Users of Accounting Information

Users of Accounting Information

Internal and External Users

Users of Accounting Information

Accounting information helps users to make better financial decisions. Users of accounting are both internal and external to the organization. Keep reading to find out some of the basic users of accounting and their information needs.

Internal Users

1)  Owner – they are interested to know whether to increase, decrease, maintain or completely dispose their business/investment; whether they are getting a fair return on their investment to the business.

Internal Users

2)  Management (including officers and directors) – to management, the financial statements serve as a measure of their effectiveness; the statements are also used in making future financial decisions or assessing nature and extent of financing needs.

Internal Users

3)  Employee– these groups is interested in two things - security of employment and satisfactory compensation (remuneration /salary). Financial information is necessary in making a decision whether to continue working for the company or look for work elsewhere.

External Users

1)  Prospective Investor/s–this group is interested in the financial statements to determine whether to commit their resources to the enterprise or acquire an ownership interest in the business firm (for investment security).

External Users

2)  Creditor–they use financial statements as a basis for ascertaining whether to grant loans or not. The amount of loan, the terms and other matters will depend in large part on the financial data submitted by the borrower.

External Users

3)  Government–the Bureau of Internal Revenue requires financial data for proper computation or assessment of taxes or penalties and for future investigation and audit.

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