SUBJECT: FUNDAMENTALS OF ACCOUNTANCY, BUSINESS & MANAGEMENT 1

QUARTER: FIRST
LESSON 2 : USERS OF ACCOUNTING INFORMATION
PREPARED BY: KELVIN JAY S. SAPLA

PART I. INTRODUCTION
The ultimate goal of accounting is to provide information that is useful for decision-making. Users of accounting
information are generally divided into two categories: internal and external. Internal users are those within an
organization who use financial information to make day-to-day decisions. Internal users include managers and other
employees who use financial information to confirm past results and help make adjustments for future activities.
This module is primarily centered on the users of accounting information. This will help student to fully understand the
concepts of accounting information and the usage in our daily activities.
This module seeks you to answer: “Who are the users of accounting information?”.

PART II. STANDARDS

CONTENT CONTENT LEARNING LEARNING TARGETS
STANDARDS COMPETENCIES
Uses of Accounting
Information
The learners demonstrate The learners shall be able 1. I will be able
an understanding of the to: to define
external and internal users 1. Define external external users
of financial information. users and give of accounting
examples information
2. Define internal and give
users and give examples
examples 2. I will be able
3. Identify the type of to define
decisions made by internal users
each group of users of accounting
4. Describe the type information
of information and give
needed by each examples
group of users 3. I will be able
to identify the
types of
decisions
made by each
group of
users
4. I will be able
to identify the
types of
information
needed by
each group of
users

PART III. TRANSFER

Performance Standard: The learners shall be able to:
1. Solve exercises and problems on the identification of users of information
 2. Cite users of financial information and identify whether they are external or internal users.
Transfer Goal: The learners will determine the kind of people making transactions in a business operations.

PART IV. ACTIVITIES

ACTIVITY 1:
Direction: Locate the following words and underline it.
ACTIVITY 2: Make an essay of 3-4 paragraph about your “Dream Business”.

MY DREAM BUSINESS

_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________

ACTIVITY 3: Based on your output in activity 2, answer the following questions.

1. In your own opinion, how will you establish that business? Where will you get money to fund your
business?
_________________________________________________________________________________
_________________________________________________________________________________
_________________________________________________________________________________
_________________________________________________________________________________
2. Who are your target markets/ customers?
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
3. How will you secure the success of your business in the long run?
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________

PART V. NEW IDEAS/ REFLECTION PART

What I learned in this lesson?
I learned that ______________________________________________________________________________________
_________________________________________________________________________________________________
_________________________________________________________________________________________________
_________________________________________________________________________________________________

PART VI. DISCUSSION/ SUMMARY

USERS OF ACCOUNTING INFORMATION
INTERNAL USERS
Internal users of accounting information are those individuals inside a company who plan, organize, and run the business.
These users are directly involved in managing and operating the business. These include marketing managers, production
supervisors, finance directors, company officers and owners.

Internal users (Primary Users) of accounting information include the following:

A. Managament
Information need: income/earnings for the period, sales, available cash, production cost
Decisions supported: analyze the organization's performance and position and take appropriate measures to improve the
company results. sufficiency of cash to pay dividends to stockholders; pricing decisions
B. Employees
Information need: profit for the period, salaries paid to employees
Decisions supported: job security, consider staying in the employ of the company or look for other employment
opportunities
C. Owners
Information need: profit or income for the period, resources or assets of the business, liabilities of the business
Decisions supported : considerations regarding additional investment, expanding the business, borrowing funds to
support any expansion plans.

Accounting information is presented to internal users usually in the form of management accounts, budgets, forecasts and
financial statements. This information will support whatever decision of the internal users.
Discuss the external users of accounting information
EXTERNAL USERS

External users are individuals and organizations outside a company who want financial information about the
company. These users are not directly involved in managing and operating the business. The two most
common types of external users are potential investors and creditors. Potential Investors use accounting
information to make decisions to buy shares of a company . Creditors (such as suppliers and bankers) use
accounting information to evaluate the risks of granting credit or lending money. Also included as external
users are government regulatory agencies such as Securities and Exchange Commission (SEC), Bureau of
Internal Revenue (BIR), Department of Labor and Employment (DOLE), Social Security System (SSS), and
Local Government Units (LGUs).

External users (Secondary Users) of accounting information include the following:

Creditors: for determining the credit worthiness of an organization. Terms of credit are set by creditors according to the
assessment of their customers' financial health. Creditors include suppliers as well as lenders of finance such as banks.
Tax Authorities (BIR): for determining the credibility of the tax returns filed on behalf of a company.

Investors: for analyzing the feasibility of investing in a company. Investors want to make sure they can earn a
reasonable return on their investment before they commit any financial resources to a company.
Customers: for assessing the financial position of its suppliers which is necessary for them to maintain a stable source of
supply in the long term.

Regulatory Authorities (SEC, DOLE): for ensuring that a company's disclosure of accounting information is in
accordance with the rules and regulations set in order to protect the interests of the stakeholders who rely on such
information in forming their decisions.

SUMMARY OF THE DIFFERENCES BETWEEN INTERNAL AND EXTERNAL USERS

Internal users of accounting information are those who are involved in planning, organizing and running the business.
They need more detailed information on a timely basis in order to support their decisions. Examples of these internal
users are managers, employees and owners.
The external users of accounting information are those individuals or organizations outside a company who are interested
in its financial information. Examples of these external users are potential investors, suppliers and government agencies.

PART VII. EVALUATION

IDENTIFICATION: Classify each of the following as either external user or internal user. Write E for external and I
for internal. Write your answer on the space provided by each number.
______________________1. Academe
______________________2. Creditors
______________________3. Customers
______________________4. Employees
______________________5. General Public
______________________6. Government
______________________7. Management
______________________8. Owners
______________________9. Investors
______________________10. BIR