Summary
Highlights
Regulatory bodies like the Securities and Exchange Commission, Department of Trade and Industry (for proprietorships and partnerships), and the Department of Labor and Employment supervise businesses to ensure compliance with legal requirements.
Internal users are individuals within the organization who plan, organize, and run the business, directly involved in managing and operating. They are also known as primary users of accounting information and include marketing managers, supervisors, finance directors, company officers, and owners. They use financial information to understand profit and loss, assets, and liabilities, and to make decisions regarding investments, expansion, and borrowing funds.
Management and employees use financial information to know the income or earnings, sales, available cash, and production costs. They analyze organizational performance and position to improve company results and ensure sufficient cash for dividends and pricing decisions. Understanding these aspects helps them make informed decisions to lower costs, for example.
External users are individuals or organizations outside the company not involved in its operation. These include creditors, tax authorities, investors, customers, and regulatory authorities.
Creditors, such as suppliers, need accounting information to determine the creditworthiness of an organization and set appropriate credit terms before extending loans or credit.
The Bureau of Internal Revenue is a government agency that verifies the accuracy of financial data to ensure the credibility of tax returns filed by businesses.
Investors evaluate financial statements to assess a company's performance and financial position, deciding whether to invest. Customers evaluate a supplier's financial information to ensure a stable supply source in the long term and justify pricing.