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A major aim of financial information is to provide inputs for decision‐making. Accounting can be described...

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.

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Internal users of accounting information are the managers of the firm who use the accounting data for day to day decision making. Such accounting information is called management information system which helps the managers in taking informed decisions. Managers need to take various decisions on day to day basis like Profitability analysis, pricing, launch of new product, continue or discontinue division, sell or process further, make vs buy, shut down vs continue, etc . Management accounting techniques helps in taking reliable decisions by the managers. Some of the techniques used by managers are cvp analysis, variance analysis, marginal costing, etc

External users of accounting information take the accounting information majorly to serve their purpose. Below is the list of external users:

  • Shareholders who would like to know the performance of the company for each period say quarter or year end
  • Bankers/Financial institutions given loan to the firm. They would like to know how funds are used.
  • Lenders who have lent loan to the firm. They would like to know application of fund and solvency of the firm to repay loans
  • Regulatory agencies want annual filing of the financial information for compliance purpose
  • Stock exchanges if the firm is listed in stock markets
  • Tax authorities want financial statement to see tax calculations and payments
  • Potential investors who want to fund the investment for next phase of growth
  • Suppliers who supply input material to the firm

ekkarill92 answered 1 year ago
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