Question

Thinking about the types of users: Internal and External users, How do each type of user effect the accounting process in an organization? What types of users have the most impact and why?

responses must be 100 words minimum.

Answer 1

There are two types of users :

1. Internal Users: They are parties, within the business. Some of them are -

a) Management: It requires information about each segment of the business. Their objectives is to establish steady or increasing level of cash flow. They also establish prudent level of debt risk.

b) Owners: Investors require accounting information to calculate  return on investment.

c) Employees: They can use it to calculate ability of business to pay an adequate level of compensation and extra benefits.

Keeping all these internal parties in mind, business has to present and prepare it's accounts. All these users affect accounting process.

2. External Users: They are affected by the organisation's account information. They have either direct or indirect interest. Some of them are -

a) Creditors: They use information to estimate the ability of borrower to repay the loan, the number of assets and liabilities, proof of income etc. before he lends amount to the economic entity.

b) Investors: Investor views financial report for estimating the possibilities of the organisation in future to make sure that the investment is secure.

c) Trading partners: Associate trading companies views at the accounts and decide to trade or not.

d) Government Regulatory Agencies: They can keep a check and it allows to overview economy and market.

e) Lawmakers and economic planners: The accounts provides information that is important for making changes in laws.

Keeping all these external parties in mind, business has to present and prepare it's accounts. All these users affect accounting process.

Internal Users are the most important and they have maximum impact on the business. They include 'Owners' who take crucial decisions of organization. They make profit and also handle losses.