Users of Accounting Information

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on November 16, 2021

Two types of users make use of accounting information: external users and internal users. This is shown in the diagram below.

Chart of Users of Accounting Information System

Internal Users of Accounting Information

1. Owners

Owners are the people who provide capital for the business. They need information about the financial performance and position of the business. For this reason, they use accounting information to look into the financial affairs of the business.

2. Management

Management is responsible for taking work from others in the most appropriate way. Management needs accounting information to check the efforts of subordinates, ensuring that those who are working hard are properly motivated.

3. Employees

Employees are the people who serve in the business. Employees are interested in accounting information because their salary appraisal, bonuses, and other monetary and non-monetary benefits are attached to the company’s financial position.

External Users of Accounting Information

1. Investors

Investors are the people who are ready to invest their money in a business.

An investor is interested in knowing about the financial position of the business. This kind of information is supplied in financial statements. Accounting information shows the future potential of the business in terms of future profits for investors.

2. Creditors

Creditors give loans to businesses. Creditors use accounting information to evaluate creditworthiness and other factors since this helps to guarantee that the loan will be repaid in the future.

Accounting information also helps creditors to make decisions about whether to offer loans to a business in the future.

3. Government Agencies

Government agencies such as CBR and the Income Tax Department need accounting information from businesses in order to levy tax effectively and accurately.

Without accounting information, these agencies may miscalculate the revenues generated for the government.

4. Customers

Customers are divided into four categories:

  • Producers
  • Wholesalers
  • Retailers
  • Final consumers

Producers must have assurance about the continuous supply of materials needed to make products. Similarly, wholesalers, retailers, and final consumers are interested in the fluent supply of materials.

For example, if any party (e.g., a wholesaler) believes that a product may be unavailable in the future, they will shift their choice to another product. To help make all these decisions effectively, accounting information is necessary.

5. Public

The public is interested in accounting information because this informs them about the financial health of individual businesses. In turn, it is possible to determine the overall impact on the country’s economy.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.

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