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(TCO 1) Who are the users of managerial accounting information? How does their use of
accounting information differ from the users of financial accounting information?
Solution
Answer: Accounting information helps users to make better financial decisions. Users of
financial information may be both internal and external to the organization.
Internal users (Primary Users) of accounting information include the following:
External users (Secondary Users) of accounting information include the following:
They use financial statements in order to satisfy some of their different needs for information.
These needs include the following:
(a) Investors. The providers of risk capital and their advisers are concerned with the risk inherent
in, and return provided by, their investments. They need information to help them determine
whether they should buy, hold or sell. Shareholders are also interested in information which
enables them to assess the ability of the enterprise to pay dividends.
(b) Employees. Employees and their representative groups are interested in information about the
stability and profitability of their employers. They are also interested in information which
enables them to assess the ability of the enterprise to provide remuneration, retirement benefits
and employment opportunities.
(c) Lenders. Lenders are interested in information that enables them to determine whether their
loans, and the interest attaching to them, will be paid when due.
(d) Suppliers and other trade creditors. Suppliers and other creditors are interested in information
that enables them to determine whether amounts owing to them will be paid when due. Trade
creditors are likely to be interested in an enterprise over a shorter period than lenders unless they
are dependent upon the continuation of the enterprise as a major customer.
(e) Customers. Customers have an interest in information about the continuance of an enterprise,
especially when they have a long-term involvement with, or are dependent on, the enterprise.
(f) Governments and their agencies. Governments and their agencies are interested in the
allocation of resources and, therefore, the activities of enterprises. They also require information
in order to regulate the activities of enterprises, determine taxation policies and as the basis for
national income and similar statistics.
(g) Public. Enterprises affect members of the public in a variety of ways. For example,
enterprises may make a substantial contribution to the local economy in many ways including the
number of people they employ and their patronage of local suppliers. Financial statements may
assist the public by providing information about the trends and recent developments in the
prosperity of the enterprise and the range of its activities.

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(TCO 1) Who are the users of managerial accounting information- How do.docx

  • 1. (TCO 1) Who are the users of managerial accounting information? How does their use of accounting information differ from the users of financial accounting information? Solution Answer: Accounting information helps users to make better financial decisions. Users of financial information may be both internal and external to the organization. Internal users (Primary Users) of accounting information include the following: External users (Secondary Users) of accounting information include the following: They use financial statements in order to satisfy some of their different needs for information. These needs include the following: (a) Investors. The providers of risk capital and their advisers are concerned with the risk inherent in, and return provided by, their investments. They need information to help them determine whether they should buy, hold or sell. Shareholders are also interested in information which enables them to assess the ability of the enterprise to pay dividends. (b) Employees. Employees and their representative groups are interested in information about the stability and profitability of their employers. They are also interested in information which enables them to assess the ability of the enterprise to provide remuneration, retirement benefits and employment opportunities. (c) Lenders. Lenders are interested in information that enables them to determine whether their loans, and the interest attaching to them, will be paid when due. (d) Suppliers and other trade creditors. Suppliers and other creditors are interested in information that enables them to determine whether amounts owing to them will be paid when due. Trade creditors are likely to be interested in an enterprise over a shorter period than lenders unless they are dependent upon the continuation of the enterprise as a major customer. (e) Customers. Customers have an interest in information about the continuance of an enterprise, especially when they have a long-term involvement with, or are dependent on, the enterprise. (f) Governments and their agencies. Governments and their agencies are interested in the allocation of resources and, therefore, the activities of enterprises. They also require information in order to regulate the activities of enterprises, determine taxation policies and as the basis for national income and similar statistics. (g) Public. Enterprises affect members of the public in a variety of ways. For example, enterprises may make a substantial contribution to the local economy in many ways including the
  • 2. number of people they employ and their patronage of local suppliers. Financial statements may assist the public by providing information about the trends and recent developments in the prosperity of the enterprise and the range of its activities.