Accountancy, Business, and Management Strand
Fundamentals of Accountancy, Business, and Management 1
S.Y. 2024-2025
MODULE 2 LESSON 1: USERS OF ACCOUNTING INFORMATION
USERS OF ACCOUNTING INFORMATION
There are two broad categories of users of accounting information: internal and external users.
1. INTERNAL USERS
Internal users of accounting information are those individuals inside a company who plan,
organize, and run the business. These users are directly involved in managing and operating the
business.
What information will that user need that can be answered by accounting?
Internal Users Information Need Decisions Supported
analyze the organization's performance
income/earnings for the and position and take appropriate
MANAGEMENT period, sales, available measures to improve the company results.
cash, production cost suBiciency of cash to pay short-term
obligations; pricing decisions
job security, consider staying in the employ
profit for the period,
of the company or look for other
EMPLOYEES salaries paid to employees
employment opportunities
profit or income for the considerations regarding additional
period, resources or investment, expanding the business,
OWNERS assets of the business, borrowing funds to support any expansion
liabilities of the business plans.
Accounting information is presented to internal users usually in the form of management
accounts, budgets, forecasts, and financial statements. This information will support whatever
decision of the internal users.
Questions Asked by Internal Users
Is cash suLicient to pay bills? What is the cost of manufacturing each unit of product?
2nd Semester 2024 – 2025
FABM 1 Page 1 of 3
Accountancy, Business, and Management Strand
Fundamentals of Accountancy, Business, and Management 1
S.Y. 2024-2025
MODULE 2 LESSON 1: USERS OF ACCOUNTING INFORMATION
Can we aLord to give employee pay raises this year?
Which product line is the most profitable?
Will the company be able to pay its debts as they come due?
2. EXTERNAL USERS
External users are individuals and organizations outside a company who want financial
information about the company. These users are not directly involved in managing and operating
the business. The two most common types of external users are potential investors and creditors.
Potential Investors: for analyzing the feasibility of investing in a company. Investors want to
make sure they can earn a reasonable return on their investment before they commit any financial
resources to a company. They use accounting information to make decisions to buy shares of a
company.
Creditors: (such as suppliers and bankers) use accounting information to evaluate the risks of
granting credit or lending money. for determining the credit worthiness of an organization. Terms of
credit are set by creditors according to the assessment of their customers' financial health.
Creditors include suppliers as well as lenders of finance such as banks.
Customers: for assessing the financial position of its suppliers which is necessary for them to
maintain a stable source of supply in the long term.
Also included as external users are government regulatory agencies such as Bureau of Internal
Revenue (BIR) and Department of Labor and Employment (DOLE)
2nd Semester 2024 – 2025
FABM 1 Page 2 of 3
Accountancy, Business, and Management Strand
Fundamentals of Accountancy, Business, and Management 1
S.Y. 2024-2025
MODULE 2 LESSON 1: USERS OF ACCOUNTING INFORMATION
Tax Authorities (BIR): for determining the credibility of the tax returns filed on behalf of a
company.
Regulatory Authorities (DOLE): for ensuring that a company's disclosure of accounting
information is in accordance with the rules and regulations set in order to protect the interests of
the stakeholders who rely on such information in forming their decisions.
What kind of information do users need that can be answered by accounting?
External Users Information Need Questions Supported
Income or profit of the Is it profitable for me to invest in this
Potential Investors
business business?
If extend a loan to this company, will it be
resources or assets of the
Banks able to pay this loan? Does this company
business
have suBicient resources to pay its loan?
liabilities or amount owed
Do I extend credit to this company? For
Suppliers by the business to its
how long?
suppliers
BIR taxes paid by the business Is the owner paying the correct taxes?
Are the employees paid according to what
salaries and other benefits
DOLE the law states? Do they get the benefits
paid to employees
required?
The external users of accounting information are those individuals or organizations outside
company who are interested in its financial information. Examples of these external users are
potential investors, suppliers and government agencies
Question:
What if you are from a Local Government Unit
(City/Municipality)? Do you think the Local
Government (City/Municipality) will be interested
with your accounting reports/records?
2nd Semester 2024 – 2025
FABM 1 Page 3 of 3
