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Users of Accounting Information Internal & External Users

external user of accounting information

The groups, who lend money need accounting information to analyses a company’s profitability, liquidity and financial position before making a loan to the company. Further, they keep constant watch on the operating results and financial position of the wave broadband push business through accounting data. Financial accounting is one of the broad categories in the study of accounting. These financial statements ensure the information is consistent from period to period and generally comparable between organizations.

The users of financial statements such as the balance sheet include people both inside and outside your company. The study was on the relevance of accounting theory on business financial performance in Nigeria. The objective of the study was to examine how accounting theory affects financial performance of business in Nigeria.

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Lenders – Banks and Non-banking financial companies which provide loans in the form of cash or credit are termed as lenders. The branch of accounting which deals with internal users is called management accounting. There are other external users, for example, labor unions, customers and consumers, suppliers, SEC, tax authorities, chamber of commerce, press, competitors, auditors, etc. Financial accounting is the process of the preparation of financial reports of the enterprise for use by both internal and external parties. Government keeps a close watch on the firms which yield good amount of profits. The state and central Governments are interested in the financial statements to know the earnings for the purpose of taxation.

What are the six primary components of accounting information systems?

Accounting information systems generally consist of six primary components: people, procedures and instructions, data, software, information technology infrastructure, and internal controls.

For example, assume that you have a company that produces and sells both computer printers and the replacement ink cartridges. If the company decided to eliminate the printers, then it would also lose the cartridge sales. In the past, in some cases, the elimination of one component, such as printers, led to customers switching to a different producer for its computers and other peripheral hardware. In the end, an organization needs to consider both the financial and nonfinancial aspects of a decision, and sometimes the effects are not intuitively obvious at the time of the decision.


Management needs accounting information to check the efforts of subordinates, ensuring that those who are working hard are properly motivated. Comparability refers to information that has been measured and reported in a consistent manner across different enterprises. Bookkeeping is a part of accounting that solely involves recording economic events.

What are the 6 external users of accounting information?

External users are creditors, investors, government, trading partners, regulatory agencies, international standardization agencies, journalists and internal users are owners, directors, managers, and employees of the company.

Various Government departments such as Company law department, Reserve Bank of India, Registrar of Companies etc. require information to be filed with them under law. By examining this accounting information they ensure that concerned companies are following the rules and regulations. External users are those groups or persons who are outside the organization for whom accounting function is performed. Owners, being businessmen, always keep an eye on the returns from the investment. Comparing the accounts of various years helps in getting good pieces of information.

The Users of Financial Statement:

The users of financial statements are classified as internal users or external users for financial information. Internal users work within the company or are shareholders of the company. External users do not work within the company on the company payroll but are interested in the financial position of the company.

This happens when a customer uses the goods from a particular company as raw materials or supplies in his own business or when he is heavily dependent upon the goods or services of the company. At Finance Strategists, we partner with financial experts to ensure the accuracy of our financial content. Consistency is the application of the same accounting treatment to similar events by an entity from period to period. Consistency does not imply that companies cannot switch from one accounting method to another.

Who are the User of Accounting Information System?

The benefit of reporting what has already occurred is the reliability of the information. Accountants can, with a fair amount of confidence, accurately report the financial performance of the organization related to past activities. The feedback value offered by the accounting information is particularly useful to internal users. That is, reviewing how the organization performed in the past can help managers and other employees make better decisions about and adjustments to future activities. External and internal users have a stake in the financial information generated by a company. These users use the financial statements in different ways, but most of the time, it’s to determine whether to invest, provide credit, or make decisions about regulatory compliance.

external user of accounting information

The research was carried out, using three quoted companies (Berger Paint, Lafarge Cement and Meyer Plc) as the study area. Secondary data was gotten from the companys’ audited annual reports on return on asset with multiple regression analysis. Findings revealed that accounting theory have no significant relationship with the financial performance of business organizations in Nigeria. Owners, as internal users, often wonder who uses financial accounting information when they work to generate new financial statements. In truth, many different groups use financial information and statements to make important decisions regarding a company’s financial health. These statements should also reflect the full truth of the accounting practices within the company within a specific time frame.

31 The company paid $1,800 cash in dividends to the owner (sole shareholder). 23 The company paid $2,300 cash for the office equipment purchased on July 10. 15 The company completed work for a customer on credit in the amount of $8,200. 8 The company completed work for a customer and immediately collected $7,600 cash for the work. 2 The company rented office space and paid $700 cash for the July rent.

Water Heater Market Continues to Grow, with $48,519 Million Valuation and 5.1% CAGR Forecasted for 2018-2025 – EIN News

Water Heater Market Continues to Grow, with $48,519 Million Valuation and 5.1% CAGR Forecasted for 2018-2025.

Posted: Mon, 26 Jun 2023 04:58:00 GMT [source]

What are the 5 users of accounting information?

  • Owners/Shareholders.
  • Managers.
  • Prospective Investors.
  • Creditors, Bankers, and other Lending Institutions.
  • Government.
  • Employees.
  • Regulatory Agencies.
  • Researchers.
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