Importance of Accounting and Financial Function

FINANCIAL DECISION
MAKING

Table of Contents
INTRODUCTION...........................................................................................................................3
Task 1...............................................................................................................................................3
Importance of accounting and financial function........................................................................3
Task 2...............................................................................................................................................8
Performance evaluation of organisations.....................................................................................8
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Financial decision-making is denoted as taking decisions based on the financial position
of the business entity. This report is based on the case study of the Skansa Plc in respect to its
financial decision-making practices. The organisation is a construction company based in United
Kingdom. The company was established in the year 1984. The business entity is aiming to
expand its business in different parts of Europe for which it seeks a financial evaluation in regard
to its financial capability. This report will evaluate different financial decision-making areas.
Henceforth, report will emphasis over the importance of accounting and finance functions. Roles
and duties about financial function will also discuss in this project. Furthermore, ratio analysis
will be conducted to assess the financial position of business entity. On the basis of ratios
financial position of the business entity will reflect in this project.
Task 1
Importance of accounting and financial function
Accounting and finance are the two major and prominent functional direction associated
with the business entity. In the organisation structure of Skansa Plc both accounting and finance
departments are attached with each other as the roles and responsibilities of both the functional
areas are similar and also the finance team cope up with all accounting needs and requirements
of business entity. Importance of accounting and financial functions can be demonstrated in the
following points.
Duties and role of accounting department
Financial accounting function
Financial functions empower the business entity to project the financial records over a
monthly and yearly basis. Accounting department role is about to record the transactions in
accounting books and ledger. Preparation of accounting records is the major role and duty
accounting department play in the organisation (Larasati and et.al., 2017). This duty is the
primary role and responsibility attached with the accounting department at the Skansa Plc. They
further reflect the financial position of business entity. Financial records clearly demonstrate
about the profitability and growth of the organisation that also become a sole reason behind the
decisions company has taken.
Management accounting

Accounting functions allow the business entity to assess the overall performance of the
entity. Accounting records and financial statements comprises with income statement, balance
sheet and other related statements which support the entity to identify the overall performance of
the venture. Profitability is the prominent base behind measuring the success and performance of
the entity (Aga, 2019). Growth rate is another crucial indicator that used by the management at
the Skansa Plc to evaluate the overall performance of the business entity. Performance
evaluation play huge role as it allow the entity to measure the success of different strategic
choices implemented and also motivate the strategic direction by entertaining different changes
in decisions based on the financial outcomes entertained by the organisation. Accounting involve
preparation of financial records of business entity that can demonstrate the overall performance
of entity of the respective financial year. Financial practices involve annual audits, returns and
other such operations. All these are statutory compliances as in any situation Skansa Plc required
to fulfil the need and requirements of this legal requirements. Accounting and financial
operations empower the business entity to achieve the best level of statutory compliances.
Tax function
Accounting team play a huge role in tax reporting and also in processing the inventory of
the business entity. Both these functions are the primary role and responsibility associated with
the business entity. Tax reporting is about to report or project the estimated tax liability part of
the organisation. Tax reporting involves identifying profits of company and based on that to
generate the tax liability liable for the organisation. This further involve filling tax returns and
also to pay the liability. Inventory processing is another key functional duty part of the
accounting and financial departments. This involves ensuring the proper management of the
inventory. This involves based on the need and requirements of Skansa Plc inventory is ordered
and process further.
Auditing function
Auditing function is the major role associated with the accounting department of business
entity. Accounting functions enable business entity to improve external communication of
organisation. In the normal business operations Skansa Plc required to communicate with various
external stakeholders such as shareholders, investors, government and many others by reporting
the audit in front of them. These operations empower the organisation to reflect the overall