INTERNATIONAL PHILIPPINE SCHOOL IN JEDDAH

SENIOR HIGH SCHOOL DEPARTMENT

CHAPTER 3
USERS OF ACCOUNTING INFORMATION

Prepared by:
DEBORAH MAE R. BONOAN
Subject Teacher
What’s In!

Given Best School Supplies Center which sells school

and office supplies to customers. After six months of
operation, its owner Beverly asks her accountant to
prepare and present the financial statements of the
business. As an owner, Beverly has reasonable interest of
knowing through the financial statements if her business is
profiting or losing
What’s In!

Other than Beverly, who else do you think will use

the financial statements of Best School Supplies
Center?

Making guesses now? You’ll find out no sooner

about the different accounting information users!
Word Search!

Find words that are related to accounting inside the

word square and write them on your answer sheet.

Cue: Some words may be in vertical-downward

position, horizontal-forward position, and slanting-
downward position
Open Your Eyes, Activate Your Mind!
Users of Accounting Information

Accounting information is communicated to

different stakeholders who use such accounting
information in making decisions. Users of
accounting information are classified into
internal and external users.
Users of Accounting Information

Internal users are those who make decisions

on behalf of the organization.

They are the following:

Users of Accounting Information

Managers/Management

They are people employed by the company to

perform management functions such as planning,
organizing and running the business affairs.
Users of Accounting Information

Employees/Labor Unions

They are ordinary company employees who

assess the company’s profitability and stability,
and their consequence on future salary and job
security
Users of Accounting Information

Owners/Stockholders

They provide capital to the business. They need

accounting information to check if the business is well.
Accounting information also helps them in deciding
whether to withdraw or increase their investments.
Overall, they are interested to know if the business is
profiting and how much.
Users of Accounting Information

External users are those who are not part of

the company but need to use accounting
information to be able to make decisions

They are the following:

Users of Accounting Information

Potential Investors

They are individuals or other business planning to

invest in the company. To be able to make sure that
the company is worth putting their money in, they
check its financial statements and make decisions
based on the accounting information gathered.
Users of Accounting Information

Creditors and Potential Creditors

They are individuals, institutions or banks who have

lent or are planning to lend money to the company.
They need to check the company’s financial
statements in order to assess its credit worthiness and
the capability of the business to pay its obligations
including related interests on maturity date.
Users of Accounting Information

Customers

They refer to people who buy goods or acquire

services from the company at a price. They check the
financial statements of their suppliers in order to
determine if they are a stable source of supply over a
long period.
Users of Accounting Information

Suppliers

They are businesses that provide supplies to other

businesses. They check the financial statements of
their customers in order to determine if debts owed to
them will be paid when due.
Users of Accounting Information

Government

The government is concerned about regulating businesses

and their effects to the economy. They also want to check if
businesses are paying their taxes honestly. Thus, they check
the financial statements of businesses.

Examples are the Bureau of Internal Revenue, which is a tax

authority, and the Securities and Exchange Commission which
is a regulatory body.
Users of Accounting Information

Academe

Educational institutions use accounting information

from the financial statement of a company for
academic purposes.
Users of Accounting Information

Public

The general public is composed to individuals who

are not related to the company. However, they use the
financial statements of a company to determine how it
affects the economy, and pinpoint possible prospects
for employment.
Get Ready for Some Kicking!

Identify which does not belong to group of internal

or external users.

1. Top Management, Owner, Stockholder, Government

2. Laborer, Public, Potential Investors, Clients

Get Ready for Some Kicking!

3. Academe, Supervisor, Lending Company,

Taxing Authority

4. General Public, Existing Investor, Company Proprietor,

Manager

5. Researcher, Academe, Regulatory Bodies, Labor Union

Individual Activity!
Hover through the cases below. Answer them on
your answer sheet or paper.

Case #1: Joshua is a BS Accountancy student. He also

is a stockholder of Imperial Inc. On the part of
Imperial Inc., is Joshua an internal user or external
user? Support your answer.
Individual Activity!
Case #2: Ryan is a collection officer of HAMA Motor
Dealer company. But he also is a supplier of
construction nails to different hardware shops in his
locality. Can Ryan be classified as an external
accounting information user? How?
Summative Test!

Do Summative Test on pages 46-57 in your

book.