Who Uses Accounting Data ?
The financial information that users need depends upon the kinds of decisions they make. There are two broad groups of users of financial information: internal users and external users.
Internal users of accounting information are managers who plan, organize, and run the business. These include marketing managers, production supervisors, finance directors, and company officers. In running a business, internal users must answer many important questions, as shown in Illustration.
To answer these and other questions, internal users need detailed information on a timely basis. Managerial accounting provides internal reports to help users make decisions about their companies. Examples are fi nancial comparisons of operating alternatives, projections of income from new sales campaigns, and forecasts of cash needs for the next year.
External users are individuals and organizations outside a company who want financial information about the company.
The two most common types of externalusers are investors and creditors. Investors (owners) use accounting information to decide whether to buy, hold, or sell ownership shares of a company. Creditors (such as suppliers and bankers) use accounting information to evaluate the risks of granting credit or lending money.