What uses of financial accounting information are made by the internal and external users

What uses of financial accounting information are made by the internal and external users

Ans.: According is termed as language of business it provides necessary accounting data and information. The type of financial information that a users requires depends of his decision.

The users of financial information are essentially divided into two groups:

(1)  Internal Users

(2)  External Users.

Internal Users:

(a)  Owner or owners:

The owner or owner’s invests capital in the business with a view to earning profit they always keep their waterfowl eyes on earning of capital invested.

(b)   Managers:

The managers use various information of financial statements for policy formulation, planning, co-ordinating and communication. Proper carrying out of business needs various financial information. Managers are marketiong manager, production manager, Finance manager, general manager and company officer. The managers are to answer many important questions in runningbusiness such as, Users quarries about particular information, cash sufficiency in payment of a particular bills, unit cost of production, financial capacity for increasing salary of employees and officers, product profitable for production etc.


The employees for the sake of ensuring their job securities keep constant watch on financial statement   and nature of financial changes. They also keep observing the profit earning capacity of the business.

(2)       External Users:

The external users of accounting information are many in number. They are stated below:

(a)       Investors:

The investors take decision aster careful study before investment the investors are to depend on necessary accounting information to know where the investment is profitable or where it is not and to take decision in the regard.

(b)       Loan givers and creditors:

The Capital supplies by the owners of the business concerned are not sufficient in many cases for running the business successfully. In that case the business concern is to depend upon loan ginners and creditors, Bank, industrial bank and insurance companies are included in loan giving organizations.

(c)       Tax authority:

Actual information is needed to know whether fixation of tax has been proper or not. Tax infixed depending upon profit of the organization and VAT or current tax is determined on the basis of trading.

(d)       Regulatory agency:-

Regulatory agencies like register of joint stock Company, stock exchange authority asks for necessary information from the companies concerned to know if the joint stock company will run as per specific lows.

(e)       Consumers:

With the help of proper management depending on accurate accounting system production cost and transport cost may be minimized and at the same time the qualitative standard of commodities can be improved. For this reason consumers remain interested to know whether in a business concern accounting system prevails or not.

(f)        Researchers and economist:

Researchers and economist want to know accounting information for finding out or innovating any system relating to a particular business concern and for economic plan.