State the internal users of accounting information
Answers
Answer:
Internal Users of Accounting
Internal users are the primary users of accounting.
Following are the 3 types of internal users and their information needs:
Owners
Owners need to assess how well their business is performing.
Financial statements provide information to owners about the profitability of the overall business as well as individual products and geographic segments.
Owners are also interested in knowing how risky their business is.
Accounting information helps owners in assessing the level of stability in business over the years and to what extent have changes in economic factors affected the bottom line of the business.
Such information helps owners to decide if they should invest any further in the business or if they should use their financial resources elsewhere in more promising business ventures.
Managers
Managers need accounting information to plan, monitor and make business decisions.
Managers need to allocate the financial, human and capital resources towards competing needs of the business through the budgeting process.
Preparing and monitoring budgets effectively requires reliable accounting data relating to the various activities, processes, products, services, segments and departments of the business.
Management requires accounting information to monitor the performance of business by comparison against past performance, competitor analysis, key performance indicators and industry benchmarks.
Managers rely on accounting data to form their business decisions such as investment, financing and pricing decisions.
In case of investment decisions for example, managers would require the return on investment calculation of a proposed project supported by reliable estimates of the costs and revenues.
Employees
For the employees operating in the finance department, using accounting information is usually part of their job description. This includes for example preparing and reviewing various financial reports such as financial statements.
Employees are interested in knowing how well a company is performing as it could have implications for their job security and income.
Many employees review accounting information in the annual report just to get a better understanding of the company’s business.
In recent years, the increase in number of shares and share options schemes for employees particularly in startups has fostered a greater level of interest in accounting information by employees.
Moreover, potential employees are also interested to learn about the financial health of the organization they aspire to join in the future.
Answer:
Explanation:
Internal users are people within a business organization who use financial information. Examples of internal users are owners, managers, and employees. ... Examples of external users are suppliers, banks, customers, investors, potential investors, and tax authorities.