The role of Accounting in an Organization

Table of Contents

1.    Executive summary
2.    Introduction
3.    Body
I.     The purpose and scope of accounting in complex operating environments
II.       A critical evaluation of the accounting function in informing decision making and meeting stakeholder and societal needs and expectations
III.      The main branches of accounting and job skillsets and competencies
IV.      Accounting systems and the role of technology in modern-day accounting
V.   Issues of ethics, regulation and compliance and the extent to which they are constraints or threats to the organization.
4.    Conclusion
5.    List of References (Harvard style)

1. Executive summary

In this blog, we mention about the role of accounting in an organization. First, we introduced what is an Accounting and why need to do accounting. Then describe the purpose and scope of accounting in a complex operating environment and next describe critical evaluation of the accounting function in informing decision making and meeting stakeholder and societal needs and expectations and then the main branches of accounting and job skillsets and competencies and accounting systems and the role of technology in modern-day accounting. Next describe what are the Issues of ethics, regulation and compliance and the extent to which they are constraints or threats to the organization and finally write the Conclusion

2. Introduction

“According to American Accounting Association, Accounting is the process of identifying, Measuring and Communicating information to permit informed judgments and decisions by the users of the information (American Accounting Association,1974 )”

In other words, Accounting is the process of designing and operating an information system for collecting, analyzing and recording business transactions, and summarizing and communicating the results to the interested parties to facilitate the economic decision making.

Why do we need Accounting –

®    To keep systematic records
®    To protect business properties
®    To ascertain the operational profit or loss
®    To ascertain the financial position of business
®    To facilitate rational decision making

3. Body

I. The purpose and scope of accounting in complex operating environments

The Purpose of Accounting – The purpose of accounting is to gather and present financial data on a company's operations, finances, and cash flows. Following that, decisions regarding how to operate the company, make investments in it, or provide credit are made using this information (Accounting Tools, 2022).

The purpose of accounting is changed by their complex operating environment. For Example: -

®   In Business Organization ( profit organization), the main purpose is use accounting to know about their profit and share with their shareholders. They need to earn profit for shareholders in company.
®   In Non- profit organization, they mainly use accounting to know about received donations.
®   In Government organization, they use accounting to know their income and expenditure also their profit.

Scope of Accounting – Accounting has a broad range of applications that include those in business, trade, government, financial organizations, private citizens, families, and every other sector. In each phase, accounting principles are applied (iEduNote, 2022). The scope of accounting is changed by their complex operating environment.

We can explain scope of accounting using following points in different areas: -

® Business organizations – The main objective of every business is to earn profits. They use accounting for record the transactions. They use accounting to identify profit for the financial year, what are income and expenditure, financial position of the organization.

® Non-Profit Organizations – Accounting also has scope in Non – Profit organizations. These organizations record their Transactions using accounting statements such as receipt and payment account, income and expenditure account and balance sheet.

® Government Organizations – These organization use the system of accounting for various purposes such as determined the income, calculating expenditure. Also they use to prepare financial budget.

II. A critical evaluation of the accounting function in informing decision making and meeting stakeholder and societal needs and expectations

Accounting Function – Accounting functions are a collection of financial systems that include bookkeeping, financial analysis, summarizing data, and recording transactions (Rishab Nigam, 2022).

We can describe Accounting Function as following: -

® Business Cost & Revenue – We need to record expenses and payments to keep an accurate and up to date record of the company's funds.

® Accounts Receivable and Payable – We need to record trade receivables and payables to ensure the business pays for any money they owe and check that revenue is continually flowing into company.

® Financial reporting - Accountants use digital systems to store and calculate data and prepare both quarterly and yearly reports to know the assets, profits and losses of the business.

® Budgeting - accountants use financial data from the past as well as projections for future income to compose annual budgets. Accountants also prepare budgets for individual departments and special projects within the company.

Stakeholder – Anyone who has an interest in a company or project is considered a stakeholder. The operational and financial decisions made by a business can be significantly influenced by stakeholders (Accounting Tools, 2022).

Stakeholders can divide in to two parts as Internal stakeholders and external stakeholders. They are as follows: -

Figure 1 : Types of Stakeholders

Stakeholder and societal needs and expectations –

® Investors – providers of risk capital and their advisors are concerned with the risks and rewards inherent in their investments. They need information to decide whether they should buy, hold or sell. Shareholders are also interested in information that enables them to assess the enterprise's ability to pay dividends.

® Management – Members of management need financial information for day-to-day operations as well as for setting the strategic direction of the enterprise.
® Employees - Employees and their representatives are interested in information about the stability and profitability of their employers. They are also interested in information that enables them to assess the enterprise's ability to provide wages, retirement benefits and employment opportunities.

® Suppliers and other trade creditors - Suppliers and other creditors are interested in information that will enable them to determine whether the amounts owed to them will be paid on time. merchant
® Lenders – Lenders are interested in information that will enable them to determine whether their loans and their attached interest will be paid on time. .
® Customers – Customers have an interest in information about the continuity of an enterprise, especially when they have a long-term relationship with or are dependent on the enterprise.
® Governments and their agencies - Governments and their agencies are interested in the allocation of resources and therefore in entrepreneurial activity. They also need information to regulate entrepreneurial activity, determine tax policies, and form the basis for national income and similar statistics.
® Public – Enterprise affects the public in many ways. For example, enterprises can make a significant contribution to the local economy in many ways, including the number of people they employ and the patronage of local suppliers.

III. The main branches of accounting and job skillsets and competencies

Accounting branches - Accounting branches deal with gathering, analyzing, and disseminating financial and non-financial data that has an impact on a business's bottom line. The performance of an organization's finances is evaluated using a variety of business accounting disciplines (By Indeed Editorial Team, 2022). We can describe Main branches of accounting as follows: -

® Financial Accounting – Financial Accounting focuses on reporting to external parties. It measures and records the business financial transactions & event and provides financial statements that are based on Accounting Standards.

® Managerial Accounting – Management accounting measures and reports financial and non-financial information that help managers to make decisions to fulfil the goals of the organization. Managers use managerial accounting system (MIS) to select, communicate and implement the strategy formulated, coordinate product design, production and marketing decisions.
® Cost Accounting – Planning, regulating, and minimising such costs as well as providing information to management for decision-making are all part of cost accounting. Cost accounting is the process of recording, classifying, and summing costs in order to calculate the cost of goods or services.
® Auditing – Auditors examine and monitor a business for accurate reporting, compliance with tax laws and regulations and financial integrity. Auditors can be divided in to two parts. They are Internal Auditors and External Auditors.

Internal Auditors – They are identifying and prevents tax issues or prepare the business for an outsider’s audit.
External Auditors – Independent or Outside auditor who examine a company’s financial statements for accuracy.

® Tax Accounting – This branch reports on the effects of taxes on a business and offer advisory services on minimizing taxes or the consequences of tax decisions. They are calculate income and other taxes depending on the structure of the business.

® Forensic Accounting – This branch handle legal matters related to bankruptcy, fraud or mismanagement. The conducts investigations for court and litigation cases calculates damages, and oversees dispute resolutions.

Job skillsets and competencies –

To ensure that their accountants have the knowledge to accurately and responsibly handle, evaluate, and report an organization's or individual's financial activities, employers look for technical skills in their accountants. Employers are also on the lookout for soft skills, or less obvious competencies that enable you to succeed at work. Forensic accountants, financial analysts, and personal financial counsellors are only a few of the many occupations in accounting, so we need to enhance the following abilities and talents that companies need.

Skills required by accounting field : -

Self-Motivation
Integrity
Organization skills
Teamworking ability
Communication and Interpersonal skills
Proficiency in IT
Analytical ability
Problem Solving skills

Competency required by accounting field : -

® Risk assessment, analysis and management – Who are apply for an accounting job need to improve their Evaluation, Analysis and control of risks skills to assess, analyze and manage risk using appropriate frameworks for effective business management.

® Analysis and interpretation of measurements - To analyze data for a specific purpose and intended use, choose and employ metrics that are relevant, trustworthy, and verifiable.

® Reports - Determine the suitable material and, in accordance with the legal or professional requirements, explain the intended audience, the work done, and the results in a clear and objective manner.
® Research - For analysis and well-informed decision-making, locate, access, and use the pertinent professional frameworks, standards, and guidelines.
® Management of Systems and Processes - To assist system design and use for efficient and effective operations, identify the suitable business processes and system(s), as well as pertinent frameworks and controls.
® Technology and Tools - To evaluate data, complete tasks that have been given to you successfully and efficiently, and assist other competencies, find and use the appropriate technology and resources.

IV. Accounting systems and the role of technology in modern-day accounting

Role of technology in modern-day accounting - Modern accounting is the transformation of conventional accounting systems and procedures via the use of software and hardware that automates operations and significantly lowers the requirement for humans to carry out routine duties (Black Line, 2022).

Previously, accounting was done by hand, but technology now makes it possible to report information in real-time, collect data from numerous sources, and automate repetitive activities. This enables experts to concentrate more on other crucial responsibilities like giving financial advice and keeping track of performance. In present, we can do accounting using Modern accounting. We can do following functions using modern technology accounting.

Forming A Plan and Controlling Financial Policy
Preparing A Budget
Cost Control
Evaluation Of Employees’ Performance
Prevention Of Mistakes and Deceit

Accounting systems - An accounting system is a collection of accounting operations with built-in controls. An accounting system's main functions are to keep track of corporate transactions, aggregate those transactions into reports that decision-makers can use to monitor, evaluate, and enhance operations, and to record those transactions. Accounting system can describe as follows: -

® Artificial intelligence (often referred to as AI) - This technology can carry out accounting duties including entering and matching data from receipts and invoices to buy entries in accounts receivable and enforcing company standards in the expenditure reimbursement process.

® Cloud Computing - Modern accounting makes advantage of cloud computing, where data is kept in a centralized database that is accessible from anywhere over the Internet (Cloud). Data is stored using cloud computing in a central location that is open to all users.

® Data input - Digital programmers that collect data from many sources and enter it into a central information source can replace the requirement for human data entry in modern accounting.

® Robotic Process Automation (RPA) - In contemporary accounting, RPA is a type of automation that performs repetitive activities like sorting, data entry, form completion, and text and data interpretation.

V. Issues of ethics, regulation and compliance and the extent to which they are constraints or threats to the organization.

Ethics is a broad term. At its core, acting ethically in business means building a company around integrity and trust, as well as complying with regulations. (Michigan state University, 2022) we can describe as follows what types of issues can expect to face and may need to overcome: -

® Discrimination - Discrimination is not just wrong; it's frequently unlawful as well. There are laws that prevent discrimination against workers based on their age, gender, ethnicity, religion, disability, and other factors. Nevertheless, pay disparities based on race and gender show that prejudice is still present.

® Harassment - Bullying is another ethical issue that affects businesses. Employees may leave the company early as a result of bullying. Employees who are bullied may experience long-term impacts, including psychological ones, financial ones, and even career-wide effects.

® Unethical accounting - Companies that are publicly listed may use unethical accounting techniques to appear more prosperous than they actually are.

® Safety and health - Health and safety concerns are another form of ethical issue that are frequently covered by the law. Companies may choose to reduce expenses or complete work more quickly. Failure to take worker safety into account can result in accidents as well as psychosocial concerns that might result in stress at work.

® Abuse of power by leaders - Power abuse frequently takes the form of harassment or discrimination. Abuse of power is not limited to the workplace. Managers can take use of their authority to alter documents, give credit for the work of subordinates, misappropriate funds, and accept presents from vendors or clients.

4. Conclusion

In this blog, I show the role of accounting in an organization to prepare a blog that will be used to market and promote its accounting services to new and existing clients. I write what are modern accounting system, what are the branches of accounting, what are the function in accounting, who are the stakeholders, what is the purpose and scope of accounting.

5. List of References (Harvard style)

Accounting Tools (2022) The purpose of accounting. Available at: https://www.accountingtools.com/articles/what-is-the-purpose-of-accounting.html#:~:text=The%20purpose%20of%20accounting%20is,or%20lend%20money%20to%20it. (Accessed 07 October 2022)

iEduNote (2022) Scope of Accounting in Business and Personal Life. Available at: https://www.iedunote.com/accounting-scope#:~:text=The%20scope%20of%20Accounting%20is,fact%2C%20it%20is%20not%20true. (Accessed 07 October 2022)

Rishab Nigam (2022) Accounting Functions. Available at: https://www.wallstreetmojo.com/accounting-functions/ (Accessed 07 October 2022)

Accounting Tools (2022) Stakeholder definition. Available at: www.accountingtools.com/articles/what-is-a-stakeholder.html#:~:text=A%20stakeholder%20is%20any%20person,and%20even%20the%20local%20community. (Accessed 07 October 2022)

By Indeed Editorial Team (2022) 12 Branches of Accounting: What They Are and What They Do. Available at: https://www.indeed.com/career-advice/career-development/accounting-branches (Accessed 07 October 2022)

Cynthia Uzialko (2022) The 8 Types of Accounting. Available at: https://www.businessnewsdaily.com/16103-accounting-types.html (Accessed 07 October 2022)

Robert Half (2022) 7 Skills for Accountants to Succeed on the Job. Available at: https://www.roberthalf.com/blog/salaries-and-skills/the-accounting-job-skills-you-need-to-succeed (Accessed 07 October 2022)

Ottawa University (2021) 10 best Accounting Skills. Available at: https://www.ottawa.edu/online-and-evening/blog/july-2021/10-best-accounting-skills (Accessed 07 October 2022)

Black Line (2022) Modern Accounting. Available at: https://www.blackline.com/resources/glossaries/modern-accounting/ (Accessed 07 October 2022)

Super 20 Training Institute (2021) Role of Technology in Accounting. Available at: https://s20.in/blog/role-of-technology-in-accounting/ (Accessed 07 October 2022)

Accounting Tools (2022) Accounting System Definition. Available at: https://www.accountingtools.com/articles/accounting-system (Accessed 07 October 2022)

Michigan state University (2022) 5 Common Ethical Issues in the Workplace Available at: https://www.michiganstateuniversityonline.com/resources/leadership/common-ethical-issues-in-the-workplace/ (Accessed 07 October 2022)

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The Role of Accounting in an Organization