Importance Of Data In Accounting And Parties Interested In Accounting Information

Usually data is disorganized and disjointed in its raw form. It is not capable of being understood. So, accounting processes raw data into finished form of "information" to make it useful and meaningful, capable of being used in decision taking process by the various users of accounting information.Thus accounting data processed by the accounting cycle produces accounting information. Data is collected, recorded, classified, grouped, valued, tabulated, arranged, summarized in order to present the same in the form of information for its use by the users to enable them to take decisions.Accounting data Consists of financial transactions and events relating to an entity for the accounting period supported by documentary evidence (vouchers). For example receipts and payments are documented by payee's receipt purchases by invoice, sales by outwards invoice, returns inwards by credit note; returns outwards by debit note; expenses by bills or payment rolls etc.Thus the first and the most important function of accounting is to collect the data supported by the vouchers to ensure the authenticity of the same. Accounting processes consist of recording in the books of original entry (journal or sub- journals); classifying (posting into ledger) grouping (putting transactions of similar nature at one place in one account) valuing (finding the value at year end by balancing or valuing) tabulating (preparing list of balances and checking arithmetical accuracy) and preparing financial statements (Trading and Profit and loss account; Balance Sheet) in report form to communicate the information.

Now-a-days computer accounting software can manage this task very efficient in a matter of short time. Accounting information is presented mostly in the form of financial statements like Income statement (Trading and Profit &amp; Loss account) Position statement (Balance sheet). Now-a-days statement of changes in financial position; value added statement; report on Human resources accounting; Social performance report etc. form part of accounting informationDifference between Data and InformationData1. Refers to details, facts about any event.2. Is, generally, disorganized and disjointed in the form.3. Is in raw-form and is the input of accounting.4. Cannot be understood or made use of by the users.5. It does not depend upon information.Information1. Refers to only those events which are concerned with entity.2. Is properly arranged, classified and organized.3. Is in the finished form and is the output of accounting.4. Is understood and used by the users of accounting information for taking their decisions.5. Information is based upon and derived from data.Parties interested in accounting informationAccounting information is of interest to various persons who are directly or indirectly concerned with an enterprise.Management:A small business is generally carried on by the sole trader or by the partners. But a large business is usually conducted by an incorporated company which separates management from ownership. Managers' responsibility is to operate the business efficiently and maximize the return on capital without jeopardizing the fund.Management needs accounting information in(1) selecting out of alternative proposals;(2) controlling acquisition and maintenance of inventories (stock) cash receipts and payments;(3) planning or budgeting for the future(4) appraising the performance and(5) devising remedial measures for the deviations of the actual results from the budgeted targets.Owners:Although owners initiate in contributing fund to the business yet they are the last to receive their claim on equity's return on their investment.