Identify the users of accounting information and explain the decisions each needs to make.

Identify internal and external users of a sole trader's accounting information and match each user group to the decisions and reports they rely on.

Generated by Claude Opus 4.76 min answerUpdated 2026-05-30

Reviewed by: AI editorial process; not yet individually human-reviewed

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What this dot point is asking

Accounting is often called the language of business because it communicates financial facts to the people who must make decisions. Unit 1 of the TASC course asks you to recognise who those people are and what each one needs. The clearest way to organise them is to split users into internal and external groups.

Internal users

Internal users are inside the business and have full access to detailed records.

The owner (for a sole trader, often also the manager) wants to know whether the business is profitable, whether it can pay its debts, and whether it is worth continuing or expanding.
Managers and employees responsible for parts of the business use budgets, cost reports and cash forecasts to plan, set targets and control spending.

Internal users can ask for any report at any time, including forward-looking ones such as cash budgets, because they are not limited to published statements.

External users

External users are outside the business and usually see only summary reports.

Lenders (banks) want to know whether the business can repay a loan and meet interest, so they study liquidity and stability.
Suppliers (creditors) selling on credit want to know whether they will be paid, so they look at short-term liquidity.
The Australian Taxation Office needs reliable figures to assess income tax and GST obligations.
Prospective purchasers or investors want to judge whether the business is a sound buy.
Employees may want assurance that the business is stable and can keep paying wages.

Matching information to the decision

The key skill is linking a user to the decision and then to the report that answers it. A lender deciding on an overdraft cares about the current ratio and cash budget, not the fine detail of every sales invoice. The owner deciding whether to hire staff cares about profitability and the cash forecast. Reporting the right information to the right user is what makes accounting useful rather than just a pile of numbers.

Worked example

Matching three users to their needs

Scenario

A sole trader runs a small hardware store and three parties want information: the owner, the bank considering a $40\,000$ loan, and a supplier deciding whether to offer 30 day credit terms.

Owner

Needs the income statement (is the store profitable) and a cash budget (can it fund a planned expansion). The decision is whether to expand.

Bank

Needs the balance sheet and stability ratios such as the debt to equity relationship, plus the cash budget, to judge whether interest and principal can be met. The decision is whether to lend $40\,000$ .

Supplier

Needs short-term liquidity information, mainly the current and quick ratios, to judge whether invoices will be paid within 30 days. The decision is whether to grant credit.

Conclusion

The same set of records produces different reports for each user, each matched to a specific decision.

Why this matters

Exam questions often describe a user and ask which report or ratio is most relevant, or ask you to justify why a particular stakeholder wants particular information. Being able to connect user, decision and report quickly is worth easy marks and underpins the whole decision-making strand later in the course.