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Importance of Accounting Techniques in Company

University: University of Chester

  • Unit No: 5
  • Level: Post Graduate/University
  • Pages 4 / Words 1000
  • Paper Type: Assignment
  • Course Code: ACCT 3501
  • Downloads: 59
Question :

The scenario of this report is based on developing an accounting report in the context of an organisation that provides a clear knowledge and understanding to Board of managements.

  • Discuss stakeholder conceptual framework on the basis of its relevancy.
  • Evaluate the requirement of financial statement meeting in the context of stakeholders.
  • Clearly state marginal and absorption cost as well as its advantages and disadvantages.
  • Critically discuss the requirement of costing system in different businesses by considering specified reason.
Answer :
Organization Selected : -


Accounting is crucial for business in accomplishing objectives. The present report deals with the importance of accounting techniques in the company. Various stakeholders are also explained as per the conceptual framework. The need for seeking financial statements by them is discussed. Furthermore, costing systems used in different kinds of industry is enumerated. Advantages and disadvantages of marginal and absorption costing is listed.

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Part 1

A) Relevant stakeholders as per conceptual framework

There are various stakeholders of company who have interest in the profit earning capacity of firm so that enhanced decisions may be made by them in effective way. Types of stakeholders can be described below-

1. Shareholders

The shareholders are integral part of company as they invest funds in organization and as such, shares are purchased by them. This means that investments are made by them which help firm to maintain financial stability as daily operational activities can be accomplished with these investments. This implies that if more investment is made by the shareholders, then more effective company can carry out tasks in a better way (Jain, 2017).

2. Creditors

Creditors are the persons who provide loan to firm so that daily operational tasks can be accomplished by firm in the best possible manner. It clearly shows that business is able to meet its activities without any difficulty of garnering finance. Creditors are important stakeholders of the business as they loan and as such, business is required to pay instalment amount along with interest accrued on the same Warren and Jones, (2018).

3. Employees

Employees also have their interest in the workings of company. The main reason behind this is that when organization is earning well, then jobs are effectively secure as business is able to perform well in the market. Thus, morale of workers also strengthens in the best possible manner. Moreover, employees are motivated to put their hard work and efforts and as such, they remain dedicated towards firm Petersen and et.al (2018).

4. Government

Government is another crucial stakeholder as profitability position of company is judged to find out tax obligation. The government comes to know true financial position of firm so that amount of taxes can be easily computed. This is possible because of financials furnished by the firm.

5. Customers

Customers are key stakeholders of the business as when customer wants and demands are satisfied, they become loyal to organization. On the other hand, consumer are disheartened when low quality products are provided by company Annisette, Cooper and Gendron, (2018).

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B) Financial statements meeting needs of stakeholders

The financial statements of company imparts necessary information to stakeholders by which they can take better decisions. Needs of stakeholders are as follows-

1. Shareholders

The shareholders are benefited by seeking financials as they come to know about earning capacity of business. Thus, they analyze how much returns would be provided by company on the shares invested by them and as such, whether adequate dividends will be paid or not.

2. Creditors

Creditors are loan providers and they assess solvency and liquidity position of company whether it would be able to pay outstanding amount within stipulated time or not.

3. Employees

Employees analyzes profitability position of firm in order to have clarity whether jobs are secured or not. This is assessed by them by going financial statements Sardina and et.al (2018).

4. Government

Financials are seek by the government to calculate tax obligation of the business on profits earned by firm. Thus, in accordance to financials, taxes can be computed by them.

5. Customers

Customers also seeks financials as they are affected by profitability aspect of company. If company is earing well, then needs and demands may be fulfilled by organization Booth, (2018).

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