Initiation to Accounting
Senior 1 · Entrepreneurship
Initiation to Accounting
Lesson 3 of 5
25 min
It is July 2026, and a tea growers' cooperative near Kitabi in Nyamagabe District holds its annual general meeting. Its accountant, Nshimiyimana, presents last year's accounts. Hands go up at once. (An illustrative case.)
Outside the meeting, others want the same accounts: the bank that may lend for the lorry, the Rwanda Revenue Authority (RRA), the Rwanda Cooperative Agency (RCA), which supervises cooperatives, and the fertiliser supplier who sells to the cooperative on credit.
Think about it: which of these people are part of the cooperative, and which are outside it?
Definition
Accounting information: the facts and figures that accounting produces about a business: its income, expenses, profit or loss, what it owns and what it owes.
Example: the cooperative's profit last year and the amount it still owes the bank.
Definition
User of accounting information: any person or organisation that reads a business's accounting information to make a decision.
Example: a bank deciding whether to lend.
Definition
Internal user: a user inside the business: someone who owns it, manages it or works in it.
Example: the cooperative's members (its owners), its committee and its drivers.
Definition
External user: a user outside the business: someone who deals with it, lends to it, taxes it or regulates it, without owning, managing or working in it.
Example: the bank, RRA, RCA, suppliers and customers.
| User | What they want to know | Decision it helps |
|---|---|---|
| Internal users | ||
| Owners (members, shareholders) | Profit, and whether their money is safe and growing | Keep investing, share profit, change leaders |
| Managers | Costs, sales, cash, which activities pay | Prices, spending, buying a lorry, hiring |
| Employees | Whether the business is stable and can pay | Ask for a rise, stay or look for another job |
| External users | ||
| Lenders (banks, SACCOs) | Profit and cash to repay, what it owns as security | Lend or refuse, and how much |
| Government and RRA | Income and profit to tax; data for planning | Tax to collect; economic policy |
| Suppliers | Whether the business pays its debts on time | Sell on credit or ask for cash |
| Customers | Whether the business will keep supplying | Sign a long contract or find another supplier |
| Investors | Profit and growth | Buy a share of the business or not |
| Regulators (e.g. RCA) | Whether the accounts are honest and the rules are followed | Approve, advise or take action |
Tip
Inside the gate or outside the gate? Ask: does this person own, manage or work in the business? If yes, an internal user. If they deal with it from outside, however closely, an external user.
Worked example 1: sorting the AGM's questions
| Who asks | Question | Type of user |
|---|---|---|
| A grower (member) | How much profit will be shared? | Internal: an owner |
| The chairperson | Can we afford a second lorry? | Internal: a manager |
| A driver | Is there money for a pay rise? | Internal: an employee |
| The bank | Can the cooperative repay a loan? | External: a lender |
| The fertiliser supplier | Will we be paid if we sell on credit? | External: a supplier |
Worked example
Worked example 2: the bank reads the accounts (illustrative figures)
The accounts show a profit of Frw 18,400,000 for 2025. A loan for the lorry would cost Frw 6,000,000 a year to repay. What share of a year's profit would the repayments take?
About a third of the profit. If the bank's own rule is that repayments must stay below 40% of profit, it can lend. Without accounts the bank could not do this calculation, and would refuse or demand much more security.
Warning
Checking the books does not make you an insider. Students often call RRA or RCA "internal" because they inspect the accounts. They are outside the business, so they are external users. In the same way, the cooperative's members are internal users even though most of them never work in its office: they own it.
Notepirate, "Internal vs. External Users of Accounting Information" (about 8 minutes). Watch for the reasons each user needs the figures. The examples are American: "creditors" there means lenders and suppliers, and the tax office is the IRS rather than RRA.
Practice
Sources and credits
Written by Ganzaa: the Nyamagabe cooperative case, the diagram, the tables, the worked examples and the practice items. All figures are illustrative (2026).
