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2. External users

These are individuals who are not directly involved in running the daily affairs of
the entity.
(i) Creditors/lend- Creditors are the individuals who supply goods and services on
ers credit. Lenders are providers of goods, services, money or funds
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to the business on a credit basis. The two are interested to know
the financial soundness of the business before granting loan
or goods/service on credit. This information is very important
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to decide whether to extend goods and services or loans to the
business. The information also is useful in setting the terms of
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credits.
(ii) Tax authorities Tax authorities need to know the earnings made by the businesses
for the purpose of taxation. This information helps the Tanzania
Revenue Authority (TRA) and Zanzibar Revenue Authority
(ZRA) determine the credibility of the tax returns filed on behalf
of the business or to assess taxable income.

(iii) Investors Prospective investors wish to examine the performance and
financial position of the business to evaluate the potential for
getting good or reasonable returns and prospects for viable and
sustainable business undertaking. This information is important
for their investment decisions.

(iv) Customers Customers are interested in getting goods and services at
reduced price. Informed customers may wish to know whether
the business has in place a proper accounting control, which
in turn will reduce the cost of production and eventually less
price to be paid for supplied goods and services. For example,
utility companies like TANESCO are normally required to show
their current performance when negotiating for a new price of
electricity to justify their claims.

Student’s Book Form Five
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