Users of accounting information

By: Rashid Javed | Updated on: October 20th, 2021

Accounting information of a business enterprise is used by many stakeholders. Different parties use this information for different purposes depending on their needs. Therefore, the accounting information system of a business enterprise must be designed in a way that can generate the reports to satisfy the information needs of every interested party.

We can broadly divide the users of accounting information into two groups – internal users and external users. Internal users include managers and owners of the business whereas external users include investors, creditors of funds, suppliers of goods, government agencies, general public, customers and employees.

Internal users

Internal users use a mix of management and financial accounting information. Some internal users of accounting information and their needs are briefly discussed below:

1. Management

Management uses accounting information for evaluating and analyzing organization’s financial performance and financial position, for taking important decisions and appropriate actions to improve business performance in terms of profitability, financial position and cash flows. As many popular management accounting books make clear, one of the major roles of management is to set rules and procedures to achieve organizational goals. For this purpose, management uses information generated by financial as well as managerial accounting system of the organization.

2. Owners

Owners invest capital to start and run business with the primary objective to earn profit. They need accurate financial information to know what they have earned or lost during a particular period of time. On the basis of accounting information they decide their future course of actions such as expansion or contraction of business.

In small businesses (like sole proprietorship and partnership) owners themselves perform the function of management.


External users

External users normally use only financial accounting information. Some external users of accounting information and their needs are briefly discussed below:

1. Investors

In corporate form of business, the ownership is often separated from the management. Normally investors provide capital and management runs the business of the entity.

The accounting information is used by both actual and potential investors. Actual investors use this information to know how their funds are being used by the management and what is the expected performance of business in future in terms of profitability and growth. On the basis of this information, they decide whether to increase or decrease their investment in future. Potential investors use accounting information to decide whether or not a particular corporation is suitable for their investment needs.

2. Lenders

Lenders are individuals or financial institutions that normally lend money to businesses and earn interest income on it. They need accounting information to assess both financial performance and financial position of the business, and to have a reasonable assurance that the entity to whom they are going to lend money would be able to return their principal amount as well as pay interest thereon.

3. Suppliers

Suppliers are business individuals or organizations that normally sell merchandise or raw materials to other businesses on credit. They use accounting information to get an idea about the future creditworthiness of the business and to decide whether or not to continue providing goods on credit.

4. Government agencies

Government agencies use financial information of businesses for the purpose of imposing taxes and regulations.

5. General public

General public also uses accounting information of business organizations. For example, accounting information is:

  • a source of education for students of accounting and finance.
  • a source of valuable data for those researching about organizational impact on individuals and economy as a whole.
  • a source of information for the people looking for job opportunities.
  • a source of information about the future of a particular enterprise.

6. Customers

Accounting information provides important information to customers about current position of a business organization and to make a judgment about its future. Customers can be divided into three groups – manufactures or producers at various stages of production, wholesalers & retailers, and end users or final consumers.

Manufacturers or producers at any stage of processing need assurance that the organization in question will continue providing inputs such as raw materials, parts, components and support etc. The wholesalers and retailers must be assured of consistent supply of merchandise inventory. The end users or final consumers are interested in continuous availability of products and related accessories. Because of these reasons, the accounting information is of significant importance for all three types of customers.

7. Employees

Employees who do not have a hand in core management of the business are considered external users of accounting information. They are interested in financial information because their present and future is tied up with the success or failure of the business. The success and profitability of business ensure job security, better remuneration, job promotion and retirement benefits.

34 Comments on Users of accounting information

    Very educative !!

  2. Izzvti_

    You help me so much . Thank you

  3. VF

    How can I Harvard reference this page?

  4. Goh Kok Dong

    The points are clear and easy to understand. Thank you!!

    1. Gazza

      Nice name😍 #imlovin’it

  5. Chadoka Greta

    You are the best the information is clear and easy to understand thank you so much

  6. rozzy

    So brief, clear and simple …. I understood it well

  7. Okello kenneth

    What is the reference of the above points


    Loving and enjoying every bit of it.

  9. Allan Pinia

    Valuable information

  10. Kahunwa

    That so great the note is very simple to understand.Thanks

  11. emmanuel

    thats a great explanation!

  12. Andrew mikejets

    It has really helped me even with coursework research.

  13. Monica Emanuel

    Nice and clear explanation be blesing

  14. Florence Mwakai

    Very nice information

  15. Abhi kolapkar

    This information help me to complete my nots thank you

    1. Ireny leo

      Very nice information

  16. Violet

    Well explained thanx


    I have known and am able to differentiate the users and the data is educative and shows a clear evidence to students.

  18. oyite jasper

    English used is simple and easy to understand.

  19. Augustine Amponsah

    Note are very simple to understand

  20. Joy moon

    I can’t find some like; the predictor and bank

  21. Kelvin Albert

    Good work congratulations and thanks for your assistance

  22. Samuel Barning

    I like the explanations. Good job done.

  23. Jude Imai

    u have made me 2 b awhare on much about accounting.

  24. Ray

    can you guys make information available so the article can be cited.

    1. Accounting For Management

      Published Year: June 25, 2017
      Writer: Rashid Javed (M.Com, ACMA inter)

  25. Kayode

    I love this effort very helpful. I don’t need textbooks

  26. Nyarko Blessing

    it helps very well because some site demand too much which sometimes i cant reach their demands. via their payment terms

  27. Nyarko Blessing

    pls can u send me more point on the uses of accounting by the management. i need six point

  28. Usama imtiaz

    keep on the good work

  29. Annitah kyuma

    So educative …..thanks

  30. Omary

    Very simple and clear notes

Leave a comment