1.2. Users of accounting information and their information needs is established

Users of Accounting Information and Their Information Needs

Accounting information is used by different groups of people to assist them in making financial and economic decisions. These users can be classified into internal users and external users.

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1. Internal Users

Internal users are people within the organization who use accounting information to manage business activities.

a) Owners / Entrepreneurs

Information needs:

• Profit or loss for the period

• Value of their investment (capital)

• Financial position of the business

• Liquidity and solvency

b) Management

Information needs:

• Performance evaluation

• Budgeting and planning

• Cost control

• Financial forecasts

• Resource allocation

c) Employees

Information needs:

• Job security

• Ability of the business to pay wages/salaries

• Bonus or profit-sharing prospects

• Stability and growth of the company

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2. External Users

External users are people outside the organization who use accounting information for decision-making.

a) Investors (Existing and Potential)

Information needs:

• Return on investment (profitability)

• Financial position and stability

• Future growth potential

• Dividend prospects

b) Creditors / Lenders

(Banks and suppliers)
Information needs:

• Business ability to repay loans

• Liquidity position

• Creditworthiness

• Cash flows

c) Government and Regulatory Bodies

Information needs:

• Tax assessment (VAT, income tax, corporate tax)

• Compliance with laws

• Evaluation of economic performance

d) Customers

Information needs:

• Stability and continuity of business

• Ability to continue supplying goods and services

• Long-term contracts reliability

e) General Public

Information needs:

• Company’s contribution to society

• Employment opportunities

• Environmental responsibility

f) Trade Unions

Information needs:

• Ability of business to pay fair wages

• Profitability

• Employee-related benefits

g) Competitors

Information needs:

• Market performance comparison

• Benchmarking against others

• Strategies for competition