Whether as an individual or solo business owner or multinational with complex and complicated business model, Financial Accounting (FA) information is for you and me – Yes, it is for you and me!
According to Musbau Kolawole Kayode (2015), users of financial accounting information can range from business owner, customers, suppliers, managers, lenders, public, regulators, etc[1]. The wide range of users clearly demonstrate that without financial accounting, business transaction will be almost impossible.
Of course, there are levels to sophistication at which financial accounting will be carried out depend on the user type or nature of business (single owner vs multinational for instance), however, the bottom-line principles remain same.
As an individual, you may use financial accounting information provided for a particular company to determine if it is profitable or fulfilling to buy such company shares, a company may use FA data to determine if its good to continue business, expand, shrink, divest, acquire, or even totally close the business entity. FA data is so important that even in-house labor union may rely on such data to engage company management on welfare packages for members while financial regulators are always seeking for company’s financial data to determine level of compliance to set rules and regulations, improve on loopholes that may exit in current guidelines and support authority to make right decisions, implement appropriate policies that will attract more companies and employers of labor[2].
Every business venture starts with an idea. The more the idea appeals to the owner, the more the urge to start the business. Without proper planning, the business idea will not see daylight. Early stage of planning will explore the possible outcome of the business idea, resources required to achieve set targets, current trends with potential impact on the business idea – market scenario, target customer base, potential existing or future competitors[3].
Setting up the plan as briefly described above, taking operating, investing, and financing decision on the business idea, determining profitability or otherwise of the business idea – all depends on financial accounting information or data available.
The significant importance of financial accounting data in day-day life of an individual, business owner, customers, suppliers, managers, lenders, public, regulators, etc has made the discipline a necessity for economic buoyance and financial accounting a well-studied, documented, and established area of knowledge. International standards like GAAP (Generally Accepted Accounting Principles), IFRS (International Financial Reporting Standards) have been established with clear principles and guidelines so that preparation of financial accounting statements or information will not be chaotic and confusing considering the wide range of users and differences in companies set up.
Therefore, irrespective of your need or scope, financial accounting information is for you and using it as appropriate can only improve your status and grow your business to the next level.
Learn it, use it and prosper in your business!
[1] The Users of Accounting Information and their Needs. An Introduction to Accounting and its Branches – GRIN
[2] Financial Accounting for MBAs, Sixth edition
Summary of learnings in Data Analytics so far …