Question

A major aim of financial information is to provide inputs for decision‐making. Accounting can be described as the information system which identifies, records, and communicates the financial activity of an entity to others. The users of accounting information are easily separated into two groups: internal users and external users.

Respond to the following in a minimum of 175 words:

• Discuss who are the internal users and external users of accounting information.  
• Discuss what the primary concerns are to both groups.

Answer 1

1)

The users of accounting information can be divided into 2. They are

· External Users

· Internal Users

Here, external users include investors, creditors, general public, Customers etc.

External users normally use the financial accounting information for the various purpose as their needs. As in the case of Investors, to check the profitabilities and the growth of the business organization to invest money and money equivalents. Suppliers are the kind of external users and supplier uses the accounting information to check the credit worthiness of the unit for delivering goods and services on credit. Another kind of external users of accounting information is government agencies. Government agencies are using accounting information for the purpose of imposing taxes and regulations and also general public is also another kind of external users of accounting information. They are using financial information for the purpose for studying for student purpose and job seeking.

The Internal users of accounting information includes, management,employees and owners.

The management is the kind of internal users, and they are using accounting information for the purpose of making decision for the business growth and analyzing the performance of the unit. The owners are main kind of internal users to use the financial information to evaluate and analyze their loss and gain from the business activity. The employees using the accounting information for evaluate the sales and profitability of the unit by evaluating accounting information.

2)

The users of the accounting information, external users either internal users, has the same concern that to know the business organization as well. But their purpose or area of purpose different by their designation. For example investors are seeking investment opportunities but general public using the accounting information for the seeking job opportunities as well. So from this example we can evaluate that users are using accounting information for the better understanding of the unit by evaluating accounting information but their need is vary.

The accounting information is related to economical information and it is related to the financial activities of the business organization. In the case internal users, the management using the financial information for the taking decision for the future. So providing accounting information providing to the internal or external users will affect the business organization as good. If providing of good accounting information can execute more future decision making from management, Investors can invest more, customer can increase their buying trend etc.

At last we can conclude that users of accounting information are using them to better understanding and evaluating the business organization but their purpose varying each other.