May 28, 2022

SB-Accounting

Accounting + Finance Blog

USERS OF ACCOUNTING INFORMATION-EXTERNAL

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USERS OF ACCOUNTING INFORMATION-EXTERNAL



In the previous acticle, we discussed about internal users of accounting information and we also define internal and external users. This article will discuss about the external users. The following external users

(1) Potential Investors: 

These are investors that are willing to invest their money in the business. They may want to invest in the short term or in the long term. They, therefore, need accounting information to know if investing on it will enable them acheive their objectives.

They want to know if the company is making enough profit now and if they will do so in the future. They want to know if the company will remain for a long period of years or it is at the brink of liquidation.

(2) Bankers/Lenders:

Bankers/Lenders provides loans to the entity. Lenders include: individuals, credit society and debenture holders. This set of people need accounting information of a business to know if such business will be able to pay back the principal together with the interest. They need it to know the credit worthiness of the entity, if they have collaterals for the loan and also the stability of the business.

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(3) Financial Analyst:

This needs accounting information to make financial analysis of the business. Financial analyst compute accounting ratios, study trends, make industrial analysis, and other comparative analysis.

(4) Researchers:

This set of people need accounting information for research purposes. Researchers may want to study on various relationships like: profitabilty and assets, inventory and profitabilty, earnings and sales, net assets and loans etc. Accounting information help study this relationships.

(5) Government:

The federal, state government and local government needs accounting information to make policies. Government policies can affect an entity positively or negatively. Various macroeconomic policies of the government may increase inflation, unemployment, taxes, and cost of doing business.

On the positive side, it may increase employment, infrastructure, economic development, lower cost of doing business and encourage foreign direct investments (FDI).

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(6) Government Agencies:

Government agencies are: the tax office, central bank, stock exchange market and National statistics. They need accounting information of an entity for a particular reasons, which are explained below:

(i) Tax Office:

The tax office needs accounting information to compute the taxes of an entity. They also need it to know if the entity is invading taxes or have willingly refuse to pay taxes.

(ii) Central bank:

The central bank needs accounting information to make monetary policies. They most especially need the accounting information of financial institutions. They use this information to regulate the banking sector of the economy.

(iv) Stock exchange market: 

The stock exchange market such as Wall street, London stock exchange and the Nigeria stock exchange need accounting information so that investors can ultilize for decision purposes. Also, for the market to be efficient, they need accounting information of various entity to flow within the market.

(v)National statistics:

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This need accounting information to calculate various indices in the country. This indices are GDP, Inflation rates, and so on.

(7) International organizations:

International organizations including IMF and World Bank need accounting information to compute various indices and to measure the growth and development of a country.

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