Interested Users of Information

Users of Accounting Information

Accounting is often called the language of business because it communicates the financial position and performance of an enterprise to those who need it. Every business has multiple groups of people who rely on this financial information to make decisions. These users fall into two broad categories: internal users and external users.

Internal Users

Internal users are people within the organisation who manage and run the business. They need accounting information on a regular basis to plan, control, and evaluate operations. This group includes:

• Chief Executive Officer (CEO)
• Chief Financial Officer (CFO)
• Vice Presidents
• Business Unit Managers
• Plant Managers
• Store Managers
• Line Supervisors

These managers use accounting data to compare the company's performance against industry figures, identify strengths and weaknesses, and ensure that the money invested in the business is generating an adequate return. They also need to confirm that the company can pay its debts and remain solvent.

External Users

External users are parties outside the business who have a direct or indirect financial interest in it. They do not have access to the internal records of the company and therefore rely on published financial statements. The main external users are:

• Present and potential investors (shareholders) — They want to know whether they are getting a satisfactory return on their investment and to assess the overall financial health of the company before deciding to buy, hold, or sell shares.
• Creditors (banks, financial institutions, debenture-holders, and other lenders) — They are primarily concerned with whether the business will be able to repay its debts. They focus on liquidity, which is the ability of the company to pay its debts as they fall due.
• Tax authorities — They need accounting information to compute and verify taxes such as Income Tax, Value Added Tax (VAT), Customs duties, and Excise duties.
• Regulatory agencies — Bodies like the Department of Company Affairs, Registrar of Companies, Securities Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDA), and the Reserve Bank of India (RBI) require financial information to protect the interests of investors and creditors and to ensure compliance with legal obligations under the Companies Act 2013 and SEBI regulations. …