Internal and external users of financial information

The users of accounting information

1. Internal and External Users of accounting information Section 1 Objective 2

2. Internal and External Users of Accounting Accounting called the language of a business communicates accounting information to help many types of users. The information that a user of financial information needs depends upon the types of decisions to be made.

3. Internal and External Users of accounting information Users of accounting information are divided into two main groups of users : External Internal

4. External users are users who are not directly involved in the running of an organisation have limited access to a firm’s accounting information depend on reliable, relevant and comparable accounting information to make important decisions

5. External Users and need for accounting information are Creditors/Lenders To assess whether the business can pay for its goods on credit or repay its loans. Stockholders/Owners To decide whether to buy, hold or sell shares Vendors/Customers To assess the staying power of potential suppliers and customers Government agencies To calculate the amount of taxes to be paid.

6. Internal Users are users who are directly involved in the planning, organising, and running the business. use the information to help improve the performance and profitability of the organisation.

7. Internal and External Users of Accounting

8. Internal Users and need for accounting information are: Employees Need to get better wages and working conditions Purchasing managers need to know what, when, and how much to purchase Human resource managers need information about employees’ payroll, benefits, performance and compensation Production managers Employees depend on information to monitor costs and ensure quality

9. Have a look at the video by Carmen Beatriz Accounting - Users of Financial Information - YouTube https://www.youtube.com/watch?v=h9sSFTV6MtQ