Impact of COVID-19 on Accounting and Finance Practices

This essay examines the profound impact of the COVID-19 pandemic on accounting and finance practices. It delves into various challenges, including the disruption of business operations, supply chain issues, and the impact on employee payrolls due to remote work policies. The essay highlights the effects on financial statements, asset impairment, and the need for businesses to address liquidity concerns. It also discusses the increasing tax liabilities and modifications in accounting standards. Furthermore, the essay provides recommendations for businesses, such as creating a resilient working environment, managing liquidity, and adapting to changing trends. It underscores the importance of strategic planning, risk assessment, and stakeholder management to navigate the challenges and identify strategic opportunities during and after the pandemic. The essay emphasizes the need for companies to adapt their practices to survive in a dynamic environment and emphasizes on the importance of training, development, and market share expansion.

Challenges of
Accounting and
Finance Practices
during COVID-19
Pandemic
Contents

INTRODUCTION...........................................................................................................................3
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Accounting plays the vital role in the success and failure of the organisation as the whole
transactions that has been takes place by the entity during the year are recording with the help of
accounting. It clearly shows that what is the profit or loss an organisation is earning on the basis
of the business transaction they carried upon. The COVID-19 Pandemic not affected the business
but also the employees who are engaged there as the whole business cycle is disturbed. The
measures to reduce such pandemic is social distancing measures compliance which makes
difficult for the entrepreneurs to work in their business with full capacity by engaging their
complete labour force (Abhayawansa, Elijido‐Ten and Dumay, 2019). This capacity issue arises
the problem of unemployment in various entities which affects the business performance as well
as their market share as well. The following report comprises of an essay which showcase that
how and up to what extent COVID-19 Pandemic has affected the business and finance in the
depth manner that impact will remain for the long time and survival will become tough for those
entities who completely work using the labour force in their business. COVID-19 Pandemic
affected several components of accounting such as going concern of the business, accounting for
impairment of the assets, Disclosures relating to financial statements, vulnerability from the
concentrations, credit losses to the organisations, the accounting for income tax and restructuring
of the business etc.
Accounting and finance includes the concepts of money, business and management, with
an emphasis on professional careers in these sectors. Accounting is the core of a business and the
whole management of business is completely depending upon the accounting and finances of the
organisation. Recently, COVID-19 Pandemic badly impacts the revenue of companies and
staffing levels, finance functions, liquidity and the areas in which finance professional are
looking to educate as well. Other factors which are disturbed by the COVID-19 Pandemic
presumes the evaluation of asset damage, increase in cost due to raw material shortages, market
fluctuation etc. Staff under quarantine, failure in supply chain, unavailable stocks, and sudden
reductions in demand from customers are creating serious issues for companies. The loss of
revenue in this period treats as a permanent loss and assumes as an unanticipated pressure on
working capital and liquidity of the company. Liquidity is the company's ability to cover its
short-term financial obligations and how quickly and easily the firm can covert assets into cash.
In simple words, is to get the money whenever they want it (Al Nuaimi, and Nobanee, 2019).

The outbreak of the COVID-19 Pandemic causes delay payments from customers, as they are
waiting for their customers to pay which results in low working capital availability. The low
liquidity leads to widespread faults and even bankruptcy. As pandemic started, it pushes entire
country towards shutdown. COVID-19 Pandemic has impact on business in many various ways.
COVID-19 Pandemic has one of the major impact on the employee's payrolls. Employee's
payrolls refer to the record of all accounting transaction related to remuneration of individual in
ERP software (Amin, Mohamed and Hussain, 2021). Due to rapidly change in software and
work from home policy employee's facing many difficulties regarding their payrolls. Work from
home policy is not friendly for new applicant or employees. Companies have struggled to
manage continuity of payroll and to paid every employee on time. Companies also facing
problems regarding shortage of staff and adaptation of new working environment. Companies
not able to access system, tools and data to perform efficiently working and some companies not
ready to use remote working environment. With comparison to previous financial crisis, the
COVID-19 Pandemic has brought a very different response to indirect tax system, because lean
on policies which might increase demand is bit unreliable for government. Instead many
governments are adjusted VAT/GST structures in real-time to assist financial liquidity to assist
businesses. In businesses due to pandemic, there is an increase in tax liability because of
decreasing revenue and increasing expenses creates a burden on the employers and employees
(Susanto, and Meiryani, 2019). A minor change in the accounting standards and framework
creates an unpredictable situation for a business organisation as employees are not known to the
modified standards and does not have the command on those procedures which resulted in slow
business process. The profitability of business also affected a lot because of the following
modifications which taken place during COVID-19 Pandemic.
The unusual rise of COVID-19 Pandemic and subsequent measures are triggering
pressure on business's supply chains. It may be caused by different factors such as reduced
demand due to uncertainty and increases unemployment, limited office accessibility, economic
fallout, delays and shortages due to complex and international supply chains, fluctuating share
and commodity prices due to instability in the financial market (Turker, 2018). During COVID-
19 Pandemic, companies faces many challenges in the field of accounts and business, it can be
recommended to the enterprise that it should create a working environment which is capable to
survive in the dynamic surroundings to achieve its goals. Outsourcing of funds should not carry

high cost through which more funds are available for its daily workings (Faccia and et.al., 2019).
Changing trends of accounting should be followed by this company to gain ease in recording
transactions and analysing performance of the enterprise by which further decisions can be made,
while keeping in mind all the deviations of the current measures. It should focus on the
maintaining equilibrium between liquidity and profitability by using mixed approach of
aggressive and conservatism. Structure of tax is decided by government which is not in the hands
of company but investing to various schemes and composition of capital structure in such a way
that the proportion of the debt is more as compared to equity because debt is a deductible
expense which decreases net tax payable. Accounting of payroll is necessary for managing the
database of the employees because employee’s turnover ratio should be low in order to improve
the efficiency of the organisation. Proper training should be provided to the one who handles
payroll accounting because every aspect or department should be properly governed. Companies
should draw attention towards increasing its market share and investing in those areas where
returns are high to manage its increased tax payment. It should incur expenses on training and
development improves employee morale and they work with more enthusiasm. During COVID-
19 Pandemic, a business that determines right action and approaches towards upcoming risks is
more likely to turn potential challenges into strategic opportunities. Collecting insights and
information from lessons learned can help businesses recover and help shareholders in
identifying and prioritising important areas for improvement (Maroun, 2018). For recovering the
situation, the business need to control cash and identify a shirt-term action plan and also need to
re-forecast liquidity, secure financing and government aid. The company should manage
important important stakeholders (i.e. Customers, suppliers, banks, regulator) (Obaidat, 2019). A
detailed and quantified restructuring plan that key stakeholders can support should be developed.
It is important for a business in proactive in assessing their risks and vulnerability from both
financial and an operational point. The unusual rise of COVID-19 Pandemic and subsequent
measures are triggering pressure on business's supply chains. It may be caused by different
factors such as reduced demand due to uncertainty and increases unemployment, limited office
accessibility, economic fallout, delays and shortages due to complex and international supply
chains, fluctuating share and commodity prices due to instability in the financial market.

CONCLUSION
Accounting and finance involve the concept of money, business and management of the
organisation. accounting is relating to carrying upon the analysis of various aspects of the
business in the form of accounting of the transactions whereas the focus of the finance is towards
the monetary requirement of the business. The COVID- 19 Pandemic affected the business as a
whole as complete supply and demand chain in an organisation has been affected which makes
impact on the employees and business man as well. The above essay is carried on major
concerns related to impact of pandemic on finance and accounting which shows that how
accounting deals with before pandemic and what changes taken place after that. The above
statement shows that how liquidity has been disturbed for many businesses and multiple
borrowers including various NBFC have extended the moratorium benefits given to them by the
government on the loans they have availed to their customers. Not only single area but various
implications on different parts of the accounting has been taken place to several business
according to their business and industry they are working. There are various financial factors,
contracts of the business, disclosure policies that has been modified during COVID-19 Pandemic
period. The above essay also provide suggestion to the business and accounting professional that
how they work should be modified considering such pandemic and their effects so that in near
future if such misfortune happens then they will plan and prepare accordingly.

REFERENCES
Books and Journals
Abhayawansa, S., Elijido‐Ten, E. and Dumay, J., 2019. A practice theoretical analysis of the
irrelevance of integrated reporting to mainstream sell‐side analysts. Accounting &
Finance. 59(3). pp.1615-1647.
Al Nuaimi, A. and Nobanee, H., 2019. Corporate sustainability reporting and corporate financial
growth. Available at SSRN 3472418.
Amin, H.M., Mohamed, E.K. and Hussain, M.M., 2021. Corporate governance practices and
firm performance: a configurational analysis across corporate life cycles. International
Journal of Accounting & Information Management.
Faccia, A. and et.al., 2019, August. Accounting information systems and ERP in the UAE: an
assessment of the current and future challenges to handle big data. In Proceedings of the
2019 3rd International Conference on Cloud and Big Data Computing (pp. 90-94).
Maroun, W., 2018. Modifying assurance practices to meet the needs of integrated reporting: The
case for “interpretive assurance”. Accounting, Auditing & Accountability Journal.
Obaidat, A.N., 2019. Is economic value added superior to earnings and cash flows in explaining
market value added? an empirical study. International journal of business, accounting,
& finance. 13(1).
Susanto, A. and Meiryani, M., 2019. The impact of environmental accounting information
system alignment on firm performance and environmental performance: A case of small
and medium enterprises s of Indonesia. International Journal of energy economics and
policy. 9(2). p.229.
Turker, D., 2018. Socially responsible finance and accounting. In Managing Social
Responsibility (pp. 115-130). Springer, Cham.