ICT 141: Principles of Accounting First Semester 2021 -2022

Course Title: Principles of Accounting

I. Module 2: Users of Accounting

Estimated Time: 3 hours (Week 4)

II. Module Introduction/Rationale:

This module introduces you to the users of accounting.

III. Module Outcomes:

At the end of the topic the students must have:
1) Identify the users of accounting.
.

IV. Lesson One: Users of Accounting

V. Lesson Outcomes:
1) Identify the users of accounting.

Engage
Who are the users of accounting? Can you share your idea? Go to www.menti.com and use the
designated code.

Explore
Click the link https://www.youtube.com/watch?v=pQLmnZC9lk8 and
https://www.youtube.com/watch?v=hKWMPFziMd0

Explain

USERS OF ACCOUNTING OR FINANCIAL INFORMATION

There are many possible users of the financial information generated by a business. The following list
presents the more likely users:

Customers. Major prospective customers will want to review a firm’s financial information to see if it is
stable enough to be a long-term supplier, or if the firm has the financial resources to complete a major
project on their behalf.

Employees. Employees want to review the information in order to make decisions about whether the
company is a stable employer. Providing this information to them can increase their level of interest and
participation in the business.

Governments. The government jurisdictions in which a company does business may request the
information in order to determine whether the firm paid the required amount of taxes.

Investment analysts. A public company may be followed by a group of investment analysts. If so, these
analysts need the firm’s financial information as part of their examination of whether the organization
would be a good investment for their clients.

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 ICT 141: Principles of Accounting First Semester 2021 -2022

Investors. Investors want to examine the information to make decisions about whether the business will
continue to grow and perform well enough to justify their investment decision, or whether they should sell
off their investment to a third party.

Lenders and creditors. Lenders and creditors will require the information as part of their decisions about
whether to extend credit to the business, and in what amounts. They will continue to have an interest in
the information over time, in order to decide whether their loaned funds are at risk.

Management team. The managers of the reporting entity need financial information in order to make
operational and financial decisions about how to enhance the financial results, financial position, and cash
flows of the organization.

Rating agencies. A rating agency needs to closely examine a firm’s accounting information in order to
derive a credit rating for the firm as a whole or its various security issuances.

Unions. Any labor unions representing a company’s employees want to see the firm’s financial
information in order to set a bargaining position that they believe the company can afford to pay.

In short, a large group of individuals and organizations need access to an organization’s financial
information, which is why the accounting standards require the presentation of a rich set of information,
both within a firm’s financial statements and the accompanying disclosures.

INTERNAL USERS OF ACCOUNTING

The Internal users of Accounting are individuals within the company who have direct access to their
company’s financial data or information. These people are given the knowledge of how their company
runs and its resources as well. They are the ones who handle and organize the business or company.
Generally referred to as managerial or management accounting. It includes managers, employees and
owners.

Managers
Managers should know the company’s income, earnings, sales and resources. It is their task to oversee
and supervise the company’s financial documents for internal purposes and in making business
decisions.

Employees
Employees are individuals who need to know the profit for the period and the salaries given to them. It is
their right to know if the company is stable enough to support their wages and whether if it is worth to
stand work for the company.

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 ICT 141: Principles of Accounting First Semester 2021 -2022

Owners
It is the owners job and responsibility to know the company’s profit or income, assets, and liabilities for
them to protect the company’s resources. They should be the first to know the accounting information of
the company for them to think of strategies and ways to improve the business. They need to assess the
stability of the company.

EXTERNAL USERS OF ACCOUNTING

The external users of Accounting are individuals and organizations outside the company who are
interested in the financial information of a company. They do not have direct access to their company’s
financial data or information. They are not part of the organizations administrative process.

Creditors
Creditors take interest in the financial statements of a company to know whether it is risky to lend
money to a specific company or not.

Investors
Investors need to know the company’s financial statement in analyzing the feasibility of investing in the
company.

Tax Authorities
Tax Authorities need the financial statements of the company to know if the company is paying the right
amount of taxes in the government.

Costumers
Costumers take interest in the company’s financial statements for them to know the stability of the
company when it comes to financial positions. Therefore, they would know it it is worth consuming their
services or products or not.

Regulatory Authorities
Regulatory Authorities use a company’s financial information to see if the company is a legal business
that passes all the requirements and permits that a business should acquire.

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 ICT 141: Principles of Accounting First Semester 2021 -2022

Elaborate
What type of user are you as a student?

Evaluate
Worksheet No. 5

Name: ____________________________________________________________
Course, Year and Section:_______________________________ Date: __________
Answer as directed. Write your answer on the space provided.
1) Who are the users of accounting?

References:
 Rabot, Bernabe Donato Jr. and Malco, Ma. Theresa De Francesca. Accounting Skills and
Bookkeeping Principles Workbook for K-12 Senior High School. (2019) Great Books Trading.
 Reyes, Virgilio D. The Fundamentals In Accounting 2018 th Edition (2018). GIC Enterprises Co, Inc

Online References:
https://www.youtube.com/watch?v=pQLmnZC9lk8
https://www.youtube.com/watch?v=hKWMPFziMd0

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