6.4 Interested Parties

📖 Main Content

What is Accounting Information?

Accounting information refers to the financial data that a business records and reports — for example, how much profit it has made, how much it owes to others, and how much it owns. This information is presented in documents called financial statements (such as the income statement and the statement of financial position).

Many different people and organisations are interested in this information. We call them interested parties (sometimes also called stakeholders). Each group has its own reasons for looking at the accounts, and each uses the information to make different decisions.

1. 👤 Owners

Who are they? Owners are the people who own the business. In a small business, this might be one person (a sole trader). In larger businesses, there may be multiple owners or shareholders.

What accounting information do they use?

• The income statement (also called the profit and loss account) — this shows whether the business has made a profit or a loss.
• The statement of financial position (also called the balance sheet) — this shows the value of what the business owns and owes.

How do they use it?

• To find out whether the business is making a profit — owners want to know if their business is earning money.
• To compare performance over time — is the business doing better or worse than last year?
• To decide whether to continue running the business or close it down.
• To decide whether to expand the business (for example, open a new branch).
• To check if the business is financially healthy — can it pay its debts?
• To decide how much money to take out of the business for personal use (known as drawings).

2. 🧑‍💼 Managers

Who are they? Managers are the people responsible for running the day-to-day operations of the business. In a sole trader business, the owner and manager are often the same person, but in larger businesses they can be different people.

What accounting information do they use?

• Sales figures, cost data, profit figures, and cash flow information.
• Budgets (planned income and expenses) compared to actual results.

How do they use it?

• To monitor performance — are sales targets being met? Are costs under control?
• To control costs — if expenses are too high, managers can take action to reduce them.
• To make pricing decisions — should the selling price of a product be increased or decreased?
• To plan for the future — managers use past financial data to make forecasts and budgets.
• To decide whether to hire more staff or reduce the workforce.
• To identify which products or departments are profitable and which are not.
• To make day-to-day operational decisions, such as whether to order more stock.