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Internal & External users of Accounting

Definition (1):

Internal users of accounting information are those individuals inside a company who plan, organize, and run the business. These include owners, marketing managers, production supervisors, finance directors, and company officers.

Accounting provides owners and managers with useful and important financial data for making decisions. Generally, this form of accounting is known as managerial accounting.

External users of accounting information are individuals and organizations outside a company who want financial information about the company. There are several types of external users such as creditors, investors, regulatory agencies, trading partners, government, journalists, the general public, and international standardization agencies.

External users use the financial history and statements of business organizations. The form of accounting dealing with this information is known as financial accounting.

Definition (2):

Internal users are those individuals who manage, operate, and run the daily functions inside an organization. The users include owners, stockholders, directors, managers, officers, internal departments, employees, and internal auditors.

External users are the persons who have an interest in the account information of a business but they are not part of the administrative process of the business organization.

The two most common types of external users are investors and creditors.

Investors (owners) use accounting information to make decisions to buy, hold, or sell stock.

Creditors (such as suppliers and bankers) use accounting information to evaluate the risks of granting credit or lending money.


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