Users of Accounting

Information
•why accounting is
considered as the
language of business?
•what business they
would want to enter
into.
•What if you are from a Local
Government Unit (City/Municipality)? Do
you think the Local Government
(City/Municipality) will be interested
with your accounting reports/records?”
 INTERNAL USERS

• are those individuals inside a company who plan,

organize, and run the business. These users are
directly involved in managing and operating the
business. These include marketing managers,
production supervisors, finance directors,
company officers and owners
•Internal users (Primary
Users) of accounting
information include the
following:
Management
•Information need:
income/earnings for the
period, sales, available
cash, production cost.
•Decisions supported: analyze the
organization's performance and position
and take appropriate measures to improve
the company results. sufficiency of cash to
pay dividends to stockholders; pricing
decisions
•Employees
•Information need: profit for the period,
salaries paid to employees
•Decisions supported: job security, consider
staying in the employ of the company or
look for other employment opportunities
Owners
•Information need: profit or
income for the period, resources
or assets of the business,
liabilities of the business
•Decisions supported :
considerations regarding
additional investment, expanding
the business, borrowing funds to
support any expansion plans.
•Accounting information is presented to
internal users usually in the form of
management accounts, budgets,
forecasts and financial statements. This
information will support whatever
decision of the internal users.
•EXTERNAL
USERS
• External users are individuals and
organizations outside a company who want
financial information about the company.
These users are not directly involved in
managing and operating the business. The two
most common types of external users are
potential investors and creditors.
•Potential Investors use
accounting information to
make decisions to buy shares
of a company
• Creditors (such as suppliers and bankers) use
• accounting information to evaluate the risks of
granting credit or lending money. Also included
as external users are government regulatory
agencies such as Securities and Exchange
Commission (SEC), Bureau of Internal Revenue
(BIR), Department of Labor and Employment
(DOLE), Social Security System (SSS), and Local
Government Units (LGUs).
•External users (Secondary
Users) of accounting
information include the
following:
Creditors:
•for determining the credit worthiness of
an organization. Terms of credit are set
by creditors according to the assessment
of their customers' financial health.
Creditors include suppliers as well as
lenders of finance such as banks.
•Tax Authorities (BIR): for
determining the credibility
of the tax returns filed on
behalf of a company.
•Investors: for analyzing the
feasibility of investing in a
company. Investors want to make
sure they can earn a reasonable
return on their investment before
they commit any financial
resources to a company.
•Customers: for assessing the
financial position of its suppliers
which is necessary for them to
maintain a stable source of supply
in the long term.
•Regulatory Authorities (SEC, DOLE): for
ensuring that a company's disclosure of
accounting information is in accordance
with the rules and regulations set in order
to protect the interests of the
stakeholders who rely on such information
in forming their decisions.
•examples of external users.
“what kind of information do
users need that can be
answered by accounting?”.