unit 5 accounting principles interrelationships of the accounting function and other functions

Purposes of the accounting functionIt is common to believe that the primary role of accountants is to provide regular financial statements.. Management accounting is the area of accounti

ASSIGNMENT 01 FRONT SHEETQualification BTEC Level 4 HND Diploma in Business

Unit number and title Unit 5: Accounting Principles

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2 Definition of accounting and purposes of the accounting function

2.1 Definition of accounting

2.2 Purposes of the accounting function

3 Main users of accounting information

4 Interrelationships of the accounting function and other functions

5 The roles and importance of accounting as an information system

6 A comparison between financial accounting and management accounting

7 Accounting principles, accounting constraints, and ethics in accounting

7.1 Accounting principles

7.2 Accounting constraints

7.3 Ethics in accounting

8 Accounting regulations

8.1 IFRS from IASB

8.2 GAAP from FASB / FRC

8.3 VAS from VMoF

9 Conclusion

As we all know, as technology advances, companies at home and abroad are expanding daily.Accounting is a key component of these organizations' operations because that is what they all have in common, including the necessity for the accounting room The accounting department must keep track of all financial documents As a result, the organization's financial accounts will be delivered to management This article will cover a wide range of subjects, including the definition of accounting information and the demographics of those who use it This is the primary distinction between financial and management accounting A contrast is also made between international accounting and Vietnamese accounting This blog about the purpose and relevance of accounting is published by a graduate trainee at PwCVietnam (PricewaterhouseCoopers Vietnam), a worldwide firm that provides extensive business consulting services to SMEs through partnerships.

II Definitions of accounting and purposes of the accounting function

2.1 Definition of accounting

Accounting is involved with the gathering, analysis, and dissemination of financial data, (McLaney, 2006) This knowledge is helpful for individuals who must plan and execute business choices and those who must manage them Because Accounting data, for example, may be required by corporate managers to decide whether to:

 Create new products or services (such as a computer manufacturer developing a new range of computers),

• Raise or lower the price or quantity of existing items or services (such as a telecommunications business changing its mobile phone call and text charges),

 Borrow money to assist with company financing (such as a supermarket wanting to increase the number of stores it owes),

 Modify the procedures for purchasing, manufacturing, and distributing the company's products

Increase or reduce the firm's working capacity (for example, a cattle farming company assessing the size of its herd) (such as a clothes retailer switching from UK to overseas suppliers)

 Increasing or decreasing the company's operational capacity (such as a beef farming business reviewing the size of its herd)

 Change the manufacturing, distribution, or purchasing processes (such as a clothes retailer

2.2 Purposes of the accounting function

It is common to believe that the primary role of accountants is to provide regular financial statements Despite the fact that accountants are responsible for this sort of job, creating financialstatements is not a goal in and of itself Accounting's ultimate purpose is to deliver better information so that people may make better decisions

Any accounting function's principal purpose is to keep accurate financial records Monetary data

of all types should be recorded at least monthly, including operating expenses, wages, contributions, capital expenditures, investments, cash flow, and utilities As a consequence, a financial history of an organization is established, which may be used in a variety of ways, as it provides management with a snapshot of the firm's financial health and wealth at any one moment (Fritz, 2019) Identifying is another purpose of the Accounting Function The initial phases in the technique are transaction identification and analysis This process converts

is one that can be tracked and contributed to the establishment of a commercial transaction Following the discovery and documentation of financial data, the results should be disseminated

to anybody who is interested Because information is meaningless if it is not delivered to its intended audience As a result, the communication role of accounting is critical

III The main users of accounting information

Accounting information's qualitative qualities, such as detecting, measuring, documenting, and classifying financial transactions, help in business decision-making, analysis, goal setting, budgeting, pricing, forecasting, and other operations (Staff, 2022) Financial accounting data is made available to a diverse group of persons with significantly disparate aims for evaluating the data Accounting information is used by three major groups, each of which has particular requirements for how the information is presented

Internal users (primary users) - A user of the information is regarded as one of the internal or

primary users of accounting information if they are an employee of the business itself (Staff, 2022) For instance, management, business owners, personnel, etc Management accounting is the area of accounting that deals with internal users

 Manager: By using useful accounting data, management can plan, manage, and decide more effectively Managers are frequently faced with economic questions, and accounting information is necessary to provide answers to all of these questions and reach business decisions The function and position of the organization are also 4 determined by

management using accounting data The company may simultaneously take the necessary actions to enhance business performance In addition, managers are in charge of maximizingproductivity within the company Therefore, accounting information may help managers enhance their performance and carry out their responsibilities more effectively

 Employees: Through their labor, employees enhance the company's reputation Employees are worried about the business's profitability, economic stability, financial health, and capacity to identify opportunities for professional development They therefore have every reason to be concerned about the organization's internal operations By assessing an organization's financial health or profitability, accounting information assists employees in determining their job security, future incentives, retirement benefits, and employment opportunities

 Owners: Organizational owners require financial data to help them make decisions that will protect their investments from risk The owners can use accounting data to assess a company's ability to pay dividends, which they then use to assess the viability and

they will do in the future.

External users (secondary users): A user of accounting information is regarded as one of the

external or secondary users of accounting information if they are an external party who is unrelated to the business (Staff, 2022)

 Lenders: Accounting information is useful to lenders because it enables them to determine the creditworthiness of a company The terms and conditions of loans are based on an organization's financial stability As a result, it helps them with their analysis by giving themaccurate financial information

 Government: The government, in particular the tax authorities, is interested in financial data for taxes and regulatory purposes They need to know the sales or earnings for a certain timeperiod for tax purposes Additionally, financial reports that include data from businesses willhelp the government create a thorough strategic plan

 Customers: Before making significant purchases, many customers review an organization's financial statements because they may want to uphold product warranties and broaden the

a company or has entered into a contract with it, they become interested in accounting data They use the data to assess the financial health of a business They are worried about the company's ability to survive and maintain operational stability This accounting data enables

a business to maintain a steady flow of income

 Competitors are businesses or individuals that sell comparable goods or render comparable services To determine how well the business can handle the competition, they are interested

in the financial facts of the organization They can improve their products and change their strategy by using financial information from competitors' companies to learn about the development and revisions of a product or service

 Investment analysts: Buy-side analysts and sell-side analysts are two sorts of investment analysts, according to (HAYES, 2022) Buy-side analysts work for mutual fund brokerages and companies that provide fund managers with financial advice They review the financial statements of the companies in their portfolio as well as those of additional companies that would make profitable investment choices Based on this research, they produce reports containing buy and sell suggestions for management Sell-side equities analysts are employed by big investment firms like Goldman Sachs They are responsible for assessing the financial fundamentals of the businesses the bank is thinking about going public and choosing those with the greatest potential for profit

Government – a different class of external users is the government, which is also concerned

with a company’s performance for a variety of regulatory as well as tax-related reasons In actuality, a single business may be required to file reports with numerous state, local, and even foreign governments, depending on where they conduct business

IV Interrelationships of the accounting function and other functions

Although many business owners believe their accounting department operates independently, accounting has coordinated with other departments to ensure the company's benefits

a Accounting and HRM

Since HRM will be in charge of HR-related duties including hiring and terminating employees The accounting department will need to analyze the HRM data before making payment decisions because different employees will be paid in different ways To create a balance in the working environment and employee attitude, these two departments will work together, and

to locate the company's human resources will have a significant impact on the business The company and its stakeholders will profit from the hired quality human resources, which will alsoprovide customers with the greatest goods and services.(Choice, 2022).

b Accounting and marketing

In marketing, accounting plays three responsibilities First, Saunders (2015) asserts that developing short- and long-term strategies for increased earnings and ongoing success is essential for successfully managing any firm, regardless of its size To carry out successful plans, the accounting and marketing departments must collaborate They will be able to create thorough and affordable continuity strategies Additionally, both of these divisions will be in charge of generating reports that may be used to evaluate the effectiveness of plans as well as direct their creation and execution Second, the marketing department may have expansive ideasthat the accounting department may not approve because marketing and advertising expenses can quickly add up and organizations occasionally cap the amount that can be spent on campaigns Accounting is in charge of keeping costs in check because the marketing department

proceed to authorize and make judgments regarding the company's marketing after planning andcontrolling it Earnings for the company will rise along with profits for stakeholder groups, rewards for campaign staff, and an improvement in the company's reputation as a result of an efficient and cost-effective marketing plan.

c Accounting and operation management

Similar to marketing contributes to operations management through planning, controlling, and decision-making The first is that, regardless of the size of the company, having both a short- and long-term strategy is critical for increased earnings and long-term success To achieve their objectives, the accounting and marketing departments must collaborate They will be able to create comprehensive, cost-effective continuity plans These two departments will be in charge

of producing reports that may be used to assess the success of previous projects and influence the development and implementation of new ones Next, when it comes time to evaluate the plan's efficacy, the company's operating departments will be unable to control the expected cost,

so 6 accounting will ensure this portion of the cost Following planning and control, the operation management department will authorize and make operational choices for the company (Hartman, 2022)

V The roles and importance of accounting as an information system.

Accounting Information System (AIS) is software used by businesses to collect, store, and

process financial data for decision-making It is a computer-based method of tracking accountingactivity that uses information technology resources To put it simply, an Accounting Information System provides accurate data to managers prior to making any significant decisions that will make or break their business (Staff, 2022)

Accounting Information System is very important, here is an overview of the Accounting Information process :

Making a Plan: User groups will utilize the accounting information system to make informed plans for the company or to make investment decisions in the company; those plans will be morepracticable as a result of the accounting information system

 Controlling: Even though a thorough plan has been created, there will be gaps and revisions to improve the plan's realism and correctness

 Making decisions: Management has long played an important role in human community

process This necessitates efficient administration, which necessitates competence and solid judgment Accounting can assist with decision-making and management tasks The purpose of

an accounting system is to provide financial data regarding the firm under study The data is about a company's financial health and performance, and it is intended to assist people in makingdecisions

VI A comparison between financial accounting and management accounting.

a Purposes:

Accounting is divided into two categories:: financial accounting and management

accounting, each with its own set of distinctions and operating procedures Furthermore, the operating procedures and operational goals of these two sectors of accounting are not only dissimilar but also diverse Management accounting provides information and data to help management duties, whereas financial accounting provides specific data to enable the