Accounting was developed specifically in order to record and classify monetary

transactions as well as provide the financial results of the operations of entities in forms
of accounting records. 
Ang mga accounting records or informations na ito ay importante sa iba’t ibang mga tao
inside and outside the business.
Generally, the users of accounting information in the society can be classified into two
categories, which include the internal users and external users. Internal users refer to the
people in the organization producing the accounting reports while the external users are
the people, institutions and entities outside the organization’s boundaries who use the
information for the purpose of decision-making.

Lets first talk about the external users.

Again, External users are the people, institutions and entities outside the organization’s
boundaries who use the information for the purpose of decision-making.

1. Investors and stockholders-

Investors need information on risk and return of their investments. They are interested in the
financial information whether they are going to buy, hold, or sell their investments in the
business.
Stockholders of corporate business need accounting information to assist them to make
decisions on what to do with their investments whether it is wise to hold, sell or buy additional
shares in the corporate business or not.
Explanation:
Importante sa mga investors at shareholders ang financial statements of the business
kasi with the financial statements machecheck nila ang profitability ng business.
Kumikita ba o nalulugi ba. With the financial statements, makakapagdecide sila ng
kanilang next move with the business whether they will buy, hold, or sell their shares.

2. Creditors/Lenders - Lenders, for example banks, need information which helps them assess
the business' ability to repay its loan and interest when they fall due.

Explanation: These are parties that provide alternative capital sources to the
organizations. Lenders usually provide the organization with debt capital and usually get
a return in the form of interest. For short ito yung mga banko o lending corporations na
nag ooffer ng pautang sa mga businesses. Ang mga yan ang naghahanap o humihingi ng
accounting information of business kasi dun sila nagbabase through assessment kung
kaya bang makabayad on the due time ng isang business or business owner.

3. Suppliers - Just like the lenders, suppliers assess the business' ability to repay its obligation
upon maturity.

Explanation: Dito naman mayroon kasing mga suppliers na ang payment ay after
consumption or after pa maubos ung supplies. So ang mga suppliers ay nagbabase din
sa accounting information if may kakayanan ba ang business na mag bayad sa tinakda o
pinagkasunduang oras.

4. Government and their agencies

The government usually obtains financial information from individuals and organizations, for
purposes of taxation and licensing.
Government bodies assess the general allocation of resources and activities of entities. They
usually need information for the regulation of the activities of the business, determine future
taxation policies and as a basis for computation of a country's national income and other similar
statistics.

Explanation: When it comes to government, specially the authorities of income tax

department they need the accounting information for the purpose of tax collection. Ang
gobyerno ay kinokolekta ang mga accounting informations then they calculate the taxes
payable of the particular business.

5. Public
Information set forth in the financial statements may provide the public with the trends and
recent developments in the prosperity of the company. This is especially important especially
when the company makes a substantial contribution to a local economy by providing
employment and patronizing products and raw materials from local suppliers.

Explanation:
In the general public, may mga tao na interested in the financials of the company, sila ay
maaaring analysts, students for their education, researchers who sometimes need the
data while performing surveys or any other research, others.

6. Customers
Customers assess whether the business will continue in existence. This is especially needed
where customers have a long-term involvement with, or are dependent on, the business. For
example, where product warranties exist or where specialist parts may be needed.

Explanation: May mga costumers na interested din sa financials ng isang business lalo
na kung ito ay isang malaking business na nagsusupply sa mga small businesses. These
customers are interested in the financial statements of the company from which they are
purchasing the materials that is important for running their business.

Now let’s proceed to the internal users or the people in the organization producing the
accounting reports.

B. Internal users
1. Owners or Partners
Owners or partners in a business need accounting information to assess whether their capital
investments are profitable or not, and whether to grant or not additional compensation to their
employees.

Explanation: So ito yung mga may ari ng business. Kailangan nila ang accounting
reports para malaman kung sila ay kuumikita o nalulugi. Nagbabase din sila sa
accounting reports kung kaya pa ba nila mag bigay ng additional na pasahod o
compensations sa kanilang mga mang gagawa.

2. Managers
Information set forth in the financial statements assists the managers in carrying out their day to
day functions. Managers need to face regular decisions. Such as how many units of products do
they need to produce? How much supplies or equipment do they need to purchase? Do they
have enough cash and did they meet the earnings target last year or not? These questions and
many others need analysis of accounting information.
Explanation: When it comes to the managers, sila yung pinakanakakakita ng day to day
function of the business. Sila yung may alam kung narereach ba ng company ang daily
quota, or may mga equiptments ba na kailangan bilhin, may mga kailangan ba palitan, or
kung kailangan ba magbawas or magdagdag ng tao. Kailangan ng managers ang
accounting records para malaman kung may budget pa ba or nareach ba ang target
earnings of the business or company.

3. Employees
Employees assess the stability and profitability of their company. They are interested in the
ability of their employer to provide remuneration, employment opportunities, retirement and
other benefits. Accounting information is also needed by the Labor unions as basis for
negotiating additional compensation for their member-employees.

Explanation: Even the employees, ay interesado din sa accounting information of the

company. Interesado sila kung ang kumpanyang kanilang pinagtratrabahuhan ay may
kakayanan na magbigay ng mga compensations sa kanilang mga employees. Ang
accounting information din ay kailangan ng Labor unions o Samahan ng mga employee
for them to negotiate with the companies para sa dagdag sahod o iba pang
compensations.

Aside on internal and external. Users of financial information are also classified in the
conceptual framework. These are primary users and users other than primary users.

Classification of Users in the Conceptual Framework

The Conceptual Framework for the preparation and presentation of financial statements for
external users also classifies users of financial information as:

A. Primary users - They are the main users to whom the general purpose financial reports are
directed.

Primary users of the financial statements are considered existing and potential investors,
creditors, and lenders. Primary users obtain financial statement information and allow them to
understand the overall health of the company such as its net cash flow status etc. Such users
make decisions related to purchasing or selling interest in these reporting entities. Other
information can be provided about the company such as information related to management
and the board of directors. This will give primary users a greater understanding of qualitative
characteristic about the company. 

The primary users are:

a. Existing and potential investors
b. Lenders and other creditors.

The other users not included in the primary users are classified as users other than
primary users.

B. Users other than primary users

This category includes the management, employees and others not included as primary users
of the financial statements.

The conceptual framework is a structure of assumptions, principles or rules

developed by accounting standard-setting bodies, such as the International Accounting
Standards Board (IASB) in the United Kingdom and Financial Accounting Standards
Board (FASB) of the United States, that guides the preparation of financial statements
that are relevant and useful to Users of financial information.