Unit 5 Accounting Principles: Critical Analysis of Financial Accounts and Budgetary Control Measures

Unit 5 Accounting
Principles
Contents

INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Analysing critically the role of accounting in complicated operating environment in meeting
societal requirements and organisational stakeholders requirements..............................................3
Making justified judgements through the critical analysis of financial accounts in order to gauge
organisational performance using a variety of measurements and benchmarks..............................5
Creating financial statements for partnerships, sole proprietorships and not for profit
organisations...........................................................................................................................5
a) Parcel Portal Ltd financial ratios for the years 2020 and 2021..........................................7
b) Evaluation of financial statements of Parcel Portal Ltd and financial ratios to assess the
performance of the company..................................................................................................7
Justification of budgetary control measures and their influence on organisational decision
making............................................................................................................................................11
a) The advantages and restrictions of budgets as well as budgetary planning and control for
the business...........................................................................................................................11
b) The cash budget for Duck Café for the 3 months ended 30 June 2022...........................12
c) Justifications of budgetary control measures for Duck Café and their influence on the
company to assure effective and efficient positioning of funds in the future......................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Principles of accounting are the principles and guidelines which corporations should
follow while reporting financial information. Examination of financial data is easier assisted by
these guidelines by regulating the terms, conditions and approaches that the accountants must
utilise. The ultimate objective of a set of accounting rules is to assure that the financial
statements of the company are comprehensive, comparable and consistent. This makes analysing
and extracting useful data from financial statements easier for investors. This also assists
financial information comparisons among different companies (Croitoru, 2021). The critical
evaluation of financial statements to examine organisational performance using a variety of
measures and benchmarks to draw justified conclusions, the critical evaluation of budgetary
control solutions and their impact on organisational decision making to ensure efficient and
effective depreciation, and the critical evaluation of the accounting role in meeting organisational
and societal needs within complex operating environments are all included in the report. The
paper also discusses the advantages and disadvantages of budgets, budgetary planning, and
budgetary control, as well as identifying corrective measures for issues that the plan highlighted
for organisational decision-making.
MAIN BODY
Analysing critically the role of accounting in complicated operating
environment in meeting societal requirements and organisational
stakeholders requirements
The management act has always been crucial to the operations of human civilizations. The
calibre of a company's management procedures determines how effective it is. High-performance
management is required for this, which denotes competence and sane decisions. Decision-
making and managerial procedures can benefit from accounting. Delivering financial data on the
company under inquiry is the goal of an accounting system. Users utilise this data to make
judgments about the financial health of their companies and the success of their businesses. To
make management decisions that will help the firm accomplish its goals, it is necessary to

compare its condition to that of other businesses in the same industry or to earlier times (Cussatt,
Huang and Pollard, 2018).
The economy and society both depend on accountants. Accountants promote strategies for
cost reduction, revenue growth, and risk reduction to ensure efficient resource utilisation. The
level of services provided to this profession's members determines how good it is. The regulatory
environment in the accounting sector protects the quality and reliability of the services. As a
result, it follows that accountants need to uphold moral and professional norms. They must
represent the interests of their clients and other indirect users, including creditors and investors
(Duțescu, 2019).
Purpose of the accounting functions in context of regulatory and ethical constraints
Good accounting not only enables managers, investors, and regulators to compare
organisations side-by-side but also assists managers in maintaining control of their businesses. In
order to enable direct comparison of all accounting methods across all organisations, generally
accepted accounting principles (GAAP) were established as the foundation for accounting in the
United States. It is a set of rules and accounting principles used to report financial data. US
GAAP is used by publicly traded enterprises in the country. Most countries utilise International
Financial Reporting Standards (IFRS) (Heiling, 2020). But the US is also switching from US
GAAP to IFRS standards as a result of the convergence. Convergence aims to ensure that US
GAAP accurately reflects IFRS standards. These are the underlying ideas that corporations and
their accountants must adhere to while financial reporting.
The accountants frequently face a moral conundrum. They work to increase value through
cost cutting and revenue growth. While keeping the public interest in mind, they strive to
produce favourable results for the business or their clients. Consequently, financial information
must be given honestly and properly in order to be ethical (Khan, 2020). However, even if they
don't, accountants may feel pressure to provide favourable outcomes for the company. By
offering direction on how the problem should be handled, moral accounting approaches can be
used to help people make better decisions in both their personal and professional lives.
Accountants must follow the law. But not all circumstances have clear-cut regulations. This