According to Fernando (2023) shows that accounting is the process of documenting a business's financial transactions. These transactions are compiled, examined, and reported to oversight organizations, regulatory bodies, and tax collecting organizations as part of the accounting process. A company's activities, financial condition, and cash flows are summarized in the financial statements that are used in accounting. They provide a succinct overview of financial events across an accounting period.
I. Examine the purpose of the accounting function within an organization.
1. The purpose of accounting
The purpose of accounting is to gather and
present financial data on a company's operations, financial position, and cash
flows (Accounting Tools, 2022). Accounting offers quantitative information on
economic entities, mostly of a financial type, in order to be helpful in making
economic decisions and selecting the most appropriate course of action.
2. The scope of accounting
All of a company's financial transactions and operations are
within the scope of accounting. For the purpose of producing accurate and
timely reports, it involves capturing, categorizing, and summarizing financial
information. Accounting helps businesses assess their performance and make key
choices about their future. Profitability, liquidity, and solvency may all be
measured. Accounting professionals may evaluate a company's creditworthiness
using financial statements (Mamgain, 2021).
- Business
organizations: The business sector makes extensive use of accounting. It is
appropriately known as "Language of Business." Profits are always the
primary goal of every firm. To assess operating results and the financial
condition, financial transactions of a company concern are documented in the
books of accounts (Geektonight, 2022).
- Non-profit organizations: In non-profit
organizations, accounting is also used. These organizations keep track of all
of their transactions, including the donations they get, the membership dues
they collect, and all of their outlays. To do this, statements like the balance
sheet, income and expense account, and receipt and payment account are created
in accordance with accounting regulations (Geektonight, 2022).
- Government organizations: In government organizations,
accounting is also practiced. These businesses employ the accounting system for
a number of functions, including calculating expenses, calculating income, and
operating the administration effectively. In addition, accounting data
interpretation and assessment are necessary for conducting national planning,
creating a financial budget in advance, assessing national progress or regress,
and other tasks (Geektonight, 2022).
3. The branches of accounting
There
are many distinct forms of accounting, but two are commonly used: financial
accounting and management accounting (De, 2022).
Financial accounting
is historical in nature, that is, it records transactions that have already
taken place. Financial accounting is in charge of creating the organization's
financial statements, which include the income statement, statement of owner's
equity, balance sheet, and statement of cash flows. These financial statements
describe a company's historical performance and assess its present financial
status. The final phase in financial accounting is the production of the Profit
and Loss Account and the Balance Sheet. It basically assists in figuring out
the financial status as of the provided date as well as the net result for an
accounting period (Kenton, 2023).
3.2. Management accounting
The process of gathering accounting data for internal
operational reporting is the focus of management accounting. In order for
managers to fulfill their duties, management accounting is essential. The
format for reporting information is adaptable since the data it offers is meant
to be used by persons who carry out a wide range of occupations. It contains a
wealth of data relating to the firm's planning, managing, decision-making, and
so on. It offers several techniques for combining information and creating
reports that managers utilize to do their jobs. An essential component of
management accounting is cost accounting, which deals with cost ascertainment
and cost control (CFI Team, 2023).
4. Job skill sets required for accountants
The most talented accountants, like those in any industry,
possess a unique blend of intrinsic skills and developed talents. In order to
succeed and grow in their professions, those who are interested in this subject
should work to build a variety of hard and soft talents.
4.1. Business Acumen
Accountants are required to engage often with different
departments and actively take part in running the company on a daily basis.
They require outstanding judgment, strategic thinking, and negotiating abilities,
just like any other top-tier professional. Accountants are able to view the big
picture and comprehend how their work affects the firm as a whole (Girardin, 2023).
4.2. Technological Savvy
Accounting is a profession that depends more
on technology than most others, thus accountants must stay informed.
Accountants must possess sophisticated Excel skills, ERP experience, big data
analytics competence, business intelligence software understanding, Hyperion
aptitude, and working knowledge of QuickBooks (Girardin, 2023).
4.3. Specialized Work Experience
Companies are looking to recruit accounting specialists with
particular knowledge outside of basic accounting. Organizations like the CPA
Institute of America provide courses in this area to assist professionals in
becoming familiar with various accounting degrees that address subjects like regulatory
organizations and the Act. Accountants self-educate in several accounting
fields to be competitive in this industry (Girardin, 2023).
4.4. Analytical Ability
One of the most crucial abilities for accountants to have is
analytical thinking. Reading and interpreting numbers and data is a skill that
accountants possess. This ability is useful for completing tax returns and
inspecting data to look for fraud or mistakes, among other things. Accountants
are meticulous, analytical, and good with numbers (Girardin, 2023).
4.5. Critical Thinking
Critical thinking is the capacity to use information in novel
situations to find solutions. Accountants who practice critical thinking are
better able to resolve issues impartially. Effective critical thinking includes
assembling many data points that accountants may utilize to resolve challenging
financial issues and foresee difficulties that may harm company in the future
(Girardin, 2023).
4.6. Time Management
Time management is essential to an accountant's success. It takes a lot of practice to develop and perfect this talent in the best way possible to prevent common mistakes that might happen while working (Girardin, 2023).
II. Assess the accounting function within the organization in
the context of regulatory and ethical constraints.
1. Accounting law and regulation
a. Accounting law
The Accounting Law defines the scope of accounting work,
accounting tools, accounting personnel, accounting services, accounting
administration of government entities, and accounting associations. Accounting
regulations must be followed by all firms and accountants (Thu vien phap luat,
2015).
b. Regulation of accounting
Regulation of the accounting profession typically includes the
following elements: entry and licensing requirements, including educational
requirements; monitoring of the performance and conduct of professional
accountants; the standards, including ethical standards, that professional
accountants must meet; and disciplinary systems (Thu vien phap luat, 2015).
2. Accounting standard
Accounting standards are a collection of procedures and
guidelines used to organize bookkeeping and other accounting tasks throughout
time and across different businesses. Assets, liabilities, revenue, costs, and
shareholders' equity are all included in the financial picture of a business
for which accounting standards are applicable (Kenton, 2023).
3. Ethical requirements for accountants
3.1. Integrity
Integrity is a crucial cornerstone of the accounting industry.
Integrity calls for accountants to be truthful, open, and upfront while dealing
with a client's financial information. All accountants operate consistently
thanks to these norms of behavior and ethics. Accountants examine their
activities to make sure they adhere to widely recognized principles when there
aren't any formal laws or standards in place (Vitez, 2019).
3.2. Objectivity and Independence
In the accounting industry, objectivity and independence are
crucial ethical principles. An accountant's ability to express an honest view
on a company's financial data may be hampered by a lack of impartiality and
independence. For auditors, objectivity and independence are crucial ethical
principles (Vitez, 2019).
3.3. Due Care and Competence
Accounting professionals need to adhere to all technical and moral accounting standards since being careful is an ethical value. Accounting professionals must demonstrate knowledge, thoroughness, and a solid grasp of financial data in order to be prudent. Competence is frequently determined by a person's training and experience. Prudence may thus call for experienced accountants to oversee and lead junior accountants who have less work experience (Vitez, 2019).
IV. Evaluate the context and purpose of the accounting function in meeting organizational, stakeholder and societal needs and expectations
a. Management
Accounting information is necessary for managers to plan,
monitor, and make company decisions. Through the budgeting process, managers
must allocate financial, human, and capital resources in accordance with the
competitive demands of the organization. Accounting data is needed by
management to monitor company performance through comparisons to prior
performance, competitive analysis, key performance indicators, and industry
standards. Managers use accounting information to inform choices about
investments, finance, and value (Accounting Tools, 2022).
b. Human Resources
Accounting for human resources involves keeping track of and
comprehending the expenses associated with tasks including payroll, benefits,
wages, compensation, hiring, and training. Accounting information may be used
by HR departments to keep track of their costs and calculate the profits they
make from team management and excellent recruiting (Indeed Editorial Team,
2022).
c. Marketing
Accounting information may be used by marketers to inform
choices on the 4Ps of marketing: product, pricing, place, and promotion. For
instance, accounting information may be used by marketers to inform choices
about product upgrades, pricing changes, distribution channels, and advertising
promotion (Lam, 2013).
d. Owner
Owners are those who contribute financial resources to the
company. They require details regarding the company's financial position and
performance. They examine the financial affairs of the company using accounting
information as a result (Tamplin, 2023).
e. Employees
Employees have access to accounting information, which is not always the case. They may use this information to determine whether the company will be able to pay them an acceptable wage and whether any pension plans it offers will be adequately funded. The decision to stay with the company or look for work elsewhere may be affected by this (Accounting Tools, 2022).
2. External users
a. Investors
Investors want to see a company's past financial performance as
well as management's best predictions about the company's future. These
information requests are found in the company's financial records and
accounting information. Changes in the proportion of the company's shares held
by outsiders as a result of this test can affect the share price (Accounting
Tools, 2022).
b. Unions
The amount of profitability and debt burden of a company may be
determined by labor unions using accounting information of business. This
information will help labor unions decide how fervently to advocate for a raise
in pay and benefits during the subsequent contract discussions. The union could
be disposed to press less vigorously if the firm reports mediocre results, and
vice versa (Accounting Tools, 2022).
c. Creditors
Creditors want to review the accounting information to ascertain
the firm's liquidity since they want to know if a company can pay its payments
on time. They are particularly interested in the organization's present ratio.
A modification in the amount of credit given to a firm may result from this
investigation (Accounting Tools, 2022).
d. Customers
When customers depend on the company's products and services, they
are more likely to be interested in its accounting information. Customers are
more inclined to patronize rival businesses if the company is struggling
financially (Accounting Tools, 2022).
e. Tax authority
Tax
authorities require information in order to ascertain an organization's tax
obligations. Tax authorities occasionally audit the returns submitted by
businesses in order to match the data on the returns with the accounting records
that serve as support. Tax officials also do a cross-check on the financial
records of suppliers and clients to look for any instances of tax evasion
(Accounting Tools, 2022).
3. Government
The
firm must pay taxes based on the profit it has made. The final outcome of
creating an income statement, or an accounting record, is profit. The company
incurs costs for taxes. Therefore, it is likely that businesses will attempt to
lower this obligation by presenting less earnings. To guarantee that they have
received their fair share of taxes, the government also requires accounting
information (Accounting Tools, 2022).
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