Accounting Principles and Costing Systems

The provided report deals with analyzing various stakeholders of an organization and how they are benefited by financial statements. It also explains the merits and demerits of marginal and absorption costing, as well as the costing systems used in different industries. The document provides a comprehensive understanding of accounting principles and their applications in real-world scenarios.

Accounting Questions

Contents
INTRODUCTION...........................................................................................................................3
Part 1................................................................................................................................................3
A) Stakeholders of the company as per conceptual framework..................................................3
B) Financial statements meeting needs of stakeholders..............................................................4
Part 2................................................................................................................................................5
A) Advantages and disadvantages of marginal and absorption costing techniques....................5
B) Identifying costing systems for various types of industries....................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................6

INTRODUCTION
Accounting is quite crucial for the firm in attaining financial needs. Present report deals
with analyzing various stakeholders of organization and how they are benefited by financial
statements. Further, merits and demerits of marginal and absorption costing are also explained.
Moreover, costing systems used in industries are discussed in this report.
Part 1
A) Stakeholders of the company as per conceptual framework
The stakeholders are important part of organization as they provide certain funds to
company and have stake in the business as well. As per the IASB (International Accounting
Standards Board), there are seven types of stakeholders listed below-
1. Suppliers-
The suppliers are those individuals who provide raw materials to the business on credit
basis. This means that trade creditors or suppliers require to know financial position of the
company whether money owing to them will be paid within stipulated time or not. Thus, they are
users of financial information as they supply goods to business and assess financial health in
effective way (Petersen and et.al, 2018).
2. Lenders-
Lenders provide loan to the company with terms of repayment within time frame. They
want financial information so that better and effective decision can be made by them regarding
whether to lend money to organization or not. Thus, lenders are important stakeholders of firm.
3. Investors-
Business needs funds in order to carry out daily activities in the best possible manner.
This is possible when investor invests in the shares of the company and as such, funds are
generated for meeting operational tasks by the business. Thus, they enjoy dividends on the shares
subscribed by them as company earns profit.
4. Customers-
Customers are other stakeholders of the business which have interest in the continuity of
business in the market. This is because they provides their demands and needs to company and
as such, firm fulfills the same. Thus, customers are important stakeholders which have stake in
the workings of company (Annisette, Cooper and Gendron, 2018).
5. Employees-

Employees also have interest in the earning capacity of organization as they assess
whether their jobs are secured or not. Moreover, they also evaluate regarding future growth of
careers in the organization and as such, employees work hard with full dedication. Thus,
employees assess profitability aspect of firm.
6. Government-
The government analyses financial statements to compute tax obligation of the business.
They require assessing financial health of company so that taxes can be calculated.
7. General Public-
The public assess financials as to what impact will be on overall economy by the
company. Thus, they evaluate contribution towards economy (Johnstone, 2018).
B) Financial statements meeting needs of stakeholders
1. Suppliers-
Suppliers meet their needs with the help of financial statements by assessing liquidity
position of company in the best possible manner. This means that they evaluate financials as to
when credit amount will be paid business.
2. Lenders-
Lenders are able to take enhanced decision whether to provide loan or not to company. It
implies that solvency position is analyzed by them and thus, loan is provided by them with much
ease. Thus, constructing financial statement meet their needs.
3. Investors-
They assess overall health of the business and as such, decision is made whether
investment should be made in the firm. Thus, investors assess how much returns would be
provided to investors and better decision is taken by them.
4. Customers-
Customers assess accounting statements to evaluate workings and earning capacity of the
business. Moreover, they also analyze whether demands are met in accordance to their
preferences. Thus, customers are benefited by seeking financials of company (Costa and
Torrecchia, 2018).
5. Employees-
An employee seeks level of earnings of firm whether it is attaining stated targets or not.
Moreover, they analyses about their career growth and job security in the firm. Thus, workers are
able to meet this information through financials.

6. Government-
The government is seeks for profitability aspect of company. In accordance to the
revenue garnered, calculation of tax is made by it. This is done so that correct tax can be
computed with much ease.
7. General Public-
General public is able to analyze profitability position of company and how its operations
will affect local economy. Thus, financial statements provide them clarity to whether business
activities would have positive or negative impact on economy (Guo and Anderson, 2018).
Part 2
A) Advantages and disadvantages of marginal and absorption costing techniques
Advantages of Marginal costing
 It is simple technique by which fixed and variable costs can be ascertained.
 This method is useful for short-term ascertainment of production costs.
Disadvantages
 It is not suitable as it considers historical data and management cannot make future
decisions.
 It completely ignores fixed costs in assessing product costs.
Advantages of Absorption costing
 One of the main of absorption costing is that fixed costs are taken into consideration.
 Costs are matched with revenue earned at a specific period (Agarwal. 2018).
Disadvantages
 It is unsuitable for taking decision related to selection of proper product mix
 This technique is not helpful in controlling costs incurred in production.
B) Identifying costing systems for various types of industries
1. Service industry-
In the garage, Activity based costing system is used because costs are allocated when
activities are explored and as such, indirect costs is assigned to products such as car and other
vehicles.

2. Construction company-
Construction firm is best suited by using Activity-based costing and traditional costing
method. This is because certain limitations which are provided by traditional system is overcome
by this system (Liu, Hsu and Yen, 2018).
3. Manufacturing industry-
Since, cars and SUVs are produced in adequate process, thus in this industry, process
costing system is used. The main reason is that cars are produced which are of homogenous
nature and as such, costs is assigned to individual units of production. Thus, process costing is
beneficial for manufacturing industry.
CONCLUSION
Hereby it can be concluded that business is benefited by following accounting principles.
Stakeholders are users of financial information and decisions are taken by them. Costing systems
are helpful in ascertaining costs.

REFERENCES
Books and Journals
Annisette, M., Cooper, C. and Gendron, Y., 2018. The question of research diversity in “top”
accounting journals.
Costa, M. and Torrecchia, P., 2018. The Concept of Value for CSR: A Debate Drawn from
Italian Classical Accounting. Corporate Social Responsibility and Environmental
Management, 25(2). pp.113-123.
Guo, S. J. and Anderson, L. B., 2018. Workplace adversity and resilience in public relations:
Accounting for the lived experiences of public relations practitioners. Public Relations
Review, 44(2), pp.236-246.
Johnstone, L., 2018. Environmental management decisions in CSR-based accounting
research. Corporate Social Responsibility and Environmental Management.
Liu, F. C., Hsu, H.T. and Yen, D. C., 2018. Technology Executives in the Changing Accounting
Information Environment: Impact of IFRS Adoption on CIO Compensation. Information &
Management.
Petersen, I. T and et.al, 2018. Development of internalizing problems from adolescence to
emerging adulthood: Accounting for heterotypic continuity with vertical
scaling. Developmental psychology. 54(3). p.586.
Online
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absorption-costing/52643 >