Accounting plays a significant role in society by providing information to management at all levels (internal users) and to those having a direct financial interest in the enterprise (external users), such as present and potential investors, creditors. Accounting information is also important to those having an indirect financial interest, such as regulatory agencies, tax authorities, customers, labour unions, stock exchange, and others.
Internal users, mainly management, need timely information on cost of sales, profitability, etc. for planning, controlling and decision making. External users who have limited authority, ability and resources to obtain the necessary information have to rely on financial statements. The external users are interested in the following.
1. Investors and Potential investors:
Information on the risks and returns on investments.
2. Suppliers and Creditors:
Information on whether amounts owed will be repaid when due and on the continued existence of the business.
3. Customers:
Information on the continued existence of the business and thus the profitability of a continued supply of products, parts, and after-sales services.
4. Employees:
They are interested in getting their salary, welfare measures, bonus, working conditions, etc. which are all related to financial performance of the business.
5. Lenders:
Information on the creditworthiness of the business and its ability to repay loans and pay interest.
6. Government and other regulators:
Information on the allocation of resources and the compliance to regulators.
