Chief Product Team 
Do you want to know why do managers use accounting information? If so, this article is worth reading for you. Read on to learn more.
Why Do Managers Use Accounting Information?
Accounting information is the record of the economic activities of a business. It records the economic transactions of the business such as income, expense, and asset or liability.
The accounting information is used for three basic purposes:
Internal Reporting
The internal reports are the reports that are prepared for the upper-level managers and directors of the firm. The reports are mainly used by them to monitor and evaluate the performance of different departments of the firm. They use these reports to analyze if they have achieved their planned objectives or not. These reports help to decide whether they should take corrective actions or not in order to achieve their pre-set goals.
Managers also use these reports for evaluating the performance of their subordinates. They use these reports in order to find out what their subordinates are doing. And if they are doing any favoritism or not. These reports also help them in making decisions about the future courses of action to be taken by their subordinates. These decisions may include changing their job position or terminating them from their current job position if they make any mistake that is beyond repairable.
The third purpose for which internal reports are prepared is for motivating employees to perform better. By showing them how well they have performed in comparison with their past performances. And on how much they have worked beyond expectations in order to achieve a higher stage of performance than their past performances.
External Reporting
The external reports are prepared for the owners of business firms by means of which these firms can communicate with other people and let other people know about their financial condition, operations, company policies, etc. They can inform others about where they stand financially with respect to others as well as with respect to themselves in past years. They can also communicate with others regarding new policies adopted by them, regarding new products introduced by them, and regarding new organizations formed by them, etc., through these external reports. Through these external reports, firms can also communicate with others about changes that have been made in organizational structure so that others who deal with them may not get affected adversely due to such changes.
These external financial statements also help other people to make investment decisions regarding investment in that particular firm or not because through these external financial statements they can know whether they will get good returns on their invested money if they invest it in this particular firm or not because through these external financial statements, they can know whether this particular firm has enough financial resources to carry on its operations successfully or not.
Control and Decision Making
Accounting information also helps in controlling the operations of a firm. The managers can control the operations of their firms through monitoring and evaluating the performance of their departments as well as through deciding about the future action plans to be taken by their subordinates, as discussed earlier. Accounting information also helps managers in the decision-making process.
