Recipients of accounting - Internal and external balance

updated on February 21, 2013

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‍Accounting is the most important source of information for any business. However, the recipients are not always the same people.

The recipients can be divided into two groups:

1. Internal recipients: Management, Board of Directors

Internal recipients have unrestricted access to the business books. For the management, accounting primarily serves as a management tool, i.e., it forms the basis for setting company goals, taking measures, and conducting controls. For this purpose, it is necessary that the figures are as exact as possible.

2. External recipients: Shareholders, Creditors, Employees, Customers, Public

External recipients only have limited rights to view. Since shareholders have no duty of loyalty, they only have limited rights to information. According to OR 696, there is a claim to review the business report. Creditors, on the other hand, generally have no right to view, unless they can prove a legitimate interest (OR 958e). Tax authorities represent a special case because they are considered outsiders but nevertheless have extended rights to information. This dual division is reflected in the internal and external financial statements: The external balance sheet is based on the valuation regulations of the OR and usually represents a lower than the actual financial and earnings position. In the external balance sheet, assets are undervalued and liabilities (debts) are overvalued. Consequently, the equity (assets minus liabilities) is smaller. The difference to the actual equity according to the internal balance sheet are the so-called silent reserves. They are referred to as “silent” because they are not visible in the external balance sheet.