Use of Accounting Information by Departments in an Organization

Accounting information helps every department in an organization and use of accounting information can be summarized as follows:

Marketing/Sales Department

  • Assessing the credit worthiness of the customers before approving credit

This task can be done by assessing the past records of the customer which can be found in financial accounting system.

  • Reviewing the effectiveness of the advertising strategy-

This task can be done by finding the relationship between sales and advertising expenses. Necessary cost and sales information can be obtained from financial accounting system.

  • Control cost relating to marketing/sales such as distribution expenses & sales commissions-

All relevant cost information can be gathered from financial accounting system.

  • Evaluation of achieving budgetary targets-

Accounting information such as sales amount and profit made helps to evaluate the performance of the sales department by comparing the actual data with the target provided by the budget.

  • Pricing decision

When making the pricing decision accounting data has to be used to assess the cost of the product and pricing has to be done in such a way that company can make profits.

Human Resources Department

  • Control labour cost-

Actual labour cost can be found in financial accounting system. (Salaries, wages & other benefits provided)

The requirement for additional labour has to be predicted

Predicting the requirement of additional labor depend on the demand for the product. Predicting the demand for the product involves obtaining historical data from the financial accounting system and make predictions using time series or regression analysis.

Finance/Planning Department

  • Assist in planning for future periods-

When planning/forecasting for future period planning department need to analyze the past information to find out trends and seasonal factors. This past information can be obtained from financial accounting system.

Assist the budgetary control process

In comparing the budgeted figures with actual figures to obtain the variance the actual financial data has to be obtained from the financial accounting system.

Purchasing Department

  • Assist in negotiating with suppliers for credit terms-

When negotiating with suppliers for brtter credit terms the organization need to prove their credit worthiness. For this purpose necessary information about past transactions can be generated from financial accounting system.

  • Generating information to control raw material purchases expenses.
  • Providing information to make decisions about stock levels.

Production Department

  • Control Cost-

For the purpose of controlling the cost relating to production, necessary cost related information can be generated through financial accounting system.

  • Forecast the demand for future using past accounting data.

IT Department-

  • Generating information to evaluate the potentials to expand information technology strategy.

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