January 26, 2022

SB-Accounting

Accounting + Finance Blog

Definition of information and key take away

Definition of information and key take away
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In the previous article, we examine the meaning of data with explanations. In this article, the focus is on the information. The term as mentioned is confused by many people. What actually constitutes data or information is largely unknown.

What is information?

Information is facts that have been processed or retrieved and enable a user to take action.

Also, information is processed data used to make an informed decision by its users.

Key takeaway

Information is processed facts or data. Information emanates from data. It may be a combination of similar data. For example, a combination of daily sales and purchases data for a month.

It might as well be a combination of unrelated data. For example, the statement of profit or loss is a combination of data that are of different categories. This is also true with the statement of financial position.

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Information is retrieved from data. A data or set of data may have been stored in a computer memory or in a database for future use or when required. Management may request the data and it will be retrieved for the database.

For example, the A/C Receivables schedule may have been stored in a database. A manager might request to see a/c receivable data from the past six months. These will be retrieved from the database and are available to the manager.

Information motivated users to take action. The primary difference between data and information in decision making. With Data on a user’s disposal, no action will be necessary. But information forces the user to take action or make a decision.

For example, the a/c receivable schedule in the hands of the debt recovery manager may force him to contact debtors that owe the entity on whose payments are due. However, such information in the hands of a sales representative is simply data. As it will be useless on his or her palm.

It is also possible that the recovery manager may not take any decision by examining the a/c receivables schedule. This doesn’t mean that at that moment, the schedule is not information. It is possible that by assessing the a/c receivables schedule, debtors whose debts are due to have already made payments. In such a case, the debt recovery officer makes a decision to not contact any debtor.

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To conclude, data is the next big oil in Nigeria. However, it is by making a decision that makes such data information. The next article will examine the objectives of an information system.

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