FUNDAMENTALS OF Accountancy, Business And

management 1

Users of
Accounting
Information
At the end of the lesson, students are able
to:
1. Define and provide examples of external
users of accounting information.
2. Define and provide examples of internal
users of accounting information.
3. Explain the decisions made by each of
these users.
4. Explain and describe the type of
information needed by each of these
users.
Accounting information can either
be:
 Resources -
Statement of Financial Position
 Obligation -
 Profitability - Statement of Comprehensive Income

 Capital - Statement of Changes in Equity

 Cash Flow - Statement of Cash Flows

Questions:
1.What is users/stakeholders of
accounting information?

They are individuals and or

organizations that have an
interest in how a business
performs.
Questions:
1.What are the two categories
of users/ stakeholders?

Internalusers
External users
Questions:
1.What is Internal users?

Internal users of accounting

information are those individuals
inside a company who plan,
organize, and run the business.
These users are directly involved in
managing and operating the
business.
Questions:
1.Who are the internal users of
accounting information?

 Owners
Managers
Employees
 Questions:
What information will the owners
need that can be answered by
accounting?
Information need: profit or income for
the period, resources or assets of the
business, liabilities of the business
Decisions supported: considerations
regarding additional investment,
expanding the business, borrowing funds to
support any expansion plans.
 Questions:
What information will the managers
need that can be answered by
accounting?
Information need: income/earnings for the
period, sales, available cash, production cost

Decisions supported: analyze the organization's

performance and position and take appropriate
measures to improve the company results.
sufficiency of cash to pay dividends to
stockholders; pricing decisions
Questions:
What information will the employees
need that can be answered by
accounting?
Information need: profit for the period,
salaries paid to employees

Decisions supported: job security,

consider staying in the employ of the
company or look for other employment
opportunities
Questions:
What is Internal users?

External users are individuals and

organizations outside a company
who want financial information
about the company.
These users are not directly
involved in managing and
operating the business.
Questions:
1.Who are the external users of
accounting information?
 Banks
 Customers
 Investors
 Creditors
 Suppliers
 government regulatory agencies
Questions:
Why banks/creditors need
financial information?
 Use accounting information to
evaluate the risks of granting
loan or lending money to their
client.
Questions:
Why customers need financial
information?
for assessing the financial
position of its suppliers which is
necessary for them to maintain a
stable source of supply in the
long term.
Questions:
Why investors need financial
information?
They use accounting information to make
decisions whether to buy shares of a
company. Investors want to make sure
they can earn a reasonable return on
their investment before they commit any
financial resources to a company.
Also included as external users are
government regulatory agencies
such as:
1. Securities and Exchange Commission
(SEC),
2. Bureau of Internal Revenue (BIR),
3. Department of Labor and Employment
(DOLE), 4. Social Security System (SSS),
and Local
5. Government Units (LGUs).
External users (Secondary Users) of accounting
information include the following:
Tax Authorities (BIR)
for determining the credibility of
the tax returns filed on behalf of a
company.
 Regulatory Authorities (SEC, DOLE)
for ensuring that a company's
disclosure of accounting information
is in accordance with the rules and
regulations set in order to protect
the interests of the stakeholders
who rely on such information in
forming their decisions.