Accounting Principles: Accounting in Context and Budgetary Control

This report provides a comprehensive overview of accounting principles and budgetary control within an organizational context. It explores the purpose of the accounting function, encompassing financial reporting, ethical constraints, and regulatory compliance, including GAAP and IFRS. The report examines how accounting meets organizational, stakeholder, and societal needs, emphasizing its role in informing decision-making within complex operating environments. It includes a discussion on preparing a cash budget and analyzes the benefits, limitations, and corrective actions related to budgetary planning and control. The study uses ARAMCO as a case study and provides insight on how budgetary control solutions impact resource deployment and organizational decision-making. The report highlights the importance of ethical considerations, the role of accounting in providing accurate information for prudent business choices, and the significance of budgetary control in achieving financial goals. Finally, it emphasizes the role of accounting in maintaining a company's financial health and reporting on it.

Unit 5: Accounting Principles
Accounting in Context and Budgetary Control
Part-1 (LO1&4)

Table of Contents
Introduction......................................................................................................................................3
The purpose of the accounting function within an organisation......................................................3
The accounting function within the organisation in the context of regulatory and ethical
constraints........................................................................................................................................4
The accounting function meets organizational, stakeholder, and societal needs.............................5
The role of accounting in informing decision making to meet organisational, stakeholder and
societal needs within complex operating environments..................................................................5
Preparing a cash budget from given data for an organization using a spreadsheet.........................6
The benefits and limitations of budgets and budgetary planning, and control for an organization.7
The corrective actions to problems revealed by budgetary planning and control for effective
organisational decision making.......................................................................................................7
The budgetary control solutions and their impact on organisational decision making to ensure
efficient and effective deployment of resources..............................................................................7
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

Introduction
Because the future is fluid and hard to anticipate, it is essential to plan ahead and to do it in a
manner that will have a significant and long-lasting impact on the value of the business in the
long run. The planning aspect of accounting comes into play at this point. An exhaustive study
was conducted on ARAMCO, which is really the current topic of an analysis that encompasses a
variety of topics including accounting tasks, ethical constraints, and cash budgeting. This study
was conducted because ARAMCO continues to operate on a massive scale and has thus gained a
significant market share.
The purpose of the accounting function within an organisation.
In a nutshell, the practice of accounting involves gathering, analyzing, and disclosing data on the
flow of financial resources. A business manager has a variety of purposes for running his or her
company, all of which contribute to the accounting process. The accounting function serves a
variety of purposes within an organization, some of which are listed below:
 When a transaction (cost) is registered, it is essential that all monetary inputs and outputs
be tracked. There is a risk that important information may be overlooked if these items
are left off the list. Financial reporting and tax payments are likely to become
problematic, which might lead to legal issues for the company.
 On a routine basis, monitor the news to ensure that your financial reports are updated.
The proprietors and managers of the organization were able to keep track of everyone and
everything that entered and exited the premises by using this technology. In addition to
that, the graph illustrates whether or not the activity level is growing or decreasing. If you
want to ensure that all of your payments are paid in full and on time, you should check
the balances of your accounts every day.
 An organization's managers are responsible for ensuring that the company's resources are
properly allocated and managed in order to function smoothly. A manager's
responsibilities include the effective administration of a company's finances, participation
in decision making, and the resolution of operational issues.
 It's all going to work out perfectly as long as the transactions are recorded and kept track
of. It is possible to exercise more command over the company's current financial

situation. This makes it possible for the organization to maintain tabs on the amount of
money that enters and leaves the company at any one time.
ARAMCO is one example of this. The accounting department works with a wide range of other
functions. It's possible that these and other interactions might happen like follows: For example,
upper staff may obtain information from the accounting department via various sorts of
information; from the employees or HR departments concerning employee wages; from the
procurement department related to payment authorizations for suppliers and payment
requirements; from the sales representatives related to payment receipts and bad loans; and from
the retail chains departments concerning the mobility of inventory.
The accounting function within the organisation in the context of regulatory
and ethical constraints.
The GAAP and the International Financial Reporting Standards (IFRS) are examples of
accounting rules that have been created. Because of this, organizations can now be analyzed
more easily.
Every nation has its own set of accounting rules. IFRS (the majority standard) or GAAP are used
in almost every nation (fewer countries use this). Generally Accepted Accounting Principles are
used in the United Kingdom. If your firm is audited and you don't employ these standards or
follow the guidelines provided by them, you will fail the audit. If your firm is publicly listed, this
might have devastating implications. Let's just say that if a company's financial statements can't
be verified by a public accounting firm, they're in danger of losing their license to operate. If the
firm is privately held, it may still have shareholders who utilize the financial statements to make
informed decisions. As a result, it's best to "follow the rules." Since most mom-and-pop
businesses don't need financial disclosures from their bookkeepers, the IRS is your only major
concern when it comes to easy accounting and bookkeeping for a small company (Cardoza,
2020).
To maintain a thriving economy, the proper regulations must be in play. Ethics have a role in the
effectiveness of regulation as well. To maintain high standards and consistency, legislation based
on ethical principles is essential. Accountants are often confronted with moral quandaries in the
line of duty. Most significant partners in a business might be deceived if consumers tell their

accountants not to provide truthful financial statement data. They have to choose between
satisfying their clients and preserving the interests of the majority. Codes of ethics for accounting
associations like the AICPA have been written by members to serve as a guidance for making
smart sound decisions. Since their work and the obligations that are included in them are so
complex and difficult to understand, people who are familiar with the five most critical
principles (i.e. duty, public interest and integrity; integrity; objectivity; and carefulness. will be
better able to make ethical or practical judgments. A company's reputation and the economy as a
whole may be improved if accountants abide by certain ethical standards. Their influence may
even extend to their own domains as a result of this (Maclay, 2022).
The accounting function meets organizational, stakeholder, and societal needs.
There are many organizations that use accounting. It is the ultimate purpose to maintain track of
and report on the financial well-being of an organization. Having this information will allow you
to make the best choices for the company's management or investment. If a firm wants to
develop, it must identify which components of the organization are lucrative and which require
improvement.
Successful organizations may be anticipated by looking at how effectively they accomplish their
objectives and satisfy their stakeholders. As a result, they'll be better able to deal with their
encounters with an organization. As part of this design and development process, stakeholders
are identified, studied, and actions to meet and engage with them are planned and executed
(Azim & Jesmin, 2015).
To match social expectations and norms, accounting may also be used in this manner.
Maintaining a company's overall financial health and reporting on it are two of the primary
functions of this kind of accountancy. Having this information will allow you to make the best
choices for the company's management or investment. This study will be beneficial to
individuals as well as to society as a whole. Should they make the decision to invest in the
company, they will find this knowledge to be helpful (Hall, 2015).

The role of accounting in informing decision making to meet organisational,
stakeholder and societal needs within complex operating environments.
Accountancy can provide the exact information required to aid in prudent company choices by
providing a thorough comprehension of the relevant data. Management accounting requires the
use of a wide variety of effects in order to build a bookkeeping environment that allows useful
and timely information. Since the financial reporting adheres to recognized accounting rules and
expectations, it is free of errors. Accounting management relies on three essential concepts to
keep its records accurate, timely, and up to date. Financial performance increase when decision-
makers use reliable data to guide their actions. There's no need to worry about the accuracy of
the data provided by this source. The financial accounts and budgets of a firm are subject to both
internal and external audits by this organization. Finally, it contributes in making a sound
business choice for the organization.
Preparing a cash budget from given data for an organization using a
spreadsheet.

The benefits and limitations of budgets and budgetary planning, and control
for an organization.
Benefits of budgetary control
 A thorough investigation and any necessary remedial action may be aided by this
information.
 The introduction of performance-based incentive programs is made easier as a result of
this.
 Assists the firm in coming into line with the long-term objectives it has set for itself.
Limitations of budgetary control
 The difficulty of forecasting the future necessitates the adjustment of budgeted amounts.
 Due to the difficulty of forecasting the future, budgeted estimates are often revised.
 It's a lengthy and expensive procedure that requires a lot of people and resources. Control
procedures for the budget (Thakur, 2022).
The corrective actions to problems revealed by budgetary planning and
control for effective organisational decision making.
It is necessary to keep budgets under control by first creating future-period budgets, then
evaluating their performance against those standards and finally identifying and resolving any

discrepancies. To make a wise decision for the company, the budgeting officer may go through a
variety of techniques. Initially, a budgetary controller attempts to place up a budget that
describes the business' future goals. To determine whether there are any differences, the
budgeting office should evaluate the completed budget with the actual outcomes. If this budget
has to be fixed, he or she will suggest that figures from the agencies that created it be altered
(Song, Martens & Vanhoucke, 2020).
The budgetary control solutions and their impact on organisational decision
making to ensure efficient and effective deployment of resources.
As a main means of internal control, most companies rely significantly on their capacity to
monitor their budgets. This ensures that their capabilities are dispersed in an even more efficient
way feasible. Keep a record of your current expenditure and compare it to your budget to make
sure you're in complete command of your money. To establish a budget and achieve other
financial goals, this method is crucial. By implementing budgetary control into projecting
activities, companies may enhance long-term planning and budgeting. Normally, the accounting
and management departments’ work together to accurately forecast the company's costs and
revenues. A company's need to anticipate and plan for future threats and possibilities may be
addressed by effectively implementing monitoring system. This issue may be solved with a well-
managed budget (Zimmerman, 2011).
Conclusion
The purpose of accounting is to keep track of a company's financial situation in a consistent
fashion. Establishing a record-keeping system, monitoring activities within a certain system, and
preparing financial statements based on the data generated are the three steps of the recording
process. Budget and budgetary plan are critical procedures for the finance industry of the
organization. This has to be handled correctly in order to reduce problems. The majority of your
attention for this project will be directed into the many facets of accounting and budgeting. As
the owner of the firm, it is your responsibility to monitor the ways in which the money is being
used by the business.

References
Abraham Cardoza, Jr. (2020), what are the rules of accounting? [Online] Available at:
https://www.quora.com/What-are-the-rules-of-accounting?q=what%20is%20accounting
%20rules%20and%20regualtions%20and%20ethics, [Accessed on: 8 June 2022].
Kyle Maclay, (2022), accounting regulation and ethics, [online] Available at:
https://www.personalfinancelab.com/finance-knowledge/accounting/accounting-regulation-and-
ethics/, [Accessed on: 8 June 2022].
Hall, J.A., 2015. Accounting information systems. Cengage Learning.
Azim, Md & Ara, Jesmin. (2015). Accountability of Accounting Stakeholders. Global Journal of
Management and Business Research. 15. 5-10.
Madhuri Thakur, (2022), budgetary control, [Online] Available at:
https://www.wallstreetmojo.com/budgetary-control/#h-advantages-and-disadvantages-of-
budgetary-control, [Accessed on: 9 June 2022].
Song, J., Martens, A. and Vanhoucke, M., 2020. The impact of a limited budget on the corrective
action taking process. European Journal of Operational Research, 286(3), pp.1070-1086.
L Zimmerman, J., 2011. Accounting for decision making and control. McGraw-Hill/Irwin.