Financial Accounting and its Purposes

This article discusses the purposes of financial accounting and the stakeholders involved. It explains how financial accounting helps in evaluating funds and financial situations. It also discusses the internal stakeholders, such as managers and employees, and the external stakeholders, such as suppliers, customers, creditors, and competitors.

Financial Accounting
Principles

Contents
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
1. Financial accounting and its purposes................................................................................3
2. Two internal stakeholders and four external stakeholders of a large business organisation.
................................................................................................................................................4
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
In reporting period, the volume of transactions carried out by enterprises is logical and
consistent, yet these transactions retained during one year are filmed throughout the financial
reports of the undertaking. Financial Accounting (FA) is indeed a method by which accountants
monitor their financial benefit as well as financial wellbeing in about their accounting reports,
including an income statement, statement of financial position balances and cash flow statement
(Pratt, 2013). It implements different concepts such as accuracy, duplication, consistency,
alignment, economic metrics and accounting practices.
PART A
1. Financial accounting and its purposes.
Financial accounts are the area in which money transfers performed during operations have
to be analysed, examined, produced and reported. It includes the establishment of accounting
reports, also known as economic statements such as, cash flood statement (SOCF), adjustments
to the income of borrowing funds as well as the required notes, which comprise the accounting
rules, conferences and revenue and expenditure identification core values (Deegan, 2013). At
either the close of each fiscal year, the main objective of financial accounts is to evaluate fund or
money and financial situation. These are declarations based on accounting policies including the
UK GAAP, IAS, as well as, throughout the globalised era, multinational corporations compile
their transactions in a harmonious way though the IFRS. A double bookkeeping scheme for
entering into account holders is accompanied by institutions that record all accounts from ends,
credit and debit.
Accountable accounts were also essential, since the company could not analyse its
monetary position (i.e., profitability, cash flow and corporate performance) without organising
an accurate documentation for financial events conducted in day-to-day operations. It tends to
aid also key stakeholders like management and workers to obtain relevant data they need for
rationalised decision-making process, it supports outsiders like authorities, shareholders,
creditors as well as other authorities. In the United Kingdom, under the Company Act of 2006,
all limited by guarantee organisations are required by law to write their money transfers in
audited reports and document to multiple stakeholders.
Purpose of FA

Financial Reporting Council throughout the United Kingdom, an independent governing agency
that controls accounting information by establishing the required rules. In accordance with the
rules, the Accounting Principles General Acceptance (GAAP) throughout the UK symbolises
local regulations. The regulations and bookkeeping agreements are presented which must be
accompanied in accounting records for reporting financial transactions. The relevant financial
principles and standards are described as follows:
 Accrual concept: This law suggests that transactions are recorded in the annual reports
when they happen. There would be no influence mostly on revenue recognition of its
financial leverage or expenses. In other phrases, data are recorded as they were held
irrespective of receiving / paying cash or not (Saunders and Cornett, 2014).
 Going into concern: It presumes that business can continue to fulfil its commitments
over a long period and therefore its liquidation will not be likely in the coming years.
This section of the cash enables the company to postpone various transactions like
prepayment costs, interest expense as well as other money transfers for a specified
timeframe (Jollands and Quinn, 2017).
 Matching principle: it corresponds to costs incurred with profits such as the precise
financial reporting and a double application bookkeeping. Sales commissions, for
example, must be documented on sales rather than on payments to sales staff.
 Full disclosure: Companies should in their transactions record all data that are
significant in any manner to stakeholders such as creditors and investors. Furthermore,
the documents also need to be displayed in annotations so that shareholders could even
better decide on all pertinent guidelines and norms (Gregory, Uys and Gregory, 2014).
Anything else, this same default person would be punished by great, as well as other
lawsuits by having to reveal all material declarations or information.
 Monetary principle: Only such activities which can be quantified monetarily, GBP are
recognized in the financial statements. Therefore, quantitative results, e.g. profits and
costs, are provided and no that had and productivity such as quality impacts and many
others are revealed.
2. Two internal stakeholders and four external stakeholders of a large business organisation.
The aim of accounting, in particular, is to assist customers by supplying account statements
in their business choices. Certainly, without detailed and appropriate financial details,

stakeholders cannot attempt to operate a company or make investments since it is the auditor
who composes the details. More specifically, accounting partners understand and identify the
value of financial details and collaborate with companies and organisations to better them
through market issues through use of accounting reporting (Bullivant, 2016). There are two types
of stakeholders for a business internal and external which are discussed below:
Internal stakeholders: They are committed to the provision of business services. The
strategies, efficiency, profit margin and other business of the organization are strongly
influenced. The company would not be capable to function throughout the long term in the lack
of existing stakeholders. It is why the business has a major effect. They are also those who
recognize many of the entity's strategies and organisational problems. The internal stakeholders
list is as follows:
 Managers: An administrator is an individual in charge of a business component, i.e. they
'administer' the business. A division and employees who work in can be run by the
administrators. The boss is often responsible for the whole company. For one, the
complete restaurant is managed by the 'restaurant boss.' A leader is a manager that mainly
performs management functions. They need the authority to employ, shoot, train, carry
out performance reviews and track engagement. They should still have the right to allow
holidays and employment.
 Employees: Workers work for compensation what, type of employment or the industry
wherein the worker is employed can be as an annual salary, a unit of labour, or perhaps
an annual pay check. Employees can receive free insurance, incentive rewards or stock
awards in some positions or industries. Employees can be compensated extra wages for
such forms of jobs. Benefits may include wellness, education, disabilities or the use of
exercise facilities. The employment statute, association or legal contracts are usually
regulated by employment.
External Stakeholders: There are involved parties that aren't really directly influenced by the
business performance, but indirectly. These are the external groups that belong to the market
climate. They are often referred to as secondary participants. They use the firm's earnings details
to understand its results, profitability ratios (Beatty and Liao, 2014). External stakeholders are
not involved in the everyday operations of the organisation, but are affected by the project of the

organisation. They negotiate externally mostly with business. They don't hear more about firm's
current problems. The number of external players below is as follows:
1. Suppliers: A supplier is also an individual, organisation or other
body that sells anything that someone else wants. There are
vendors and customers during sales. The manufacturers supply or
offer, and the customers accept goods or services. The phrase
'trade' operates as follows of goods as well as services to be
purchased and sold. Communicating them for income and at least 2
sides must be interested in any transaction. One is the source or
distributor, another seller or consumer. A retailer is an individual
providing other companies with products and services. This agency
is part of a company's supply chain and can provide the majority of
its value. Certain vendors will also send produced goods to just the
buyer's consumers when delivered. A manufacturer or a dealer is
typically a provider. A dealer imports and sells products from
many suppliers to its clients (Küpper and Pedell, 2016).
2. Customers: A consumer is an entity or organization that buys products or services from
some other company. Since they generate sales, consumers are essential; companies
cannot begin to function without customers. Both companies negotiate with other firms to
gain buyers, either through intense advertisement about the products, price cutting, or
through the production of innovative goods and services that they enjoy. External-service
clients are isolated from corporate practises and are mostly involved parties in buying a
business's ultimate products and services. Internal consumers are people or businesses
who are embedded throughout the company, and also work as staff or even other
development teams. Companies also research the preferences of their consumers to adjust
their marketing strategy and change their stock to gain the most buyers. Clients are also
classified by demography, including age, race, gender, ethnicity, earnings and
geographical place, all from which will enable companies develop a 'ideal customer' or
'customer' snapshot, allowing corporations to improve their ties with current clientele and
to maximise the travel to unexploited market communities (Weil, Schipper and Francis,
2013).

Customers have become so critical that schools and colleges provide customer behaviour
classes devoted to researching their behavioural habits, decisions, and idiosyncrasies. They
concentrate on why consumers purchase, use and affect businesses and markets on products and
services. Consumer awareness allows organisations to develop productive marketing and
promotional strategies, offer goods that respond to the expectations and preferences and attract
consumers for repeated business.
3. Creditors: A creditor is really a loan-providing body (person or organisation) that allows
another body to borrow for potential repayment. An entity that offers a corporation or
individual supply or product and therefore does not automatically seek compensation is
indeed a borrower, provided that the buyer owes the firm payment for things already
provided. Creditors may be listed as personal or official. Internal borrowers are those
who lend money to other people or families. Real lenders like banks or finance firms
have contractual agreements mostly with debtor and often essentially give the landlord
the entitled to demand any significant wealth including its debt collector. If the debt is not
paid back as many creditors compare the borrowing costs or payments to the credits and
previous financial records of the applicant in order to reduce risks.
Thus they might save a considerable amount by being a good borrower, especially if they take a
big loan such as a loan. The loan rates differ depending on numerous factors like the level of the
deposit as well as the debt itself, but the financial health is largely affected by the rate of return.
If a borrower is not reimbursed, he has certain other choices. Person borrowers who could not
repay the debt will report it on their federal tax return mostly as short-term capital gains
deduction, but they should make a substantial attempt to refund the debt. Creditors like lenders
may take out equity on guaranteed loans such as houses and vehicles, and debt collectors can be
held to litigation on secured debt. The courts will purchase the borrower to charge, collect
salaries or take necessary actions (Saunders and Cornett, 2014).
4. Competitors: Any person or organisation who opposes someone else. In same related
sector, a company offering a particular good or service. One or even more rivals can
lower products & services rates as organizations continue to obtain a greater market
share. Competition also allows enterprises to be more cost-effective. The aim is to assess
the amount to be spent in collecting information considering the available capital. Any
attempt they make to recognise the environment provides us with knowledge to

strengthen our knowledge to attract new customers and keep current clients. In
maintaining with competitors, money is power, like most other business sectors.
CONCLUSION
In the end of this report, More may emerge from interviews with vendors, consumers and
maybe, former managers or staff of rivals instead of written. This detail is also covered by
confidentiality requirements such as worker non-disclosure clauses and is thus very cautiously
approached.

REFERENCES
Books and Journals
Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia
Pratt, J., 2013. Financial accounting in an economic context. Wiley Global Education
Saunders, A. and Cornett, M.M., 2014. Financial institutions management. McGraw-Hill
Education.
Jollands, S. and Quinn, M., 2017. Politicising the sustaining of water supply in Ireland-the role
of accounting concepts. Accounting, Auditing & Accountability Journal. 30(1).
Gregory, B., Uys, P. and Gregory, S., 2014. The role of instant feedback in improving student
understanding of basic accounting concepts. Rhetoric and Reality: Critical perspectives
on educational technology. Proceedings ascilite Dunedin. 12(3). pp.634-637.
Saunders, A. and Cornett, M. M., 2014. Financial institutions management. McGraw-Hill
Education,.
Weil, R. L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to
concepts, methods and uses. Cengage Learning.
Küpper, H. U. and Pedell, B., 2016. Which asset valuation and depreciation method should be
used for regulated utilities? An analytical and simulation-based comparison. Utilities
Policy. 40(12). pp.88-103.
Bullivant, G., 2016. Credit management. Routledge.
Beatty, A. and Liao, S., 2014. Financial accounting in the banking industry: A review of the
empirical literature. Journal of Accounting and Economics. 58(2). pp.339-383.