Principles of Accounts

Users of Accounting Information.

• Users of accounting information can be divided into two groups:
• Internal users and,
• External users.
• Users of accounting information are sometimes known as stakeholders since they are affected and in turn affect the concerned entity’s operations.

Internal Users

• These are found inside the business entity itself and they include:
• Owners– Determine profitability and financial viability.
• Managers– Ensure a business operates efficiently and identifies and develops plans towards problem areas highlighted. Measure results against targets and evaluate variances.
• Employees– Determine if employer is able to provide stable employment and remuneration.

External Users

• These are found outside the business itself.
• Customers– Determine if business can provide products over long period of time. Assess ability for growth in product range, pricing and profitability and aftermarket support potential.
• Competitors– Competitor intelligence, to maintain competitive edge.
• Lenders– Determine if business can repay capital payments on loans and interest. Assess the liquidity, solvency and gearing of the business to assess whether further loans can be granted without security etc.
• Government– Determine the amount of taxes and levies that should be paid. Assess the corporate governance and social responsibility of the business.
• Suppliers– Determine if business can pay for goods purchased on credit. Assess whether associations with a business are beneficial or not.
• Investors– Determine if business would be good investment, and to assess risk and return of an investment in business.