3. INTERNAL USERS
Internal users are the users who work in the organization and
have direct interest in the working of the company. The
various internal users are as follows:
OWNERS/ SHAREHOLDERS: Shareholder or the Owners
are the persons who have invested their money in the
business. These persons are interested in knowing the
accounting information for following purposes:
To keep an eye on the financial health of the business.
To ensure the return on their funds invested.
To ensure the optimum utilization of the funds.
To determine the exposure of risk to the funds invested by
them.
To determine the profit earning capacity of the business
4. MANAGEMENT : There are three levels of management: Top, Middle and Low
level of management. This is the most active user of the accounting information.
Management needs the accounting information for following purposes:
Selecting out alternative proposals.
Controlling, acquisition and maintenance of inventories, cash receipts and
payments.
Planning or budgeting for the future.
For checking the profit earning capacity of the business.
To ensure the fair return on the equities invested by the shareholders.
For managing the finances properly.
EMPLOYEES: Employees are other internal users of the accounting information.
Employees are the persons who work in the organization in consideration of
salaries and wages. The employees need the financial information due to the
following reasons:
To demand the bonus in case company is earning supernormal profits.
To ensure job security.
To know better about the company’s financial position.
5. EXTERNAL USERS
External users are not directly associated or work in the organization.
They may have direct or indirect interest in the working of the
organization. These users are as follows:
CREDITORS: Creditors are the lenders of the business. The creditor
may be Short term Creditors who supplies the raw material or goods to
the company or business on credit basis.Long term creditors that
provide funds to the business by subscribing the debentures or bonds of
the company or by granting the loans.The creditors need the financial or
accounting information of the business for the following reasons:
To know the credit worthiness of the business.
To ensure the repayment of the credit provided.
To assess the risk associated with the credit provided.
T o know the existing debt service capability of the firm.
To know the existing loan amount raised by the company from other
sources
6. INVESTORS/ POTENTIAL INVESTORS: Investors are the persons who
have invested their funds in the business. Potential investors are the
investors who have not invested their funds in the business but are
planning to invest in the business. These parties need the accounting
information for varied reasons which are as follows:
To judge the future prospects of earning on investment.
To decide whether to invest more in the business or not.
To make the decision regarding holding the existing investment or to sell
it.
TAX AUTHORITIES : Tax authorities include the Income Tax authorities,
Goods and Service Tax authorities, Custom duty Authorities, Corporate
Tax Authorities etc. These authorities require the accounting information:
To assess the tax liability of the business.
To audit the records and imposing the penalties if any default is there.
7. CONSUMERS: Consumers are the persons who consume the goods and
services provided by the business house. These parties are interested to
know the financial position of the business to get an idea about the price
structure of the products manufactured by the companies. Also the
consumer protection associations require accounting data to get to know
about the social responsibility initiatives taken by the company in favor of the
consumers.
RESEARCHERS: Research scholars make use of the accounting
information to conduct the various researches. The information regarding
various companies is a mirror of the business environment. Accounting
information is needed to conduct researches regarding
Capital structure theories
Assets management
Credit rating
Risk management
Social responsibility initiatives etc.
8. COMPETITORS: Competitors are the rivals in the same
business line. The competitors need the accounting
information to draw out the plans that will make them more
successful than any other firm in the same business.
Competitors make analysis of the financial position of the
other firms to know about the strengths and weaknesses.
MEDIA: The newspapers and various TV channels related to
the economics and finance need information for publishing or
telecast the achievements, performance and problems of
companies. Accounting provides such information to the
users. Also, the share of each company in the nation
development or GDP can be ascertained on the basis of the
accounting information provided in the accounting records.
9. REGULATORY AGENCIES: Regulatory agencies include Chambers
of Commerce, various authorities under the various Acts, SEBI,
Ministry of Labor, Ministry of Industries, FICCI etc. These agencies
require the accounting information to check whether the company is
complying with the legal provisions laid down under the legal and
regulatory framework or not. These authorities also make a check on
the fraudulent and unlawful sources of income of the business
houses.
GOVERNMENT: Government ensures that a company’s disclosure
of accounting information is in accordance with the regulations that
are in place to protect the interest of various stakeholders who rely
on such information in forming their decisions. Government defines
and monitors accounting limits such as sales revenue and net profit
to determine the size of each business for the purpose of ensuring
that it complies with the relevant employee, consumer and safety
regulations.
10. AUDITORS: External auditors examine the financial
statements and the underlying accounting record of
businesses in order to form an audit opinion.
Investors and other stakeholders rely on the
independent opinion of external auditors on the
accuracy of financial statements.
PUBLIC: General public may also be interested in
accounting information of a company. These could
include journalists, analysts, academics, activists
and individuals with an interest in economic
developments.