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Making Effective Business Decisions Through Accounting

“The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information”.
According to American Accounting Association Committee, 1966.
This may be considered as a good definition because of its focus on accounting as an help to decision making.
Writing an essay on this topic brings an attention on how accounting helps manager in taking effective business decision. It is very important for any organization to take good business decision as to grow business by minimal cost. So, In order to make good decision People and organization need useful information. There is where Accounting plays a key role. Accounting helps management to determine whether a business is at a loss or a profit, how much company owe, and other such financial information. There are certain Accounting measures can helps managers in the right direction with effective information. Accounting Information helps management make sound business decisions on a timely and effectively manner.
Performance Management’s measuring tool, Balance Score is effective in taking business decision through its four perspectives (Financial perspective, Customer Perspective, Internal Perspective and Innovation

Importance of Financial Information to Stakeholders

Financial information contain in annual reports that the companies are published in periodically. That period is identified as reporting period. Company obligates to provide financial information to their various stakeholders during the past reporting period.
Annual report is a report the company report their comprehensive transactions and events to publish and provide for required parties. There are few reasons to publish annual reports by companies generally as follows.
Because companies have legal obligation between companies and the government act implemented for companies is known as company act 2007 No 7. The company act’s section 150, 151, 152 and 153 has mention the obligation to prepare financial statements, content and form of financial statements, obligation to prepare group financial statements and content and form of group financial statements accordingly.
Stakeholders of the company require the financial information for following reasons.
To know how well the company is doing.
To find company has earned more money than they spent.
To get an idea about strategic and tactical plans of the management.
To provide information to make decisions who make decisions about organisatoin.
Avoid dissimulations and corruptions of the organisation.
Through the audit process, organisations will be able to identify weaknesses of their control of procedures and corruptions occurred due to them.
To obtain and fulfill the financial requirements from monitory markets via financial equipments such as shares, debentures, bank loans and etc.
1.1. Importance of Financial Information to Stakeholders However the financial information require by stakeholders of the organisation. Stakeholder of the organisation can divide into two. The bellow chart represents the stakeholders of the organisation according to the environment they belongs to.
Stakeholders of the Organisation
External stakeholders
a). Suppliers and Trade creditors
b). Government
c). Consumers
d). Public
e). Medias
Internal Stakeholders