Mt. Carmel College of San Francisco, Inc.

8501, San Francisco, Agusan del Sur, Philippines

Tel. No. (085) 839-2161 • e-mail: mccsf.registrarsoffice@gmail.com

SENIOR HIGH SCHOOL LEVEL

School Year 2020-2021

Subject Fundamentals of Accounting & Management 1

Grade Level Grade 11 Section
Semester First Semester Quarter 1
Module No. 02 Chapter No. 1
Lesson No. 02 Date Week 2

Content The learner demonstrates an understanding of the external and internal users of
Standard financial information.

Performance The learner shall be able to…

Standard (1) solve exercises and problems on the identification of users of information, type of
decisions to be made, and type of information needed by the users.
(2) cite users of financial information and identify whether they are internal and
internal users

Learning The learner…

Competencies 1. define external users and gives example
2. define internal users and give examples

At the end of the lesson, the learners will be able to:

Specific
Learning 1. identify the internal and external users
Outcomes

Introduction
Accounting communicates financial information to decision makers. Different decision makers are
users of this accounting information. Users of accounting information are collectively referred to as
stakeholders. These stakeholders can be classified as internal and external users

Pre-Activity

1. Do we have enough cash to pay bills?

2. Can the company afford to give salary increase?
3. How much is the company’s sales growth for the months?
4. How much is the tax payable to the government?
Analysis

Financial information are the basis in making decisions whether is it and internal users or external
users.

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 Mt. Carmel College of San Francisco, Inc.
8501, San Francisco, Agusan del Sur, Philippines
Tel. No. (085) 839-2161 • e-mail: mccsf.registrarsoffice@gmail.com

INTERNAL USERS

The internal users are those who make decisions that affect the internal operations of the
company. They are the following:

1. Manager. They plan, organize and run a business.

2. Employee/Labor Union. They assess the company’s profitability and stability, its
consequence on their future salary and job security.

3. Owners. They provide the capital to the business. Owners need these accounting
information to help them decide whether they should withdraw or increase their
investments. They are interested to know the results on their investment.

EXTERNAL USERS

The external users of financial report are those who make their decisions based on the
company’s financial information. They are the following:

1. Potential Investors. They need information to help them decide whether they should invest
or not in the business. Through past performance or operating results of the company, they
would want to know potential return on their investment should they decide to invest.

2. Credits and Potential Creditors. They assess the credit worthiness and the capability of the
business to pay its obligations including the related interest on maturity date.

3. Customers. They assess the financial position of their suppliers which is necessary for them
to maintain a stable source of supply in a long term. They are interested to know whether
the business will continue to hones its product warranty.

4. Suppliers. They use the financial statements of their customers to determine whether the
debts owed to them will be paid when due or whether the customer has enough funds or
resources to pay the goods to be delivered or the service to be rendered.

5. Tax Authorities. The use of financial reports to determine the credibility of the tax returns
filed on behalf of the company. They are interested to know if the business paid the correct
amount of taxes.

6. Regulatory Bodies. They want to ensure that the company’s disclosure of accounting
information is in accordance with the rules and regulations set in order to protect the

Fundamentals of Accounting, Business & Management 1 - First Semester, SY 2020-2021 |2

 Mt. Carmel College of San Francisco, Inc.
8501, San Francisco, Agusan del Sur, Philippines
Tel. No. (085) 839-2161 • e-mail: mccsf.registrarsoffice@gmail.com

interest of the stakeholders who rely on such information. Example of these regulatory
bodies are the Securities and Exchange Commission (SEC) and the Bangko Sentral ng
Pilipinas (BSP).

7. Pubic. They use financial information to know how the business helps the economy and
whether employment is available in the company.

Application (Questions for Discussion)

1. Distinguish the type of information needed by two major groups of users.

2. How does accounting provide important data to internal users?
3. What are the accounting information needed by
a. Investor
b. Creditors

Summary

The accounting information provided to internal and external users can be in the form of
management report, budgets and financial statements.

Post – Activity

A. The following are users of financial statements. Identify if the users mentioned below is external
and internal.

_____________________________ 1. Customers

_____________________________ 2. Bureau of Internal Revenue

____________________________ __ 3. Labor Unions

_____________________________ 4. Factory Manager

_____________________________ 5. Vice-President of Finance

_____________________________ 6. Security and Exchange Commission

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 Mt. Carmel College of San Francisco, Inc.
8501, San Francisco, Agusan del Sur, Philippines
Tel. No. (085) 839-2161 • e-mail: mccsf.registrarsoffice@gmail.com

_____________________________ 7. Investors

_____________________________ 8. Suppliers

_____________________________ 9. Factory Worker

_____________________________ 10. A Bank Company

B. Multiple Choice. Select the best answer.

1. These are the internal users of financial reports who are interested in determining the return of
investment in the business.
a. Management
b. Employees
c. Owners
d. Creditors

2. The following are the external users who make decisions about their relationship to the
enterprise, except __________.
a. Taxing Authorities
b. Regulatory Agencies
c. Suppliers
d. Employees
3. Which of the following statements about users of accounting information is correct?
a. Management is an external users
b. Tax authorities are internal users.
c. Creditors are external users
d. Employees are external users.
4. The responsibility to review the work of the accountants and issue opinions as to the fairness
of financial statements results with _________.
a. The external auditor
b. The board of directors
c. The internal auditors
d. Management
5. Which of the following is an external user of a company’s financial information?
a. Board of Directors
b. Stockholders in the company
c. Holders of company’s bond

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 Mt. Carmel College of San Francisco, Inc.
8501, San Francisco, Agusan del Sur, Philippines
Tel. No. (085) 839-2161 • e-mail: mccsf.registrarsoffice@gmail.com

d. Creditors with long-term contracts with the company.

C. True or False. Write TRUE if the statement is correct and FALSE if the statement is incorrect.

__________________ 1. Potential investors are interested in financial information that will

help them to know the ability of the entity to pay dividends.

__________________ 2. The financial statements provide all the needed information by

makers.

__________________ 3. Financial reports prove information on the ability of the firm to pay
wage increase their employees.

__________________ 4. Creditors make use of financial report to know how the business
used the money lent to the entity.

_________________ 5. Taxing authorities are external users of the financial information with direct
interest in the business.

References:

Fundamentals of Accountancy, Business and Management by Vibal Group Inc,. and Joy S.
Rabo, Florenz C. Tugas, Herminigilda E. Saledrez, Copyrigth, 2016.

Fundamentals of Accounting, Business and Management 1, by Rex Bookstore, Inc. and Joselito G.
Florendo, Copyright, 2016.

Fundamentals of Accountancy, Business and Management, by The Phoenix Publishing House, Inc.,
and Solita A. Frias, Copyright, 2016.

Fundamentals of Accountancy, Business and Management I, The Commission on Higher

Education in collaboration with the Philippine Normal University, Joselito G.
Florendo, Carlsberg S. Andres, Christopher B. Honoracio, Reymond Patrick P.
Monfero, Dani Rose c. Salazar, published by Commission of Higher Education,
2016, Chairperson: Patricia B. Licuanan, Ph.D.

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 Mt. Carmel College of San Francisco, Inc.
8501, San Francisco, Agusan del Sur, Philippines
Tel. No. (085) 839-2161 • e-mail: mccsf.registrarsoffice@gmail.com

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