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Users of accounting information
Users of accounting information are the various stakeholders (parties or individuals
interested and/or concerned with the affairs of the business) who need financial information
to make informed decisions. It is for this reason that, accounting is commonly referred
to as the “language of business” since it acts as medium of communication between
various parties interested in a particular business. Users of accounting information can
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be classified into two categories, internal and external users. Further details on these
including, types of users and basic objectives for demanding accounting information
are presented in Table 1.2.

Table 1.2: Users and their objectives for demanding accounting information
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Users Objectives and examples of decisions
1. Internal users
These are individuals who are directly involved in running daily affairs of an entity.
(i) Management Accounting information provides the basis for examining the
performance of their business for example., whether, they have
been able to make profit or not. Thus, accounting information
helps management to analyse their organisation’s performance
and financial position to be able to take appropriate measures,
which will improve the business performance in case of poor
performance. In short, accounting information is important to
achieve effective planning, control and decision making by
management.

(ii) Employees In a market driven economy, a demand for wage rise, bonus and better
working conditions depends more on the financial performance
of a business. Thus, accounting information serves as a useful
tool for employees to assess the company’s profitability, which
might have some consequence on their future remuneration and
job security.

(iii) Owners/ These provide funds or capital for the organisation a n d a r e
shareholders t h e r e f o r e curious to know whether the business is being
conducted soundly including a proper use of capital or economic
resources of their business. Accounting information as presented
in financial reports provides the basis to analyse the viability and
profitability of their investment. Based on this, shareholders may
decide whether to sell/hold shares and how to vote important
matters related to their investments/businesses.

Student’s Book Form Five
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