Accounting Principles in Carrefour Supermarket

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ACCOUNTING PRINCIPLE
ASSIGNMENT TITLE: APPLICATION OF FINANCIAL AND
MANAGEMENT ACCOUNTING TECHNIQUES IN THE
PREPARATION AND ANALYSIS OF FINANCIAL
STATEMENTS IN AN ORGANISATION.
DATE: 11/15/2021

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Contents
Purposes of accounting function within Carrefour Supermarket..................................................20
Budgeting and planning.............................................................................................................20
Decision making........................................................................................................................20
Compliance of the law...............................................................................................................20
Reporting and financial statements............................................................................................21
Avoiding fraud...........................................................................................................................21
Accounting function within Carrefour in the context of regulatory and ethical constraints.........21
Ethical constraints in accounting...............................................................................................21
Manipulation of figures.........................................................................................................22
Effects of greed......................................................................................................................22
Confidentiality.......................................................................................................................22
Misappropriation of assets.....................................................................................................22
Regulatory constraints in accounting.............................................................................................23
Nature of accounting..................................................................................................................23
Generally accepted accounting principles (Gaap).....................................................................23
Context and purpose of the accounting function clearly showing the role of accounting in
informing decision.........................................................................................................................24
Financial accounting..................................................................................................................25
Managerial accounting...............................................................................................................25
Cost accounting.....................................................................................................................25
Appendix 1.....................................................................................................................................28
Sole proprietorship.....................................................................................................................28
Appendix 2.....................................................................................................................................30
Partnership.................................................................................................................................30
Appendix 3.....................................................................................................................................32
Ratios.........................................................................................................................................32
Liquidity ratios.......................................................................................................................32
Turnover ratios.......................................................................................................................33
Profitability ratios..................................................................................................................34

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Gearing ratios.........................................................................................................................35
Appendix 4.....................................................................................................................................37
Non-profit organizations............................................................................................................37
Appendix 5.....................................................................................................................................40
Cash budget...............................................................................................................................40
Benefits and limitations of budgets and budgetary planning, and control for an organization. 41
Benefits..................................................................................................................................41
Limitations.............................................................................................................................42
References......................................................................................................................................44

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Purposes of accounting function within Carrefour Supermarket
Accounting is referred to as the practice of analyzing, summarizing and recording financial
transactions and activities. There are various types of accounting such as forensic, management
and government accounting. Accounting is mostly essential to business owners, investors and
stakeholders. Regarding Carrefour, the accounting department should be able to produce critical
information such as profit and loss that is needed to analyze the financial status of an
organization (Freshbooks, 2020).
The different purposes of accounting within Carrefour include;
Budgeting and planning
Accountants are responsible for developing the organization’s budget. Accountants create annual
budgets using historical financial data and future revenue projections. Accountants also create
different budgets for individual departments within the business (Indeed, 2021). For instance,
Carrefour must plan on how they will use resources such as machinery, labor and so on.
Decision making
Accounting aids the business in a variety of decision making procedures and also aids business
owners in creating policies to optimize the efficiency of business operations. Carrefour will have
to make accounting based choices that include, resources required to manufacture products and
services, creating price points for their items as well as financing business opportunities
(Freshbooks, 2020).
Compliance of the law
An organization must follow its governments laws and standards such as those imposed by the
Kenyan Revenue Authority (KRA). Counties also impose monetary regulations on businesses.
Accounting will help to make sure that Carrefour’s financials are complying with their states
laws and regulations (Indeed, 2021).

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Reporting and financial statements
The provision of financial statements is yet another responsibility of accountants within a
business. The business’s accountants compile financial data primarily to create accurate and
truthful reports and financial statements such as income statements and balance sheets and
internal communications (Luenendonk, 2021).
Accountants are also in charge of preparing financial statements at the end of every year.
Carrefour can use these reports in order to engage with investors and stakeholders and to also
generate leads (Luenendonk, 2021).
Avoiding fraud
An accountant will ensure that capital is neither mishandled or wasted inside a business.
Accountants are aiming to safeguard the business’s assets from internal or an eternal fraud
attack, nowadays this is usually done via cybersecurity. Carrefour should monitor its financial
data to ensure that funds are not being mishandled or misappropriated by the employees for their
own benefit (Indeed, 2021).
Accounting function within Carrefour in the context of
regulatory and ethical constraints
Ethical constraints in accounting
Ethical constraints are implications that one must operate within the socially recognized norms
and standards in order to avoid committing any type of offence (Mattwattsmedia, 2012).
Managing ethical concerns within a business is generally quite difficult for most business
owners. It is Carrefour’s management’s responsibility to bring accountability to employees who
are unethical (Holton, 2020).
The following are some of the ethical issues that the Carrefour accounting department
should look to avoid;

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Manipulation of figures
Operating a business might be very pressuring for some business owners. The business owners
of Carrefour may have the urge to get their accounting department to manipulate financial data.
This is not an ideal situation for accountants, as they have a legal and ethical duty to correctly
present Carrefour’s financial status, and the failure to do exactly just this can lead to criminal or
civil consequences (Decker, 2019).
Effects of greed
Businesses face a lot of cases where their accountants will break ethical boundaries in the sake of
generating more money. An accountant who works in the Carrefour shouldn’t let their financial
desires skew their ethical behavior, he or she must adhere to the business’s ethical financial
reporting guidelines (Content, 2017).
Confidentiality
Professional accountants are expected to protect the privacy and confidentiality of sensitive
information that could be obtained via business and professional relations. This sensitive
information should never be revealed to any third parties without getting permission or it’s a
legal matter and they are forced to disclose the information. Accountants working for Carrefour
should know that it is unethical for them to break this code of conduct (Nordmeyer, 2018).
Misappropriation of assets
Carrefour may also face misappropriation of assets from their accountants. The use of business
assets for purposes that are not in line with company interests is referred to as asset
misappropriation. A top executive, for example could bill a family lunch on to Carrefour as a
business cost (Freedman, 2019).

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Regulatory constraints in accounting
Nature of accounting
The nature of accounting can be broken down to qualitative attributes and quantitative attributes.
Qualitative characteristics simplify and expand on financial data to make sure that outcomes are
easily understood and comparable. These attributes include, reliability, relevance,
understandability, comparability and faithful presentation (Commerceiets, 2019).
Quantitative attributes of accounting are simply preparing financial statements in a measurable
form and assigning them to relevant users. Some of these attributes include recording of financial
transactions only, classifying the transactions and summarizing the transactions (EP, 2020).
In order to preserve the quantitative and qualitative attributes of accounting, the regulatory body
GAAP has created various principles that a business’s accounting function must use whilst
creating financial statements. While widely recognized accounting standards seek to eliminate
erroneous financial reporting and help businesses in generating accurate and valid financial
information, they do have limitations that have constrained Carrefour’s accounting function
(Indeed, 2021).
Generally accepted accounting principles (Gaap)
The following are some of the principles that Carrefour’s accounting function is constrained to
regarding GAAP;
 Reliability principle: This principle requires for Carrefour to only document transactions
which can be verified using objective proof. Forms of objective proof can include, bank
statements, checks, receipts and so on (Bragg, 2021).
 Relevance principle: The relevance principle states that the information obtained from
an accounting system should be able to aid the end-users in making key decisions.
Carrefour’s external and internal stakeholders can be considered end users. Carrefour’s
employees are examples of internal stakeholders while external stakeholders include
lenders, investors and so on. For the information to be deemed relevant it must be clear,

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timely and useful to aid end-users such as investors to make key decisions (Banerjee,
2021).
 Understandability principle: Understandability refers to the idea that financial data
must be given in such a way that a user such as an investor can readily comprehend it.
This notion implies the user has a basic understanding in accounting. Adhering to a fair
degree of understandability can preclude Carrefour from purposefully obscuring financial
data to deceive users of the financial statements. In order for accounting information to
be understandable, it must be clear, concise, complete and organized (Bragg, 2021).
 Comparability principle: The comparability principle helps users such as investors to
compare financial performance and situations over time and also with other businesses.
Comparability increases the value of Carrefour’s financial statements as it allows the
users to carry out analysis such as cross-sectional, common-size and trend analysis.
Carrefour may use cross-sectional analysis to make a performance comparison with that
of its competitors (Jan, 2020).
 Faithful presentation: The notion of faithful representation requires for Carrefour to
produce its financial statements correctly reflecting the its current situation. For instance,
if Carrefour recorded on its balance sheet fifty thousand in October then it should be so.
For accounting data to be faithfully represented then it should be unbiased, error free and
complete (Bragg, 2021).
Context and purpose of the accounting function clearly showing
the role of accounting in informing decision
Accounting plays a vital role when it comes to decision making and decision making is done
mainly through two forms of accounting, this being, financial accounting and cost accounting
within managerial accounting. The main distinction between managerial and financial
accounting would be that financial accounting information is more provided to external parties
such as investors whilst managerial accounting information is intended more to assist the
businesses management in making decisions for the business (Kenton, 2020).