Importance of data in accounting and stakeholders in accounting information
The term “data” refers to primary details or numerical facts related to an event or transaction. Data is stored and maintained on a computer or network. Computer software such as HiTech Financial Accounting processes this electronic data. The data is also kept as hard copy or hard copy. Since accounting is limited only to those transactions and events that are of a financial nature, therefore, accounting data will consist of facts, of a financial nature, related to transactions and events of a business entity for the accounting period. In addition, the accounting data must be supported by documentary evidence. Thus, the documents known as vouchers, support the data. Data is generally disorganized and disjointed in its original form. It can not be understood. Therefore, accounting processes raw data in a complete form of “information” so that it is useful and meaningful, capable of being used in the decision-making process by the various users of accounting information.
Therefore, the accounting data processed by the accounting cycle produces accounting information. The data is collected, registered, classified, grouped, valued, tabulated, ordered, summarized in order to present it in the form of information for use by users that allows them to make decisions.
Accounting data Consists of financial transactions and events related to an entity for the accounting period supported by documentary evidence (vouchers). For example, receipts and payments are documented by the beneficiary’s receipt, purchases by invoice, sales by invoice abroad, returns to the interior by credit note; returns abroad by debit note; expenses for invoices or pay rolls, etc.
Thus, the first and most important function of accounting is to collect the data supported by the vouchers to ensure the authenticity of the same. The accounting processes consist of the registration in the original entry books (daily or sub-daily); classify (post to the general ledger) group (put transactions of a similar nature in one place in an account) value (find the value at the end of the year by balancing or valuing) tabulate (prepare the balance list and verify arithmetic accuracy) and prepare financial statements (Trade and Profit and Loss Account; Balance Sheet) in report form to communicate the information.
Today’s accounting software can handle this task very efficiently in no time. The accounting information is presented mainly in the form of financial statements such as the income statement (trade account and profit and loss) position statement (balance sheet). Current status of changes in financial situation; declaration of added value; report on human resource accounting; Social performance report, etc. are part of the accounting information
Difference between data and information
1. Refers to details, facts about any event.
2. It is generally disorganized and disjointed in form.
3. It is in gross form and is the input for accounting.
4. It cannot be understood or used by users.
5. It does not depend on information.
1. Refers only to those events that are related to the entity.
2. It is properly ordered, classified and organized.
3. It is in finished form and is the result of accounting.
4. It is understood and used by users of accounting information to make their decisions.
5. Information is based on and derived from data.
Parties interested in accounting information
Accounting information is of interest to various people who are directly or indirectly related to a company.
A small business is generally run by the sole trader or partners. But a large business is usually carried out by an incorporated company that separates the management of the property. The responsibility of the managers is to operate the business efficiently and maximize return on capital without jeopardizing the fund.
Management needs accounting information in
(1) selection of alternative proposals;
(2) control the acquisition and maintenance of inventories (shares), cash receipts and payments;
(3) planning or budgeting for the future
(4) evaluate performance and
(5) design corrective measures for deviations from actual results from budgeted targets.
Although owners begin contributing funds to the business, they are the last to receive your return on equity claim. This is true not only to repay, but also to reward your capital. After meeting all charges, including employee wages and lender’s interest earnings, if any, it can be distributed as a reward on principal. Naturally, the owners are interested in the safety of their capital and also in a reasonable return on it, which is based on the stability and prosperity of the company. Accounting reports (annual) not only assess past performance, but also help assess the future prospects of the entity. This information is also very important to potential owners.
They can be short-term, provider of goods, short-term or long-term advance lenders. mortgages, bondholders, etc. Although both are interested in the stability and profits of the debtor company, the former looks especially at its short-term solvency, that is, liquidity, while the latter is interested in the long-term solvency of the company.
Many products today are subject to excise duties and lax sales. In addition, the government regulates the prices of essential goods, for example. drugs, vegetables, oil, etc. For this reason, the Government is interested in knowing the cost information to administer excise duties and regulate the prices of products. The government is also interested in accounting information on earnings for income tax purposes.
Stable employment and business stability go hand in hand. Once again, unions are interested in sharing company profits in the form of bonuses. Therefore, employees are naturally interested in the accounting information provided by the annual accounting reports.
The rise in prices is unfavorable in almost every quarter. Consequently, a producer strives to reduce the cost of his product and also its selling price. Recently consumer protection associations have been formed to exercise control over commerce and industry and also to raise awareness about “social responsibility” towards society. Therefore, consumers also need accounting information.
Financial statements, being a mirror of business conditions, are invaluable for investigating business matters. Therefore, these statements are of great interest to scholars conducting research in accounting theory, as well as business affairs and practices.
The nature of business income
One of the main objectives of financial accounting is to know if business operations have been profitable or not. Accounting allows us to know whether a company made a profit or suffered a loss during the accounting period.