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    Fundamentals of Accountancy, Business & Management 1

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    Rodj Eli Mikael Viernes-Incognito
    This document provides information on the users of accounting and financial information, categorizing them as internal users like managers and owners who make decisions for the organization, and external users such as investors, creditors, suppliers and regulatory bodies who rely on the organization's financial reports. It defines these different users and provides examples, then has exercises to test understanding of identifying internal vs. external users and what types of stakeholders are being referred to in different situations.

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    Fundamentals of Accountancy, Business & Management 1

    Uploaded by

    Rodj Eli Mikael Viernes-Incognito
    90 views4 pages
    This document provides information on the users of accounting and financial information, categorizing them as internal users like managers and owners who make decisions for the organization, and external users such as investors, creditors, suppliers and regulatory bodies who rely on the organization's financial reports. It defines these different users and provides examples, then has exercises to test understanding of identifying internal vs. external users and what types of stakeholders are being referred to in different situations.

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    FABM1 las 2

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    This document provides information on the users of accounting and financial information, categorizing them as internal users like managers and owners who make decisions for the organization, and external users such as investors, creditors, suppliers and regulatory bodies who rely on the organization's financial reports. It defines these different users and provides examples, then has exercises to test understanding of identifying internal vs. external users and what types of stakeholders are being referred to in different situations.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    90 views4 pages

    Fundamentals of Accountancy, Business & Management 1

    Uploaded by

    Rodj Eli Mikael Viernes-Incognito
    This document provides information on the users of accounting and financial information, categorizing them as internal users like managers and owners who make decisions for the organization, and external users such as investors, creditors, suppliers and regulatory bodies who rely on the organization's financial reports. It defines these different users and provides examples, then has exercises to test understanding of identifying internal vs. external users and what types of stakeholders are being referred to in different situations.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    FUNDAMENTALS OF ACCOUNTANCY, BUSINESS & MANAGEMENT 1

    Name of Learner: _____________________________________ Grade Level: _____________


    Section: ______________________________________________ Score: __________________

    LEARNING ACTIVITY SHEET


    Users of Accounting/ Financial Information

    Background Information for Learners


    Accounting communicates financial information to decision makers. Different decision makers are users of
    these accounting information. Users of accounting information are collectively referred to as stakeholders. These
    stakeholders can be classified as internal and external users.

    INTERNAL USERS
    Internal users are those who make decisions on behalf of the organization. They include the following:
    1.Managers/ management- they plan, organize and run a business.
    a. Top-level Management- Chief Executive Officer (CEO), Chief Financial Officer (CFO), and Chief
    Operating Officer among others. They use the information to oversee the performance of the whole
    organization and set its strategic direction.
    b. Middle- level Management- Department heads, branch managers, and junior executives, among others.
    They ensure that their units’ performances are aligned with the organization’s objectives.
    c. Lower- level Management- supervisors and team leaders. They oversee the day-to-day operations and
    direct employees in the performance of tasks.
    2. Employees/ Labor unions- they assess the company’s profitability and stability and their consequence on
    future salary and job security.
    3. Owners- the provide the capital to the business. Owners need this accounting information to help them
    decide whether they should withdraw or increase their investments. They are interested to know the returns
    on their investment.

    EXTERNAL USERS
    The external users of financial reports are those who make their decisions based on the company’s financial
    information. They are the following:
    1. Potential and existing investors- they need information to help them decide whether they should invest or
    not in the business. Through past performances or operating results of the company, they would want to
    know potential returns on their investment.
    2. Creditors and potential creditors- they asses the credit worthiness and the capability of the business to pay
    its obligation including the related interests on maturity date.
    3. Customers- they assess the financial position of their suppliers which is necessary for them to maintain a
    stable source of supply in the long term. They are interested to know whether the business will continue to
    honor its product warranties.
    4. Suppliers- they use the financial statements of their customers to determine whether the debts owed to
    them will be paid when due or whether the customer has enough funds or resources to pay the goods to be
    delivered or the services to be rendered.
    5. Tax authorities- they use financial reports to determine the credibility of the tax returns filed on behalf of
    the company. They are interested to know if the business paid the correct amount of taxes.
    6. Regulatory bodies- they want to ensure that the company’s disclosure of accounting information is in
    accordance with the rules and regulations set in order to protect the interest of the stakeholders who rely
    on such information. Examples of these regulatory bodies are the Securities and Exchange Commission
    (SEC) and the Bangko Sentral ng Pilipinas (BSP).
    7. Public- they use the financial information to know how the business affects the economy possible
    prospects for employment, and/ or for educational and research purposes.

    Learning Competency with Code


    The learners shall be able to
     Define external users and gives examples ABM_FABM11-IIIa-7
     Define internal users and give examples ABM_FABM11-IIIa-8

    1
    Exercise 1: Internal vs. External. The following are users of financial statements. Identify if the users
    mentioned below is EXTERNAL or INTERNAL.

    ANSWERS USERS
    1. Customer
    2. Bureau of Internal Revenue
    3. Labor unions
    4. Factory manager
    5. Vice President of Finance
    6. Securities and Exchange Commission
    7. Investors
    8. Suppliers
    9. Factory workers
    10. A bank company

    Exercise 2: The following questions could be asked either by an external or internal user. Identify each of the
    questions as being more likely to be asked by an INTERNAL USER or an EXTERNAL USER.

    ANSWERS USERS
    1. What price should we set for our product?
    2. Did the company earn a satisfactory income?
    3. Should we hire more employees?
    4. How does the company’s profitability compared to other companies?
    5. What does it cost us to manufacture each unit produced?
    6. Which product should we emphasize?
    7. Will the company be able to provide a return to its stakeholders?
    8. Are we ready to expand?
    9. Will it be possible for us to grant the salary increase?
    10. Is the Return of Investment rate high?

    Exercise 3: Identify what kind of stakeholder is being referred to. Choose from the following items below.
    Write your answers on the space provided before each item.
    A. Owners F. Management
    B. Creditors G. Suppliers
    C. Potential investors H. Bureau of Internal Revenue
    D. Employees I. Public
    E. Regulatory bodies J. Customers

    1. To plan, organize, and run the business


    2. To know how the business helps the economy
    3. To determine whether debts owed to them will be paid when due
    4. To determine the correctness of the tax returns filed by the company
    5. To decide whether to invest in the company or not
    6. To decide whether they should withdraw or increase their investments
    7. To know whether an entity can continue to honor product warranties
    8. To ensure that the company’s disclosure of accounting information is in accordance with rules and regulations
    9. To find out the financial capacity of the company in order to bargain for benefits.
    10. To assess the capability of the business to pay its obligation including the related interests on maturity date.

    Exercise 4: Write TRUE if the statement is correct or FALSE if the statement is incorrect.

    ANSWERS STATEMENTS
    1. Potential investors are interested in financial information that will help them know the
    ability of the entity to pay dividends.
    2. The financial statements provide all the needed information by decision makers.

    2
    3. The financial statements assist the investors decide whether to sell or hold their
    investment in the entity.
    4. The shareholders or owners, management, and the company employees are external
    users with indirect interest in the business.
    5. Internal users of financial information are decision- makers who belong to the business
    organization itself.
    6. Taxing authorities are external users of financial information with direct interest in the
    business entity.
    7. Suppliers use accounting information as decisions on whether to extend credit to the
    economic entity.
    8. Financial reports provide information on the ability of the firm to pay wage increase for
    their employees.
    9. Managers use financial information to set goals for the company
    10. Creditors make use of financial report to know how the business used the money lent to
    the entity.

    Exercise 5: Essay
    Question: “What if you are from a Local Government Unit (City/Municipality)? Do you think the Local
    Government (City/ Municipality) will be interested with your accounting reports/records?”
    RUBRIC for SCORING

    INDICATORS POINTS RATINGS


    1. Content relevance 15
    2. Organization of Thoughts 10
    3. Grammar and Mechanics 5
    Total 30 points
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    3
    _______________________________________________________________________________________________
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    Reflection:
    Complete this statement:
    What I have learned from this activity
    _______________________________________________________________________________________________
    _______________________________________________________________________________________________
    _______________________________________________________________________________________________
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    _______________________________________________________________________________________________
    _______________________________________________________________________________________________
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    References:
    Fundamentals of Accountancy , Business and Management 1 Teaching Guide
    Fundamentals of Accountancy , Business and Management – Rabo, Tugas and Salendrez (Vibal Publishing)

    Prepared by:

    BRIAN S. INCOGNITO
    SHS Teacher 2

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