Challenges of Accounting and Finance Practices during COVID-19 Pandemic
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This essay discusses the impact of COVID-19 pandemic on accounting and finance practices, including liquidity, payroll, tax, and supply chain. It also provides suggestions for businesses and accounting professionals to modify their work considering such pandemic and its effects.
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Challenges of Accounting and Finance Practices during COVID-19 Pandemic Contents
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INTRODUCTION Accounting plays the vital role in the success and failure of the organisation as the whole transactions that has been takes place by the entity during the year are recording with the help of accounting. It clearly shows that what is the profit or loss an organisation is earning on the basis of the business transaction they carried upon. The COVID-19 Pandemic not affected the business but also the employees who are engaged there as the whole business cycle is disturbed. The measures to reduce such pandemic is social distancing measures compliance which makes difficult for the entrepreneurs to work in their business with full capacity by engaging their complete labour force(Abhayawansa, Elijido‐Ten and Dumay, 2019).This capacity issue arises the problem of unemployment in various entities which affects the business performance as well as their market share as well. The following report comprises of an essay which showcase that how and up to what extent COVID-19 Pandemic has affected the business and finance in the depth manner that impact will remain for the long time and survival will become tough for those entities who completely work using the labour force in their business. COVID-19 Pandemic affected several components of accounting such as going concern of the business, accounting for impairment of the assets, Disclosures relating to financial statements, vulnerability from the concentrations, credit losses to the organisations, the accounting for income tax and restructuring of the business etc. Accounting and finance includes the concepts of money, business and management, with an emphasis on professional careers in these sectors.Accounting is the core of a business and the whole management of business is completely depending upon the accounting and finances of the organisation. Recently, COVID-19 Pandemic badly impacts the revenue of companies and staffing levels, finance functions, liquidity and the areas in which finance professional are looking to educate as well. Other factors which are disturbed by the COVID-19 Pandemic presumes the evaluation of asset damage, increase in cost due to raw material shortages, market fluctuation etc. Staff under quarantine, failure in supply chain, unavailable stocks, and sudden reductions in demand from customers are creating serious issues for companies. The loss of revenue in this period treats as a permanent loss and assumes as an unanticipated pressure on working capital and liquidity of the company. Liquidity is the company's ability to cover its short-term financial obligations and how quickly and easily the firm can covert assets into cash. In simple words, is to get the money whenever they want it(Al Nuaimi, and Nobanee, 2019).
The outbreak of the COVID-19 Pandemic causes delay payments from customers, as they are waiting for their customers to pay which results in low working capital availability. The low liquidity leads to widespread faults and even bankruptcy. As pandemic started, it pushes entire country towards shutdown. COVID-19 Pandemic has impact on business in many various ways. COVID-19 Pandemic has one of the major impact on the employee's payrolls. Employee's payrolls refer to the record of all accounting transaction related to remuneration of individual in ERP software(Amin, Mohamed and Hussain, 2021). Due to rapidly change in software and work from home policy employee's facing many difficulties regarding their payrolls. Work from home policy is not friendly for new applicant or employees. Companies have struggled to manage continuity of payroll and to paid every employee on time. Companies also facing problems regarding shortage of staff and adaptation of new working environment. Companies not able to access system, tools and data to perform efficiently working and some companies not ready to use remote working environment. With comparison to previous financial crisis, the COVID-19 Pandemic has brought a very different response to indirect tax system, because lean on policies which might increase demand is bit unreliable for government. Instead many governments are adjusted VAT/GST structures in real-time to assist financial liquidity to assist businesses. In businesses due to pandemic, there is an increase in tax liability because of decreasing revenue and increasing expenses creates a burden on the employers and employees (Susanto, andMeiryani, 2019). A minor change in the accounting standards and framework creates an unpredictable situation for a business organisation as employees are not known to the modified standards and does not have the command on those procedures which resulted in slow business process. The profitability of business also affected a lot because of the following modifications which taken place during COVID-19 Pandemic. The unusual rise of COVID-19 Pandemic and subsequent measures are triggering pressure on business's supply chains. It may be caused by different factors such as reduced demand due to uncertainty and increases unemployment, limited office accessibility, economic fallout, delays and shortages due to complex and international supply chains, fluctuating share and commodity prices due to instability in the financial market(Turker, 2018). During COVID- 19 Pandemic, companies faces many challenges in the field of accounts and business, it can be recommended to the enterprise that it should create a working environment which is capable to survive in the dynamic surroundings to achieve its goals. Outsourcing of funds should not carry
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high cost through which more funds are available for its daily workings(Faccia and et.al., 2019). Changing trends of accounting should be followed by this company to gain ease in recording transactions and analysing performance of the enterprise by which further decisions can be made, while keeping in mind all the deviations of the current measures. It should focus on the maintainingequilibriumbetweenliquidityandprofitabilitybyusingmixedapproachof aggressive and conservatism. Structure of tax is decided by government which is not in the hands of company but investing to various schemes and composition of capital structure in such a way that the proportion of the debt is more as compared to equity because debt is a deductible expense which decreases net tax payable. Accounting of payroll is necessary for managing the database of the employees because employee’s turnover ratio should be low in order to improve the efficiency of the organisation. Proper training should be provided to the one who handles payroll accounting because every aspect or department should be properly governed. Companies should draw attention towards increasing its market share and investing in those areas where returns are high to manage its increased tax payment. It should incur expenses on training and development improves employee morale and they work with more enthusiasm. During COVID- 19 Pandemic, a business that determines right action and approaches towards upcoming risks is more likely to turn potential challenges into strategic opportunities. Collecting insights and informationfromlessonslearnedcanhelpbusinessesrecoverandhelpshareholdersin identifying and prioritising important areas for improvement(Maroun, 2018). For recovering the situation, the business need to control cash and identify a shirt-term action plan and also need to re-forecastliquidity,securefinancingandgovernmentaid.Thecompanyshould manage important important stakeholders (i.e. Customers, suppliers, banks, regulator)(Obaidat, 2019). A detailed and quantified restructuring plan that key stakeholders can support should be developed. It is important for a business in proactive in assessing their risks and vulnerability from both financial and an operational point. The unusual rise of COVID-19 Pandemic and subsequent measures are triggering pressure on business's supply chains. It may be caused by different factors such as reduced demand due to uncertainty and increases unemployment, limited office accessibility, economic fallout, delays and shortages due to complex and international supply chains, fluctuating share and commodity prices due to instability in the financial market.
CONCLUSION Accounting and finance involve the concept of money, business and management of the organisation. accounting is relating to carrying upon the analysis of various aspects of the business in the form of accounting of the transactions whereas the focus of the finance is towards the monetary requirement of the business. The COVID- 19 Pandemic affected the business as a whole as complete supply and demand chain in an organisation has been affected which makes impact on the employees and business man as well. The above essay is carried on major concerns related to impact of pandemic on finance and accounting which shows that how accounting deals with before pandemic and what changes taken place after that. The above statement shows that how liquidity has been disturbed for many businesses and multiple borrowers including various NBFC have extended the moratorium benefits given to them by the government on the loans they have availed to their customers. Not only single area but various implications on different parts of the accounting has been taken place to several business according to their business and industry they are working. There are various financial factors, contracts of the business, disclosure policies that has been modified during COVID-19 Pandemic period. The above essay also provide suggestion to the business and accounting professional that how they work should be modified considering such pandemic and their effects so that in near future if such misfortune happens then they will plan and prepare accordingly.
REFERENCES Books and Journals Abhayawansa, S., Elijido‐Ten, E. and Dumay, J., 2019. A practice theoretical analysis of the irrelevance of integrated reporting to mainstream sell‐side analysts.Accounting & Finance.59(3). pp.1615-1647. Al Nuaimi, A. and Nobanee, H., 2019. Corporate sustainability reporting and corporate financial growth.Available at SSRN 3472418. Amin, H.M., Mohamed, E.K. and Hussain, M.M., 2021. Corporate governance practices and firm performance: a configurational analysis across corporate life cycles.International Journal of Accounting & Information Management. Faccia, A. and et.al., 2019, August. Accounting information systems and ERP in the UAE: an assessment of the current and future challenges to handle big data. InProceedings of the 2019 3rd International Conference on Cloud and Big Data Computing(pp. 90-94). Maroun, W., 2018. Modifying assurance practices to meet the needs of integrated reporting: The case for “interpretive assurance”.Accounting, Auditing & Accountability Journal. Obaidat, A.N., 2019. Is economic value added superior to earnings and cash flows in explaining market value added? an empirical study.International journal of business, accounting, & finance.13(1). Susanto, A. and Meiryani, M., 2019. The impact of environmental accounting information system alignment on firm performance and environmental performance: A case of small and medium enterprises s of Indonesia.International Journal of energy economics and policy.9(2). p.229. Turker,D.,2018.Sociallyresponsiblefinanceandaccounting.InManagingSocial Responsibility(pp. 115-130). Springer, Cham.