[PDF] Financial Accounting Assignment Sample

Financial Accounting

INTRODUCTION
Financial accounting (FA) refers to the process of analysing, managing, recording,
evaluating and concluding the financial data to get the information from the data and different
accounts to evaluate the performance of the company in the market. Small accountancy firm
provide financial services to the different organisations. The report explains the various kind of
advantage taken by the stakeholders from the financial information.
MAIN BODY
1.Meaning of FA and its purpose in the organization
Meaning: Financial accounting refers to the process of recording, analysing, managing
and evaluating the financial data to give the monetary and non-monetary information to different
stakeholders to take effective and efficient management decisions (Atrill and Lindley, 2019).
Purpose of financial accounting
Providing information: the main purpose of financial accounting is to support the
decisions of management by giving them useful data to management team and employees to
improve performance of organization and help them to evaluate the data for better understanding.
Small acountancy firm provide the information to its client to take the effective decisions.
Evaluate data : Financial accounting help the manager to evaluate the financial
information such as growth of the company, increasing revenue, profit etc. in particular time
period and provide brief information to the stakeholders.
Financial statements : The aim of FA is to prepare financial statements such as cash
budget, capital budget, financial report etc. to present the financial position to the different
stakeholders which have interest in the financial data.
Control : Financial accounting help the company to control the cost of the activities to
upgrade the productivity and profitability of organization. Small accountancy firm control the
activities such as maintenance cost, expenses to increase the performance and profitability of the
organization by evaluating the performance of different financial year data (Atrill and Lindley,
2019).
Difference between MA and FA
Criteria FA MA
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Definition FA is the procedure of
recording, analysing
presenting and evaluating the
financial data.
MA is the process of using
financial data to analyses the
business reports and records
the operation and business cost
to provide the information to
the managers for decision
making.
Aim The aim of financial
accounting is to provide
information to both internal
and external users (S. S.,
2018).
MA supply financial
information to support the
decision of internal users or
stakeholder.
Time period FA report are prepared on
regular intervals mostly at the
end of accounting period.
MA reports are prepared by
the company whenever they
required the report.
User The users of financial
accounting are internal and
external stakeholders.
The user of management
accounting are internal
stakeholders.
Example of user Internal user : employees,
managers and owner
External user : suppliers,
creditors, customer, client,
shareholder etc.
Internal user : employees,
managers and owner
Uses of accounting FA is used to present the
organization financial result in
operation and management
work.
Management accounting report
are used to provide the
financial and non- financial
information and support the
manager to take the qualitative
decisions.
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Example of accounting
report
Example of FA report are cash
flow statements, balance sheet,
income statements etc.
Example of MA report are
budget planning, account
payable and receivable report
etc.
Regulatory framework and its purpose
Regulatory framework provides a framework to the organization to follow the guideline
provided by the different regulatory frameworks for the effective and efficient running of
business and its performance. The framework such as IASB, IFRS etc set some accounting
standard for the organisation to compare the performance and achieve the goal of the
organisation (Bahorun, Aruoma and Neergheen-Bhujun, 2019).
The purpose of regulatory frameworks is to provide standard for analysing the
performance of the company and measure the various outcomes. The reason behind forming
accounting framework is to give general guidelines to the company so they can perform in the
organisation in better way. To follow the guideline also help them to increase the reliability and
trust of the customer on the company output and information.
Conceptual framework and its purpose
Conceptual framework refers to the set of ideas and creation which help to set the rules
and regulation in the organization. It helps the company in smooth running of its business and
improve its performance in the market (Rahman and et.al., 2019).
The primary and main function of conceptual frameworks is to assist the IASB for
developing and growing the future of IFRS and review the existing IFRS to monitor the
performance. It helps to develop the financial statements according to the changing rules and
regulation of the conceptual frameworks for accurate and correct result of the company
performance (Sampaio and González, 2017). The main motive of conceptual framework is to
facilitate standardization and thereby enables investors to take appropriate decision about
investment.
Accounting concepts
Accounting concepts help the organization to provide the basic rule and regulation for
preparing and recording the monetary information to evaluate the productivity. Forrest Brown
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company follow various rules and regulation recorded in the concepts to analyse and present the
data in accurate way. They follow various accounting concepts such as:
Going concern concept : The concept says the business of the organization always run.
Owner comes and goes but the business run always. Company follow the current policy and plan
in the next and current fiscal year (Du, McEnroe and Mindak, 2019). It is used by the company
in preparing the financial statements to stabilise the business performance.
Accruals concept: As per this fundamental principle income should be recorded when it
earned rather than received in cash. The same concept is applicable in the context of expenses
which in turn helps in presenting better view of financial position pertaining to the concerned
accounting period.
Qualitative characteristics
Qualitative characteristics help the organization to upgrade the productivity of the firm
and make the customer more reliable on the financial information and data. The following are the
qualitative characteristics :
Relevance : The financial information provided by the manager must be relevant to the
company performance and different uses. It helps the users to use the information for the various
purpose such as help lenders to lend the money in company, provide relevant information to
investor to take the investment decisions.
Reliability : reliability refers to provide the data more accurate and with facts and
variables so the customer and user can relay on the data and use the information according to
their interest. For example, the reliability of data make influence the investor to invest in the
organization and increase the capital to gain the higher benefits.
Comparability : It refers to present the data in more comparable form so the
organization can analyse the performance by comparing the one year annual data to the another
year data and evaluate the financial performance and make decision on the basis of outcomes
(Barth, 2018).
Consistency : Consistency refers to use t the same strategy and methods for calculating
the financial performance the change in methods affect the financial performance and does not
provide the accurate information from the data.
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2.Different users of financial information in the organization
User of financial statements can be distinguished into two such as internal and external.
Both such users undertakes and evaluates financial statements with the motive to take effectual
or profitable decisions.
Internal stakeholders
Employees : Employees are accountable for organization performance to achieve the
organization objective and target exchange of salary and wages. Employees work for the
organisation to get the higher salary. They need the monetary and non-monetary data of the
company to prepare the different accounts such as balances, cash budget, capital budget, ledger,
journal to record the transaction and provide the information to the user for further uses.
Management: They have much interest in accounts and profit of the organization. They
need the monetary data for calculating the profit of organization of particular period and take the
decision of whether to invest profit in the company or distribute among the shareholders as
dividend (Brunton, Eweje and Taskin, 2017). Further, management requires the financial
information to evaluate the performance and take the effective decisions for organization to
improve the productivity and profitability of the company.
External stakeholders
Investors : The external user of financial information indirectly affect the business of the
organisation. Investor invest in the business to get the share of profit from the business activity.
They require the financial information for evaluating the profit of the company in different
financial year and measure the growth aspect of the company to take the decision of investment.
Suppliers : They supply the raw material and information to the firm or organization.
They need the financial information to evaluate the credibility and worthiness of the organisation
and take the decision of providing the material on credit. Financial data help stakeholders to
measure the debtor and creditors of the company by presenting data in balance sheet.
Customer : They are the decision maker of price. They force the company to estimate
the accumulates price of the goods supply in the market. They evaluate the productivity and
profitability of the organization via monetary and non-monetary data (Farooq, Rupp and Farooq,
2017). They use the information to check the reliability of the products and services. The various
financial statements such as income statements, balance sheet help customer to find the revenue
and profit in particular accounting period which make them reliable on the products and services.
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Creditors : creditors refers to the person who lend the money to the company for various
purpose such as increasing capital, pay debts, etc. They require the financial information such as
debtor and creditor of the company, revenue, profit etc. to check the payback period of their
lending amount.
CONCLUSION
The report summarizes the different role and aim of FA in the organization and the
comparison of financial and management accounting to provide information to the various users.
It can be concluded from the report that the company follow various regulatory and conceptual
framework to set the rules and regulation for improving the performance. The various concept
such as accruals and going concern help the company to finalize the data in accurate method and
provide the best method for calculating the monetary and non-monetary performance. It can also
be summarized that the various users of the information such as employees, owner, customer,
creditors, investors etc. Use the financial information to evaluate performance for their own
interest.
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REFERENCES
Books and Journals
Atrill, P. and Lindley, L. eds., 2019. Issues in Accounting and Finance. Routledge.
Bahorun, T., Aruoma, O. I. and Neergheen-Bhujun, V. S., 2019. Phytomedicines, nutraceuticals,
and functional foods regulatory framework: the African context. In Nutraceutical and
Functional Food Regulations in the United States and around the World (pp. 509-521).
Academic Press.
Barth, M. E., 2018. Accounting in 2036: A Learned Profession: Part I: The Role of
Research. The Accounting Review. 93(6). pp.383-385.
Brunton, M., Eweje, G. and Taskin, N., 2017. Communicating corporate social responsibility to
internal stakeholders: Walking the walk or just talking the talk?. Business Strategy and the
Environment. 26(1). pp.31-48.
Du, N., McEnroe, J. and Mindak, M., 2019. An Examination of the Perceptions of Auditors and
Chief Financial Officers of the Proposed Statement of Financial Accounting Concept
Definition of Materiality. In Beyond Perceptions, Crafting Meaning (pp. 25-47). Emerald
Publishing Limited.
Farooq, O., Rupp, D. E. and Farooq, M., 2017. The multiple pathways through which internal
and external corporate social responsibility influence organizational identification and
multifoci outcomes: The moderating role of cultural and social orientations. Academy of
Management Journal. 60(3). pp.954-985.
Mohammed, M. S., 2019. The effect of the external auditor qualifications on improvement the
qualitative characteristics of accounting information: A survey study on sample of external
auditors of Iraq. Tikrit Journal Of Administrative and Economic Sciences. 12(36). pp.93-105.
Rahman, M. A., et al. 2019. Green Accounting Concept Based on University Social
Responsibility as A Form of University Environmental Awareness. Integrated Journal of
Business and Economics. 3(2). pp.164-178.
Sampaio, P. G. V. and González, M. O. A., 2017. Photovoltaic solar energy: Conceptual
framework. Renewable and Sustainable Energy Reviews. 74. pp.590-601.
Online
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S. S., 2018. Difference Between Financial Accounting and Management Accounting. [Online].
Available through : <https://keydifferences.com/difference-between-financial-accounting-
and-management-accounting.html>
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