Users of accounting information

A. Internal users

a) Owners

 Need information to see whether their business is profitable.

 Need information for them to make decision such as how much

money can be drawn out, whether to expand or disinvest from
their business.

b) Employees

 Require information concerning the ability of the organization

to pay wages and pensions.

 Also interested in the future of the organization because this

will affect their job security.

c) Management

 They are the day-to-day decision makers.

 Need to information to decide how many units to produce?

How much of materials to purchase?

 Also need information to evaluate certain investment proposal.

B. External users

a) Investors

 Includes both existing and potential investors.

 Require information concerning the profitability of the company

and its ability to pay dividends.

b) Bankers / lenders

 Require information concerning the ability of the business to

repay the interest on such loan as they fall due & repaying the
loan at the agreed time.

c) The government

 Includes tax authorities & other government agencies.

 Need information for them to assess the tax payable by the

companies.

 Also require information to measure the state of the economy.

 d) The business contact group (customers & suppliers)

 Require information concerning the ability of the business to

provide the goods / services requested & continue to provide
similar services in future.

 Require information concerning the ability to pay for goods /

services supplied when payment becomes due.

Characteristics of useful accounting information

a) Relevance

b) Reliable

c) Comparable

d) Understandable

e) Timely

f) Complete