Financial Accounting

FINANCIAL ACCOUNTING

ASSIGNMENT 1

1. What is the role of accounting in the functional domain of marketing, HR and Operations? The role of financial accounting played in the various fields are stated below.

Marketing

Capturing sales trends:

The accounting department tracks the sales of the company, which is used by the marketing department to understand the company and market trends. Monitor advertisement expenditure and tracking benefits.

Long term Strategizing

One of the keys to success in a small business is pre-planning and development of a strategic

vision to guide the organization over the long haul. They will look over the long-term strategic

planning, particularly as it relates to developing comprehensive and cost-effective ongoing

promotional strategies.

Forecast:

Marketing departments can give accounting department business forecasts, which assist accounting in allocating resources effectively.

Human Resources

Budget Preparation:

 HR deals with both people and budgets. HR manager is required to plan and budget  the hiring strategy for various projects .It is important that they understand the manpower in accounting terms -cost of hiring a permanent worker, cost of hiring subsidiaries or contractors, the social charges linked to each strategy, the costs of the benefits a worker will come with, etc.

Budget Approval:

Accounting Department approves the budget for manpower planning- hiring, training and development, compensation and benefits which are pre- approved by the Accounts department.

Operations

Budget Preparation and Approval:

The accounting department approves the budget prepared by the operations and logistics department, which assists in allocating the resources effectively

Effectiveness Tracking: The accounting department keeps a track of the profitability of each supply channel. The Operations team uses this information to forecast, plan and modify future logistics.

b) In general explain the statement of financial position portray about an entity? What are benefits and limitations to the different stakeholder groups of the financial content publically available?

Accounting information enables the stakeholders to take better decisions. The people who use the financial information include internal and external users.

 Internal users (Primary Users) of accounting information include the following:

Management: for analyzing the organization's performance and position and taking appropriate measures to improve the company results.

Employees: to assess the company's profitability and the impact of it on the employee’s future remuneration and job security.

Owners: for analyzing the viability and profitability of their investment and determining any future course of action.

The internal users use the accounting information that is available as management accounts, budgets, forecasts and financial statements.

External users (Secondary Users) of accounting information include the following:

Creditors: for determining the credit worthiness of the organization. Terms of credit are set by creditors according to the assessment of their customers' financial health. Suppliers and lenders of finance fall under the category of creditors. Banks are the best example for this.

Tax Authorities: to determine the credibility of the tax returns filed on behalf of the company.

Investors: for analyzing the feasibility of investing in the company. Investors aim to earn a reasonable return on their investment. This is done before the investors commit any financial resources to the company.

Customers: for assessing the financial position of its suppliers which is necessary for them to maintain a stable source of supply in the long term.

Regulatory Authorities: for ensuring that the company's disclosure of accounting information is in accordance with the rules and regulations set in order to protect the interests of the stakeholders who rely on such information in forming their decisions.

c) The CEO has described conservatism in the accounting of Reprise Media, which elements of financial statements can elaborate his statement? Explain how accounting concepts are applied in financial statements?

Conservatism in accounting is a policy of anticipating possible future losses in a company and not its future gains or profits. Companies often play safe by understating net assets and net income in order to assess the impact of future losses faced by the firm throughout the course of its lifespan. The statement made by the CEO of Reprise Media can be elaborated in Income/Profit and Loss Statement of a company. An Income Statement presents the results of operations of a business over a specified period of time (e.g., one year, one quarter, one month) and is composed of Revenues, Expenses and Net Income of an organization. Therefore, the CEO of Reprise Media can understand if the company is following an conservative approach of accounting, if for example the reporting of the overall expenses and losses suffered by the company is reported more frequently than as opposed to overall revenues and gains.