Question

Who are the internal users of the financial information

Answer 1

Answer:

Organizations measure financial performance in monetary terms. In the United States, the dollar is used as the standard measurement basis. Measuring financial performance in monetary terms allows managers to compare the organization’s performance to previous periods, to expectations, and to other organizations or industry standards.

Financial accounting is one of the broad categories in the study of accounting. While some industries and types of organizations have variations in how the financial information is prepared and communicated, accountants generally use the same methodologies—called accounting standards—to prepare the financial information. You learn in Introduction to Financial Statements that financial information is primarily communicated through financial statements, which include the Income Statement, Statement of Owner’s Equity, Balance Sheet, and Statement of Cash Flows and Disclosures. These financial statements ensure the information is consistent from period to period and generally comparable between organizations. The conventions also ensure that the information provided is both reliable and relevant to the user.

Answer 2

Users of financial information

Internal users:-

• Owner - Owner i.e. the person who contributed the capital to start the business is offcourse ìnterested in knowing the financial statement of the business. Owner is exposed to the maximum risk therefore, he/she would be interesting in the profit/loss incurred by the business.

• Management - Management also requires financial statements to take major decisions of the business. They use financial statements to determine selling price, cost reduction etc.

• Workers - Workers are employees are often rewarded as bonus at the end of financial year on the basis of the profit earned or loss incurred by the business. Hence they are also interested in financial statements of the business.