Impact of Financial Reporting Quality on Sustainability Information Disclosure

The provided content consists of various articles, books, and studies on management accounting, financial reporting, sustainability information disclosure, budgetary slack, and strategic budgeting. The topics covered include the relationship between financial reporting quality and sustainability information disclosure, rethinking budgetary slack as budget risk management, and the role of management accountants in accounting for sustainable development. Additionally, there are discussions on process flow, performance indicators, variance analysis, and beyond budgeting. Overall, the content provides insights into different aspects of management accounting and its relevance to organizational performance.

INTRODUCTION TO
FINANCIAL
ACCOUNTING

Table of Contents
INTRODUCTION ..........................................................................................................................1
ii) Discussing on record keeping system needed to ensure the revenue figure is accurate.........3
iii) Discuss the process to achieve satisfactory corporate governance........................................4
iv) Analysing Corporate social responsibility for J. Sainsbury and with valid examples...........6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Financial accounting is regarded as the specialized branch of accounting that supports in
keeping record of the financial transactions of the business. Further, it is possible to know real
performance of business in the market and on the basis of same management can take actions
regarding the same (Callahan, Stetz and Brooks, 2011). This type of accounting is usually
undertaken by every type of company operating in the market and in turn it has positive impact
on the overall operations also. Different types of statements are being prepared by companies
such as income, balance sheet etc with the help of which financial position of enterprise can be
easily known and in turn it acts as development tool for the organization (Debarshi, 2011). For
conducting the present study organization chosen is J Sainsbury which operates in retail sector
and well known in the market for range of products it offers to its target market. Various tasks
have been covered in the report which involves discussion of record keeping system, processes
to achieve satisfactory corporate governance etc.
How accounts provide useful information to external stakeholders
Different types of accounts are being prepared by Sainsbury with the motive to know its
overall performance in the market. Further, income statement, balance sheet and profit and loss
account provides information regarding financial strength of the enterprise. Apart from this, data
regarding expenses, revenue, profits etc provides useful information to the external stakeholders
of the company (Macintosh and Quattrone, 2010). Generally, it is well known fact that many
parties are associated with the business who are interested in knowing the long term performance
of the business. Through income statement prepared by J Sainsbury revenue along with gross
profit of the enterprise can be known easily. Further, through this management along with
shareholders can easily know whether company is operating efficiently in the market or not.
Profit or loss incurred by the business supports in knowing whether the overall operations carried
out are effective or not (Silvester and et. al., 2014). In case of Sainsbury plc organization carries
out operations on wider basis and external stakeholders are interested in knowing about
performance of enterprise in the market. All the accounts prepared by the business provides
useful information such as regarding profit and loss, overall income, cost of operations etc.
Income statement of organization provides information such as earning per share, finance
income etc. Shareholders, government, suppliers and other form of external parties are interested
in accessing accounts of the business for obtaining different type of information. So this, directly
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satisfies their need and helps company in knowing the real areas where it performance lacks and
improvement is needed.
Apart from this balance sheet is another type of account being prepared by company
which represents the real assets and liabilities of the company (Stenstrom and et. al., 2014). It
represents the non currents assets along with current assets of the J Sainsbury. Total assets of the
enterprise are highlighting base of the company and the long term strength of organization.
Moreover, asset base of the firm has enhanced as compared with past and this is highlighting the
real efficiency of company to perform in the market. Apart from this, liabilities owned by
business are also highlighted in the balance sheet of the enterprise which represents bills payable,
borrowing and other form of equities of the organization. Retained earnings of the business are
quite high and they are representing that j Sainsbury can easily satisfy its investors along with
suppliers, government due to presence of effective financial strength (Leszcynska, 2012). It has
assisted investors to purchase funds of the company due to strong financial base and this has
acted as development tool for the company in the market. So, in this way balance sheet of the
organization is also an effective statement in order to know financial capacity of the business.
Cash flow statement is also prepared by J Sainsbury which considers the activities
associated with inflow and outflow of funds. On analyzing the statement of the business it has
been found that main investing activities of the company are purchase and sale of assets along
with other type of activities (Sandalgrh and Bukh. 2014). Further, financing activities are linked
with short term borrowings. This statement is providing proper information to shareholders along
with banks and financial institutions associated with the company. It is representing that J
Sainsbury is efficient enough in satisfying need of the external stakeholders and this has
somehow assisted in managing long term growth of enterprise in the market. Apart from this,
organization has also developed group statement of changes in equity and this is representing the
real financial activities of the enterprise (Terrance, 2014). Business is operating efficiently in the
market and is able to deal with its major expenses. Due to proper financial planning J Sainsbury
is able to utilize its financial resources and this has acted as development tool for the enterprise.
Every account of the business has been properly prepared and it is assisting in satisfying need of
every party associated with the organization. Further, bank, suppliers, creditors, government and
other type of parties are interested in knowing about performance of company in the market and
same is satisfied by business through its financial statements prepared. Apart from this it
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provides proper base for comparison where business can easily compare its present performance
with past (Butt, 2010). So, on the basis of same corrective measures can be taken easily and in
turn it allows J Sainsbury in gaining competitive advantage. Due to this basic reason different
type of accounts are accessed by external stakeholders of business on continuous basis.
Moreover, information need varies from one party to another and they does not require same
type of information such as in case of investors they are interested in knowing about financial
strength of company and government wants to ensure whether business complies with the laws
and regulations or not (Macintosh, and Quattrone, 2010). Apart from this, Sainsbury takes loan
from banks on continuous basis and with the financial statement they ensure whether business is
able to repay the amount taken or not. Therefore, it is beneficial for financial institutions
operating in the market and satisfies their need.
ii) Discussing on record keeping system needed to ensure the revenue figure is accurate
Record keeping system is regarded as the procedure of recording the transaction relates
with finances of the organization. Keeping sound records for the firm acts as an aid in making
application for finance, review the activities of firm, managing effectively and following the tax
requirements. In other words record keeping can be assessed as the systematic process through
which the records of the firm such as J Sainsbury plc can be created, maintained, captured as
well as disposed of. It is the system that makes sure the protection of evidential purposes,
accurate as well as updating effectively, timely availability and controlling access to them by the
authorized employees (Elmassri and Harris, 2011). There is greater importance towards making
use of record keeping system by the organization. It is being determined that good record
keeping assist the employee in protecting the firm, measuring its performance and maximizing
its profitability to a greater extent (Schoute and Wiersma 2011).
Recording is considered as the major source documents both physical as well as
electronic. This reflects the transaction dates as well as amounts, legal agreements, private
customers and details of the organization. There is greater importance of record keeping as it
effectively reflects the amount of revenue that is actually been made by J Sainsbury plc. With the
system of record keeping the firm cam be benefits in several aspects. This is related with
planning and working in more effective manner (Vinal, Umesh and Mary, 2014). Further it assist
the business in meeting the tax as well as legal requirements with greater effectiveness. The role
of record keeping system is effective in terms that it helps J Sainsbury plc in measuring profits as
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well as performance. Along with this it has effective role in managing potential risks. With all
such advantage it has greater suitability in demonstrating the revenues of the business in more
accurate way.Record keeping system is quite effective for J Sainsbury as with the help of this
financial records of the business can be managed easily. Apart from this, it supports in
identifying the real areas where business is not keeping proper record of the key accounting
transactions (Chapman, Hopwood and Shields, 2011). Further, it is well known fact that all the
transactions of financial nature needs to be recorded properly so that management can know its
overall performance in the market. Due to this basic reason proper recording system has been
employed by business for obtaining long term benefits. On the other hand, at the time of
recording any transaction it is necessary for business to ensure that accurate figures are being
considered as any type of wrong information added can lead to unfavorable results for the
company. Apart from this, it is the duty of accountant to ensure that each transaction is right and
amount has been entered through proper entries. Record keeping is considered to be most
important task for business and is linked with the growth and success of enterprise in the market.
Recording every transaction in proper manner supports in knowing whether business
performance is improving or declining(Callahan, Stetz and Brooks, 2011).
iii) Discuss the process to achieve satisfactory corporate governance
Corporate governance is related to the involves balancing the interest of many
stakeholders in the company. These will includes shareholders, management, customers,
suppliers, financiers, government and the whole community (Barth, 2015). Corporate governance
consists of explicit and implicit contracts between the company and the stakeholder. Corporate
governance is the set of processes, costumes, policies and laws of J Sainsbury Plc that will affect
the administration. It is very essential for J Sainsbury Plc to get the satisfactory conditions from
the corporate governance as it will help them to enhance their business. Through managing the
corporate governance the organisation will be able to attract the different kind of investors to
increase the investment. Identifying the objectives of J Sainsbury plc the following process is
there which will help to achieve the satisfactory corporate governance: Finding interest of the stakeholders:It is very essential for J Sainsbury Plc to find the
interest of their stakeholder through which they will be able to make them satisfied. To
find out the interest of the different stakeholder J Sainsbury Plc need to organize
meeting for them. Through this, the company will be able to find reviews and thoughts
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of them (Christensen, Nikolaev and Wittenberg‐Moerman, 2016). After that they should
work on finding the ways through which they will be able to achieve the demand of the
stakeholders. Roles and responsibilities of the board: After finding the interest of the different
stakeholder J Sainsbury Plc should work on finding their major roles and
responsibilities for the stakeholders. As they are having responsibility of maintaining
transparency with them so that the stakeholders will be able to develop trust on J
Sainsbury Plc. The company should work according to their roles and responsibilities.
They should also work on the basis of their code of conduct so that the people will be
able to enhance their trust on the company. Integrity and ethical behavior: Ethical behavior is much helpful in developing public
relations as it allows the people to increase trust on the stakeholders. For this,
organizations should have to develop the code of conduct for their directors and
executives that will help to promote ethical and responsible decision making (Henderson
and et.al., 2015). It is also important for J Sainsbury Plc to understand the needs of the
stakeholder and understand them through which it will be easy to make them satisfied.
They should behave with the stakeholder in an ethical manner so that it will create god
image of the organisation in the minds of them (Magnan, Menini and Parbonetti, 2015). Disclosure and transparency: For this J Sainsbury Plc should clarify and make publicly
known the roles and responsibilities of board and management to provide shareholders
with a level of accountability. Other than this, They should work on implementing the
procedures independently to verify and safeguard the integrity of the company's
financial reporting. J Sainsbury Plc also have to disclose all of the material in front of the
stakeholders so that they can find the clear, factual information timely (Macve, 2015).
Other than the stakeholder the organisation also should disclose all the information to the
regulatory bodies such as Chief Executive officer, the board of directors, management
and auditors (Valdez and Molyneux, 2015).
 Solving the issues: It is also an effective thing that can help J Sainsbury plc to achieve
satisfactory corporate governance. They should work on find the major issues of the
different personnel related to the organisation (Martínez‐Ferrero, Garcia‐Sanchez and
Cuadrado‐Ballesteros, 2015). They can find the issues through conducting meetings and
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getting feedback from them. This will help the company to solve the major issues of the
stakeholders. Solving the issues of the stakeholder will make them able to get satisfied
from the organisation (Weygandt, Kimmel and Kieso, 2015).
iv) Analysing Corporate social responsibility for J. Sainsbury and with valid examples
Corporate social responsibility is one of the crucial and most significant part of attaining
effective and well defined business objectives of the company. CSR activities are effectively
adopted by every business unit for attaining the business results in an efficient and well defined
manner. Sainsbury is a well established business unit operating successfully in UK. This retail
chain of supermarket focuses on attaining well defined business objectives of the company in a
well defined manner. The company is involved in CSR activities widely to attain high growth
and promotional aspects of the business (Chapman, Hopwood and Shields, 2011). Different
measures have been adopted to attain the social responsibilities of the business unit. Triple
bottom line approach is one of the most significant and well managed means of analysing CSR
activities of the business unit. The framework has analysed the CSR activities on the basis of
three major aspects which are:
Economic aspects
This is one of the crucial and most significant aspect of business operations. Economic
development and growth is the crucial objective for every organisation to grow and develop
within the market. This helps the business unit in attaining high and valuable business results for
the company. Economic efficiency of the business helps in ensuring the development of
stakeholders associated with the firm as well. This is a crucial aspect CSR. Silvester and et. al.,
(2014) analysed that economic growth of the company ensures development, credibility and
success measures of the business in the competitive era. This help the company in creating a
wide impact on employee development as well.
Sainsbury has established a well defined growth aspects in the economy. High
profitability of the business has helped the company in contributing in economic development of
the country as well. High business profitability and development also ensures the of stakeholders
associated with the company. High probability of Sainsbury enhances shareholder's growth in the
market. Moreover, timely payment of salary and wages is ensures through economic stability of
the business. This aspect also results in enhancing credibility of the business to suppliers of the
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business. Thus, Sainsbury has attained effective economic responsibility in the market
(Stenstrom and et. al., 2014).
Social responsibility
This is another significant part of CSR in the market. This aspect focuses on contributing
in social development of the society. This helps the business unit in attaining effective
promotional aspects in the economy. Sainsbury has widely contributing towards the social
development aspects within the economy. The strategies such as fair trade policies has helped the
business unit in developing positive partnership in the economy. This created a wide impact on
organisational growth of the business (Macintosh and Quattrone, 2010). Moreover, effective
measures such as charities, donations, initiatives for social development etc. has helped the
business in enhancing growth of the people living within the society. The company has also
adopted policies of fair wages, ethical code of practice, legal compliance etc which has helped
the business unit in attaining high growth aspects.
Environmental responsibility
Increasing awareness towards environmental aspects within the economy is another
significant growth and development aspect for the company. Sainsbury has adopted effective
measures for enhancing the environmental development within the market. The company has
undertaken the concious steps such has sustainability development, effective waste disposal,
increasing awareness towards wastage reduction in the market (Callahan, Stetz and Brooks,
2011). This has helped the company in developing wide growth aspects in the market.
Environmental development has created in enhnacing brand identity and environmental
awareness within the people. This segment of CSR activity is effectively regulated by the
government of the organisation as well.
CONCLUSION
The aforementioned report concludes that financial accounting is the most important part
of corporation which assists business to integrate all its accounting activities. It is also effective
for cost reduction because finance department gather all important information related to costing
and each and every production information. It proves to be effective to meet requirement of
different stakeholders as their expectations can be effectively met by offering them higher rate of
return. However, record keeping is the most important aspect for proper management which is
also helpful for business to improve performance. It can also be said that, satisfactory corporate
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governance is very important which facilitates to maintain transparency and catering requirement
of all associated parties in the business. Moreover, corporation social responsibilities ensure
sustainable development of company as it depicts values and brand image of firm in the
marketplace. In addition to this, important information must be incorporated in financial
statement of company which effectively provide useful information to external stakeholders.
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Christensen, H. B., Nikolaev, V. V. and Wittenberg‐Moerman, R., 2016. Accounting
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Journal of Accounting Research. 54(2). pp.397-435.
Henderson, S. and et.al., 2015. Issues in financial accounting. Pearson Higher Education AU.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision,
Tool, Or Threat?. Routledge.
Magnan, M., Menini, A. and Parbonetti, A., 2015. Fair value accounting: information or
confusion for financial markets?. Review of Accounting Studies. 20(1). pp.559-591.
Martínez‐Ferrero, J., Garcia‐Sanchez, I. M. and Cuadrado‐Ballesteros, B., 2015. Effect of
financial reporting quality on sustainability information disclosure. Corporate Social
Responsibility and Environmental Management. 22(1). pp.45-64.
Valdez, S. and Molyneux, P., 2015. An introduction to global financial markets. Palgrave
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Weygandt, J. J., Kimmel, P. D. and Kieso, D. E., 2015. Financial & Managerial Accounting.
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Elmassri, M. and Harris, E., 2011. Rethinking budgetary slack as budget risk management.
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Chapman, C. S., Hopwood, A. G. and Shields, M. D., 2011. Handbook of Management
Accounting Research. Elsevier.
Callahan, K. R., Stetz, G. S. and Brooks, L. M., 2011. Project Management Accounting:
Budgeting, Tracking, and Reporting Costs and Profitability. John Wiley & Sons.
Debarshi, B., 2011. Management Accounting. Pearson Education India.
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Macintosh, N. B. and Quattrone, P., 2010. Management Accounting and Control Systems: An
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Leszcynska, A., 2012. Towards shareholders' value: an analysis of sustainability reports.
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