A primary user of accounting information with a direct financial interest in the business would be a ______.

A. tax authority
B. creditor
C. labor union

Correct Answer: B

Most companies must report to one or more regulatory agencies. Tax authorities oversee the collection of taxes to finance government. Labor unions study the financial statements of corporations as part of preparing for labor negotiations. They all have an indirect financial interest in a company. They have not invested in the business or loaned money to the business, but use the accounting information to make decisions on public issues.

Creditors are the primary users of accounting information, with a direct financial interest in businesses, because they make loans to companies and want to ensure that the companies will have the cash to pay interest charges and repay debt at the appropriate time.