The external users may be classified further into users with direct financial interest – owners, investors, creditors and users with indirect financial interest – government, employees, customers and the others. Internal users refer to managers who use accounting information in making decisions related to the company's operations.Įxternal users, on the other hand, are not involved in the operations of the company but hold some financial interest. The users may be classified into internal and external users. General PublicĪnyone outside the company such as researchers, students, analysts and others are interested in the financial statements of a company for some valid reason. This need is also heightened in cases where the customers depend upon the entity.įor example, a distributor (reseller), the customer in this case, is dependent upon the manufacturing company from which it purchases the items it resells. When there is a long-term involvement or contract between the company and its customers, the customers become interested in the company’s ability to continue its existence and maintain stability of operations. They may also be interested in its financial position and performance to assess company expansion possibilities and career development opportunities. They are after the ability of the company to pay salaries and provide employee benefits. EmployeesĮmployees are interested in the company’s profitability and stability. In general, the state would like to know how much the taxpayer makes to determine the tax due thereon. Taxes are computed based on the results of operations and other tax bases. Governing bodies of the state, especially the tax authorities, are interested in an entity's financial information for taxation and regulatory purposes. They are nonetheless especially interested in the company's liquidity – its ability to pay short-term obligations. Like lenders, trade creditors or suppliers are interested in the company’s ability to pay obligations when they become due. Lenders of funds such as banks, financial institutions, and bondholders, are interested in the company’s ability to pay liabilities upon maturity ( solvency). The managers, whether owners or hired, regularly face economic decisions – How much supplies will we purchase? Do we have enough cash? How much did we make last year? Did we meet our targets? All those, and many other questions and business decisions, require analysis of accounting information. In huge organizations, however, management is usually made up of hired professionals who are entrusted with the responsibility of operating the business or a part of the business.
In small businesses, management may include the owners. In the same way, small business owners need financial information to determine if the business is profitable and whether to continue, improve or drop it. Prospective investors need information to assess the company's potential for success and profitability. Stockholders of corporations need financial information to help them make decisions on what to do with their investments (shares of stock), i.e.
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