 Typically called financial

accounting, the record of a business’

financial history for use by external
entities is used for many purposes.
 The External users of financial
reports are those who make their
decisions based on the company’s
financial information. They are the
following:
 They need information to help them
decide whether they should invest or
not in the business. Through past
performances or operating results of
the company, they would want to
know potential returns on their
investments.
 They assess the credit worthiness
and the capability of the business to
pay its obligation including the
related interests on the maturity date.
 They assess the financial position of
their suppliers which is necessary for
them to maintain a stable source of
supply in the long term. They are
interested to know whether the
business will continue to honor its
product warranties.
 They use the financial statements of
their customers to determined
whether the debts owed to them will
be paid when due or whether the
customer has enough funds or
resources to pay the goods to be
delivered or the services to be
rendered.
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 They use financial reports to
determine the credibility of the tax
returns filed on behalf of the
company. They are interested to
know if the business paid the correct
amount of taxes.
 They want to ensure that the
company’s disclosure of accounting
is in accordance with the rules and
regulations set in order to protect the
interest of the stakeholders who rely
on such information.
Examples of these regulatory bodies
are the Securities and Exchange
Commission(SEC) and the Bangko
Sentral ng Pilipinas(BSP)
 They use the financial information to
know the business affects the
economy possible prospects for
employment, and/or for educational
of research purposes.