BOD, Investors, Suppliers, Partners, Customers, Managers, Lenders. Which of the following statements is correct? (a) (i) Internal Users : BOD, partners, managers (ii) External users: Investors, Lenders, Suppliers, Customers (b) (i) Internal Users : BOD, Investors, managers (ii) External Users : Partners, lenders, Suppliers, Customers (c) (i) Internal Users : BOD, partners, lenders (ii) External Users : Investors, managers, suppliers, Customers (d) (i) Internal Users : BOD, partners (ii) External Users : Investors, lenders, Managers
Answers
M
Poor liquidity, low profitability, lack of assets that can be secured and an inability to pay liabilities on time demonstrate poor financial health of borrowers.
On a lighter note, borrowers can only get a loan from lenders if they can prove that they don’t need the money.
Suppliers
Just like lenders, suppliers need accounting information to assess the credit-worthiness of its customers before offering goods and services on credit.
Some suppliers only have a handful of customers. These customers could be very large businesses themselves. Suppliers need accounting information of its key customers to assess whether their business is in good health which is necessary for sustainable business growth.
Customers
Most consumers don’t care about the financial information of its suppliers.
Industrial consumers however need accounting information about its suppliers in order to assess whether they have the required resources that are necessary for a steady supply of goods or services in the future. Continuity in supply of quality inputs is essential for any business.
Tax Authorities
Tax authorities determine whether a business declared the correct amount of tax in its tax returns.
Occasionally, tax authorities conduct audits of the tax returns filed by businesses in order to verify the information with the underlying accounting records.
Tax authorities also cross reference accounting information of suppliers and consumers in order to identify potential tax evaders.
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 thresholds 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.
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.