11.What kind of accounting information do customers and employees need?

Where customers regard a business as an important supplier of goods or services they will require information to satisfy themselves that business can be relied upon as a continuing source of supply. The current financial condition of the business and likely future performance and prospects will, therefore, be of interest. Employees. Employees will rely on business for their livelihood and will often have a long-standing relationship with the business. Their concerns will be for security and prospects of employment and its financial rewards. Employees will require information concerning possible changes in employment levels, the condition of service and the ability of the business to meet pay demands. Information relating to the performance and prospects of individual units of the business will be useful in addition to information concerning the progress of the business overall.

12. For what reasons governments may require information concerning a business?

Governments may require information concerning a business for different reasons. Governments use information on profits made in order to assess liability for taxation. In addition, information concerning financial condition of profits may be useful in assessing the effects of government policies or for deciding on the level of grants or subsidies to be provided.

Governments sometimes wish to regulate the activities of certain businesses. For example, there may be a policy to prevent the growth of monopolies in business and to encourage the spread of competition. Such a policy may be seen as being in the best interests of the consumer. Where anti-monopoly policies are being pursued, governments may take a keen interest in the sales and profits achieved by large businesses.

13 For what reasons competitors may require information concerning a business?

For accounting to serve its intended purpose, it is necessary to establish clearly who the major users of financial information are and what their needs are. As is known, in the world of business it is possible to classify users of accounting information into major groups. Users within each group are considered to have very similar, or the same, information needs. Some of the major users of accounting information are: l) owners of business, 2) lenders of money, such as banks, 3)suppliers of goods and services, 4) managers of businesses, 5) customers of a business, 6 employees, 7 governments, 8) the public, 9) competitors Owners. Owners normally invest in business in order to increase their wealth. The major decision confronting owners and potential owners is whether or not to invest or retain an investment in a business.  14. What qualities should accounting information possess to meet the needs of users? These qualities may at times be in conflict with one another and some compromise between them may have to be made. The view as to what constitutes a satisfactory compromise may well vary between users or groups of users 2. The most important quality is certainly relevance. Accounting information is said to be relevant if it has the potential to influence the decisions and judgments of users. Relevance is often regarded as the primary quality of accounting information as it embodies the basic idea that accounting exists in order to meet the needs of users. Accounting information which is irrelevant provides no benefits to users and does not, therefore, justify the costs of producing the information. 15. What is the most important quality of the accounting information?  2. The most important quality is certainly relevance. Accounting information is said to be relevant if it has the potential to influence the decisions and judgments of users. Relevance is often regarded as the primary quality of accounting information as it embodies the basic idea that accounting exists in order to meet the needs of users. Accounting information which is irrelevant provides no benefits to users and does not, therefore, justify the costs of producing the information. 3. Another important quality is objectivity. Objectivity. i.e. impartiality, can be divided into two elements: 1) verifiability, and 2) freedom from bias. Verifiability suggests that the information produced can be independently observed or tested. This means that qualified accountants handling the same basic data but working independently would produced the same results.  In other words, accounting information should possess the quality of comparability. 6. And last but not least is understandability. Users will only be able to employ accounting information in a sensible way if they are able to understand it. This means that accounting information should be set out in a clear and logical manner and not be unnecessarily complicated.

16. What does verifiability suggest? Verifiability suggests that the information produced can be independently observed or tested. This means that qualified accountants handling the same basic data but working independently would produced the same results.