) will demand for corrective action. Financial statement provides information to both managers and other parties external to the business including shareholders to the business including shareholder, bankers and other creditors, government agencies and general public.
The shareholder go through financial statement provided by the management to know whether is satisfactory or not if not they (shareholders) will demand for corrective action.

THE BALANCE SHEET

Accounting to Hanson Paul, H. (1993) is a snap short of the current financial position of a given date usually a year. It gives information about an organizational financial position in terms of what it owes and what is owns it records the organizations liabilities and assets states at the end of a trading period. It form the starting point for the next trading period.

Accounting information in the balance sheet is not just the preparation of records and reports but rather, it must aim at giving financial information that could be analyzed and interpreted.

OPERATING STATEMENT OF INFORMATION

The information link between the two successive period is the profit and loss account. The profit and loss account. It reflects the changes that have taken place in the business (operation) within particular financial year.

The statement of change in financial position according to Serge Matilich (1998) describes change in an organization “Strength resulting from operation and other sources for the period indicated. It is from the operation of the year that the profit and loss are estimated.

A considerable amount of information is required to conduct day to day operation. Employees must be paid their salaries and the pay roll records be maintained for each employee showing amount earned and paid as well as the various deductive.

The sales force needs to know what goods are available for some and each ones cost or selling price or both when goods are sold, a each one’s cost or selling price or both when goods are sold, a record must be made of that fact. The person in the stock room need to know what raw material and accessories are on hand, and it stock of certain goods becomes depleted this fact needs to be known and of a customers does not pay a bill on time this fact needs to be known so that appropriate action can be taken.

The organization or company needs to know the amount it owes to offers and when this amount should be paid and how much money it has in the bank. This information is very useful to the management. It enable the management of an organization to know the progress or failure of their operations, that is whether after paying the amount it owes, it still have money to continue operation or not.

FUND FLOW STATEMENT

It is a well known fact that every business requires capital to trade. The capital issued to acquired a number of assets such as premises, equipment and most important of all a sufficient stock of goods, to enable it to offer attractive choice to its customers. The working capital is use normally to indicate the amount of supplies fund a business has at bank or hand to enable it meets immediate financial commitments.

The fund flow statement show how much the working capital has increase or decreased during a given period by preparing statement setting out the sources from which fresh working capital entered the business.

MANAGERIAL DATA REPORT

In addition to financial statement, management needs much detailed accounting data to assist in planning and controlling the daily operation of the business. The managing directors, the supervisors and manager of an organization do not have the time to examine the detail of the operational information.

These types of information are used in three management functions:
i. Planning
ii. Coordinating
iii. Control.

REFERENCES

Arya A. and J Glover.(2003). Abandonment Options and Information System Design, Reviewed of Accounting Studies. 8 (1): 29 – 45.

 

Diwivedi, D. N. (2008): Management Economics Seventh Edition. UBs publishers Distributors PU Ltd. A Asari Road New Delhi 110002.