The major reason for studying accounting is to acquire relevant knowledge and skills to participate in important economic decisions. The accountants provide information about such decisions both inside and outside the business enterprise.
It is not necessary that every individual engaged in different areas of business viz., finance, production, marketing, personnel and general management to be expert accountant, but they are more effective if they have a good understanding of accounting principles. Everyone engaged in business activity, from the junior most employee to the manager and owner is associated with accounting. The higher the level of authority and responsibility, the greater is the need for understanding of accounting concepts and terminology.
The importance of understanding accounting is not limited the business world. Many employees with specialized training in non-business areas also make use of accounting data and need to understand accounting principles and terminology. For example, an engineer responsible for selecting the most desirable solution to a technical manufacturing problem considers cost accounting data to be the deciding factor. Lawyers use accounting data in tax cases and in lawsuits involving property ownership and damages from breach of contracts. Government agencies rely on accounting data evaluating tile efficiency of operations and for appraising the feasibility of proposed taxation and spending measures. Thus, every adult engaged in business transactions must necessarily be concerned with the financial aspects of life.
Concluding the discussion, we can say that accounting plays a significant role in society by providing information to managers of all institutions and to other persons having direct financial interest in those institutions such as present or potential investors or creditors. Accounting information is also important to agencies having indirect financial interest such as taxing authorities, regulatory agencies, economic planners and other groups.
Accounting as a provider of information to users is illustrated in the following diagram.
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