Topic 6.4 – Interested Parties (Cambridge IGCSE Accounting 0452)
Learning objective
Identify every interested party required by the Cambridge IGCSE Accounting syllabus, state the specific accounting information each party needs, and explain how managers use that information in decision‑making.
1. List of interested parties (in the order given by the syllabus)
Owners / Share‑holders
Managers
Trade‑payables / Creditors (including banks and other lenders)
Suppliers
Government – tax authorities & regulators
Customers
Club members (where the business is a club or society)
Other interested parties
Investors (e.g., venture capitalists, private‑equity firms)
Community / Society (local residents, environmental groups, etc.)
2. Why managers must consider each party
Every decision influences resources, profitability, legal compliance and reputation. By understanding each party’s needs, managers can:
Secure finance and maintain favourable credit terms.
Motivate, retain and develop staff.
Meet legal, tax and regulatory obligations.
Build customer loyalty and increase market share.
Protect the organisation’s public image.
Deliver the owners’ and investors’ aim of profit and growth.
Maintain good relationships with clubs, suppliers and the wider community.
3. Accounting information required by each interested party
Interested Party
Key Accounting Reports Needed (syllabus focus)
How managers provide the reports
Owners / Share‑holders
Profit & Loss Account
Balance Sheet
Cash‑flow Statement
Dividend forecast (if applicable)
Annual accounts, directors’ report, shareholders’ meeting minutes, dividend notes.
Managers
Management accounts (budget vs. actual)
Cost‑centre statements
Cash‑flow forecast
Key performance indicator (KPI) dashboards
Monthly/quarterly internal reports, budgeting packages, electronic dashboards.
Trade‑payables / Creditors (banks, other lenders)
Balance Sheet – current liabilities
Cash‑flow Statement
Debt schedule & interest‑cover ratio
Loan‑covenant compliance statements
Statutory accounts, credit reports, covenant compliance letters.
Suppliers
Accounts‑payable ageing
Outstanding balances
Payment‑terms schedule
Supplier statements, payment calendars, purchase order confirmations.
Government – tax authorities & regulators
Tax returns (Corporation Tax, VAT)
Statutory accounts (Profit & Loss, Balance Sheet)
Regulatory filings (e.g., Companies House)
Submitted tax filings, audited financial statements, regulatory reports.
Customers
Product‑cost information (used to set prices)
Pricing breakdowns
Service‑level data (e.g., warranty, after‑sales support)
Price lists, product specifications, service reports.
Club members
Membership fee receipts
Club financial statements (Profit & Loss, Balance Sheet)
Activity budgets
Annual club accounts, committee meeting minutes, member newsletters.
Other interested parties – Investors
Profit & Loss Account
Cash‑flow Statement
Financial forecasts & ROI analysis
Investment prospectus, periodic performance updates, projected cash‑flows.
Other interested parties – Community / Society
Corporate Social Responsibility (CSR) report
Environmental impact statements
Employment statistics
CSR disclosures, sustainability reports, community‑outreach summaries.
4. Using the information in managerial decision‑making
When evaluating any decision, managers should assess the impact on every interested party. A simple, syllabus‑friendly framework is:
Net Benefit = Σ (Benefiti – Costi )
List all parties that will be affected.
Quantify the monetary (or measurable) benefit and cost to each party.
Sum the net effects – a positive total indicates the decision is likely acceptable to most parties.
If the net effect is negative for a particular party, plan mitigation actions (e.g., environmental safeguards for the community).
5. Example – Launching a new product line
ABC Ltd. is considering a new product. The table below summarises the estimated impact on each interested party.
Party
Estimated Benefit
Estimated Cost
Net Effect
Owners / Share‑holders
Additional profit: £50 000
Capital outlay: £30 000
+£20 000
Managers
Higher KPI achievement, strategic growth
Extra monitoring workload
Positive
Trade‑payables / Creditors
Improved cash inflow from sales
Short‑term borrowing interest: £10 000
Neutral
Suppliers
Increased order volume
Potential need for larger credit limits
Positive
Government
Higher taxable profit
Additional VAT & corporation tax
Neutral (compliance maintained)
Customers
More choice, better features
Possible price rise
Mixed – market research required
Club members
— (not applicable)
—
Not relevant
Investors (other interested parties)
Higher ROI (projected 12 %)
Extra risk exposure
Positive (subject to risk‑adjusted analysis)
Community / Society (other interested parties)
Local employment, economic boost
Environmental waste
Negative – requires mitigation (e.g., recycling programme)
Using the net‑benefit framework, the overall financial effect is +£20 000. Managers would therefore:
Develop a waste‑reduction plan for the community.
Communicate the projected ROI to investors.
Prepare training schedules for the five new positions.
Update the cash‑flow forecast and inform creditors of the borrowing requirement.
6. Summary checklist for managers (aligned with the syllabus)
List every interested party relevant to the decision (use the syllabus order).
Identify the exact accounting reports each party requires (profit & loss, balance sheet, cash‑flow, tax returns, etc.).
Gather accurate, up‑to‑date financial and non‑financial data.
Quantify the benefit and cost for each party.
Calculate the overall net benefit using the simple model.
Record any negative impacts and design mitigation actions.
Communicate the analysis and the final decision to the relevant parties.
Monitor outcomes and revise future decisions based on feedback.
Suggested diagram: Flowchart showing two‑way information exchange between managers and each interested party (reports ↔ decisions).