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Financial Accounting Principles : Stakeholder

   

Added on  2021-02-19

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Financial AccountingPrinciples

Table of ContentsINTRODUCTION...........................................................................................................................3Part (a)..............................................................................................................................................3Part (b).............................................................................................................................................6Client 2.......................................................................................................................................19Client 3.......................................................................................................................................22Client 4.......................................................................................................................................24Client 5.......................................................................................................................................26CONCLUSION..............................................................................................................................28REFERENCES..............................................................................................................................29

INTRODUCTIONThe term financial accounting has been defined as a kind of accounting which is relatedto the management of financial position of companies by preparation of financial statements withthe help of analysis of financial information (Albanese, Andersen and Iabichino, 2015). Thisfield of accounting is useful for both to the internal and external stakeholders. It is so becausewith the use of this accounting methodology, internal stakeholders can take important decisionsas well as external stakeholders can assess the actual financial position. Herein, the project reportthe financial accounting and its purposes are mentioned as well as various kind of stakeholdersare also included. In the further part of report, calculation is done as per the requirement of brief.For better understanding, a small sized accountancy firm is selected that is City gateaccountants. This company is located in London and provides various kind of accountingconsulting services to other companies. Part (a)1. Financial accounting and its purpose.Financial accounting- It may be defined as an accounting that is related with the trackingof all kind of financial transactions of companies with an objective of preparation of financialstatements (Wen and Moehrle, 2015). This accounting is essential for companies because itprovides the information about actual financial position of company to the stakeholders. Underthis accounting different kind of financial statements are prepared as per the accounting rules andprinciples. Purpose of financial accounting- The financial accounting is very crucial for both tointernal and external stakeholders. Herein, below importance of this accounting is mentioned thatis as follows:It helps in determining the result of operations- This is the main purpose of financialaccounting because with the help of it, companies can evaluate the efficiency of theirvarious kind of operations in terms of profits and loss. Due to this companies makecorrective actions for further. Such as in the above city gate accountants company, theyuse this accounting for assessment of actual financial results.

Helps in evaluating the financial position- Another purpose of financial accounting isthat, it is helpful for evaluation of actual financial position of companies (Du, 2015). Onthe basis of it, stakeholders make investment in companies as well as owners determinesabout the areas in which company's performance is weak. In the aspect of abovecompany, they enable to know about financial position with the help of this accounting. Maintains a control over assets- The financial accounting is important for maintaining aproper control over the assets of companies. It is so because, with the help of balancesheet analysis organisation can aware about how much assets they have in compare toliabilities. Like in the above company, their managers keep an extra site of eye over theassets by help of this accounting.Helps in providing information to the tax authorities and government agencies- Apartfrom above mentioned purpose, another importance of financial accounting is that by thistax calculation of companies get easier (Pucheta‐Martínez and Olcina‐Sempere, 2016).It is one of the crucial benefit of financial accounting because with the help of itgovernment can determine the rate of tax on the basis of overall profitability. Such as inthe above city gate accountants company, at the end of year tax rate is easily calculatedby help of financial accounting. Help in making planning for cash- The financial accounting is useful for determination ofneed of cash for future activities. In the absence of estimation of future need of cash, thiscan be difficult for companies to manage the liquidity position. This is being done byanalysis of cash flow statement. Like in the above city gate company, they evaluate theneed of cash with help of financial accounting. So these are the purpose of financial accounting in relation to internal and external managementof companies. As well as in the above city gate company, the financial accounting plays animportant role that is described above.2. Evaluation of internal and external stakeholders and reason for which they show interest in thefinancial information of companies.Stakeholders- The stakeholders can be defined as a person or group of person who showinterest in financial position of companies with an objective to make investment as per thefinancial condition (Brown and Dillard, 2015). There are majorly, two types of stakeholders

which are internal and external stakeholders. Herein, below both of these stakeholders arementioned as follows:Internal stakeholders- These are the individuals or group of individuals in a companywho have an active interest in the business activities. In the aspect of internal management, thesestakeholders are very crucial because they take part into day to activities. Herein, below sometypes of internal stakeholders are mentioned that are as follows:Employees- These are one of the important stakeholder of companies because allprofitability depends on them. This is so because if they will not perform well thenoverall operating activities will be caused and it can result in loss to companies.Basically, the employees involve actively in process of completing various kind of tasks.They show interest in the financial information of companies because on the basis of it,employees can determine that whether they should work with company or not. Like if acompanies' financial position is getting down then employees will not have willing towork with that company. Apart from it, another reason to show interest in the financialinformation of employees is that as per it, they can assess their level of performance. It isso because financial statements present the conclusion of all business activities in theform of profit or loss. Managers- Another internal stakeholders are managers who manage all the businessactivities from an edge (Grenier, Pomeroy and Stern, 2015). As well as they preparevarious kind of plans, policies and strategies so that their company can beat to theircompetitors. The managers show interest in the financial information of companies sothat they can assess the actual financial condition and on the basis of it can makeeffective plans and policies. Otherwise, in the absence of complete financial information,it can be difficult for them to formulate the plans and strategies as well as to manage thebusiness. External stakeholders- These stakeholders are those who keep an eye on the company'sperformance from outside. Eventually, they do not take part into day to day activities and have acommon objective to know the financial position of companies so that they can makeinvestment. Herein, below some common example of external stakeholders are mentioned belowwhich are as follows:

Customers- These are one of the key external stakeholder of the companies because, theyare the only who become source of income of companies by purchasing of goods andservices (Holt, 2015). All organisations try to attract more and maximum customers sothat their profitability can be raise. They show interest in the financial information ofcompanies so that they can decide about purchasing. Suppliers- These stakeholders sell the goods to companies in the form of credit and cash.In the condition of credit transaction, suppliers evaluate the financial condition ofcompanies. If companies are not performing well then they will not offer products oncredit. Hence, this is the main reason for which they show interest in the financialinformation of companies. Investors- These are kind of stakeholders who make invest in the operations ofcompanies with an expectation of getting return on invested amount of money. The rateof return on investment depends on the financial position of companies. Hence, theinvestors show the interest in financial information of companies so that they candetermine about whether they will get higher return or not on their invested capital. Government- The government is very crucial external stakeholder. This is so becausethey are the only who set rules and regulations which are needed to be followed bycompanies (Ward and Lowe, 2017). They show the interest in the financial informationof companies so that tax rate can be determined. So these are the main external stakeholders who have multi-pal purpose for which they showinterest in the financial position of companies. Part (b)Client 1.Completion of double entry recording within relevant ledgers:

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