There are 2 types of
users which is internal users and external users. Internal users refers to the
members of a company’s management and other individuals who use financial
information in running and managing business. They work within the company and make
decisions for the business. Internal users are such as management, owners and
employees. Management uses accounting information to analyse the company or
organization’s performance and current situation to take appropriate measures
to improve the company’s result. Whereby, to determine any future decision making
owners uses accounting information to analyse the viability and profitability
of their investment. Lastly, employees uses accounting information to get the accounting
details of their company so that they are aware of overall profitability of the
company which will have a direct impact or effect on their salary and job security.
external users are entities or individuals who do not participate in running or
managing the business but are interested in the financial information of the
company. Unlike internal users, they do not make decisions for the business.
External users includes investors, creditors and customers. Investors uses
accounting information to analyse the achievability of investing in the
company. Investors want to make sure they will get reasonable return on their
investment before they commit financial resources to the company. Whereby,
creditors uses it to determine the credit worthiness of the company. Lastly,
customers uses accounting information to assess the financial state of its
supplier which is necessary for them to maintain a stable source of supply of
goods in the long term.
The accounting process
or known as book-keeping process is a series of activities that begin with a
transaction and ends with the closing of the books. The accounting process
includes identifying economic activities, recording and communicating.
Identifying is a process of identifying those events that are considered as an
economic activity relevant to the business. Next recording is keeping a
chronological diary of measured events in an orderly and systematic manner.
Lastly, communicating through the preparation and distribution of accounting
reports to the parties.