 Hello everyone. I welcome you to the second part of the Unit 1 Introduction to Accounting of the Course Financial Accounting. In the first part, we have discussed the meaning of bookkeeping, the meaning of accounting, objectives and functions of accounting. In the second part, now we will discuss the use of accounting as a source of information. Means how accounting can be used as a source for collecting information. And number two, characteristics of accounting information. What are the characteristics of this information that is supplied by accounting? Now if you remember our example in the first part of the discussion that Mr. X started a business with investment of Rs. 10,000, then various expenses and he wanted to know the profit or loss of the business. Now all this information will be supplied by accounting. In that case, the accounting user of accounting information was limited to the only one person, that is Mr. X, the owner of the business. So when the nature of business changes or the size of the business changes, the users of accounting information will also change. In our example, it was a small business, the accounting information will be used by only one person, that is Mr. X, the sole owner of the business. So in case of soldier business and partnership business, generally the users of accounting information are limited to the owners or the partners. But when the size of the business is bigger, for example, in case of a joint stock company, the users of accounting information will vary. The category of accounting information users will be more as compared to a soldier business and partnership business. So let us see in case of a joint stock company, who are the stakeholders, means who are the interested parties in the business and why they need accounting information. The accounting information will be generated by the system of accounting and that will be presented to the users in the form of various financial statements. These financial statements we will discuss in the later part of the course. Now, the first and foremost user of accounting information are the shareholders. Shareholders are the owners of the business. So they want to know the financial position of the business, the future prospect of the business. They want to take decision whether to hold the shares of the company or to sell the shares of the company. So all these decisions will be taken by the shareholders based on the information generated by accounting. Then another category of users of financial information are the prospective investors, means those who want to invest money in a particular company. The amount of money to be invested will be decided on the basis of the accounting information. Means the prospective investors will collect information on the profit of the company or the loss suffered by the company, the future performance, the likely performance in the future of the business. All those information will be generated by the accounting and will be used by the prospective investors to invest their money. They will calculate the expected rate of return in the future periods. Then board of directors, board of directors are the persons who manage the day-to-day affairs of a company. So their purpose is to declare dividend or to keep the reserves for future utilization for expansion of the company. So dividend declaration division again need the accounting information. This information will be again supplied by the financial statements from the accounting. That is that we have to keep the records, then classified, summarized, etc. All these will be done by the accounting system to supply the necessary information for managerial decision making like the dividend declaration. Then the amount to be transferred to the reserves, etc. Then the employees of a big company are also interested in accounting information because they want to know the profitability of the business. They want to know the stability of the business so that they can assure about their job security in the future. So employees are also interested in the accounting information, the profit earned, the amount invested in other business, the assets of the company, the liabilities of the company. All this information will be generated by accounting and will be used by the employees. Then government or we can directly say that this tax authority. So a business, a joint-stock company have to pay corporate tax. Now, how the tax will be calculated? This will be calculated based on the transactions done by the company. So we need a complete record of these transactions, then summarizing classification, etc. So the tax authority will use the information that will be generated by the accounting system. So these are the different users. They use the accounting information for different purposes. The accounting system generates the information and accordingly the defined users will define objectives used this information. Then as the users are different, the accounting information must possess certain characteristics. Positioning of these characteristics will help all the users to use the accounting information as per their needs. Number one, relevance. The accounting information must be relevant. It must be communicated at the right time so that the user can take the decision. For example, the board of management management or board of directors must know the amount of profit generated in a particular financial year to declare dividend at the right time. So the information will be relevant for them if the accounting system generates the information at the right time. Then reliability. The accounting information must be free from all errors as we record the transactions. We classify, we summarize. There should not be any errors. If there is any error, then the accounting information will not be reliable. Any user using that accounting information if face loss, then that information will have no purpose for that user. So it must be reliable free from all errors. Comparability. The accounting information must be such that it helps in comparing the accounting results. You know that a business continues for a very longer period of time, but we calculate the results of the business over different periods of time, maybe three months, six months and one year. For tax purposes, it is generally one year, the whole financial year. Now the business results must be comparable with one period with other periods. At the same time, it must be comparable with companies involving in the same kind of business. So that is possible if the accounting information is supplied. That is it must be able to compare the results of the same company over different periods and with other companies, means with the competitors at a different period of time. Consistency. Consistency means the financial statement must show a true and fair view of the financial position of the business. It is possible if the accounting method that is applied to record, to summarize and to classify the transactions are consistently followed. Means one particular method should be followed consistently over a longer period of time. But it does not mean that the organization cannot change the accounting system. The organization can change the accounting system, but proper provision and proper information must be provided to the all the stakeholders. Then understandability. The accounting information must be presented in such a way that users can understand the information. This understanding is also important. However, the users must also have some accounting knowledge so that they can interpret the results of the financial statements. So in this session, we have discussed mainly two aspects. The users of financial information, their defined purposes, why they use accounting information. Shareholders use accounting information for investment. Employees to assure their job security, future prospect of the company, tax authority for tax purposes. This accounting information must have certain characteristics in terms of relevance, reliability, comparability, consistency and understandability. So the second session will be in here and we will move to the third part where we will discuss the different terms of accounting that are generally used when we will come to discuss about the different accounting aspects, different books of accounts, etc. Thank you. Thank you for watching.