Q."Accounting information is useful to both internal and external parties." Explain with examples of each.

Accounting reports are read by people both inside and outside the organisation, each for a different purpose.

Internal users are part of the organisation:

• Owners use accounting data to judge the return on and safety of their investment.
• Management uses it to plan operations, control costs, price products and take strategic decisions.
• Employees use it to gauge job security and to negotiate wages/bonus.

External users are outside the organisation but have a stake in it:

• Investors/potential shareholders decide whether to buy, hold or sell based on published results.
• Banks and lenders assess creditworthiness before sanctioning loans.
• Creditors/suppliers decide whether, and on what credit terms, to supply goods.
• Government/tax authorities use accounting profit as the base for income tax and GST, and for compiling economic statistics.
• Customers (especially where long-term contracts or warranties exist) check the continuity and reliability of the business.

Both groups depend on the same set of books, which is exactly why accuracy and honesty in accounting matter — a single set of records has to serve very different, sometimes conflicting, purposes.

Listing only owners and government and forgetting employees, creditors and customers, all of whom the syllabus explicitly names as users.