Accounting is one of the primary techniques by which organisation can record, summaries, evaluated various financial transactions that are done by the company. There are certain basis aspects that are useful in recording financial statements through taking into account all standards and regulations. This project describe different types of stakeholders categories as per the conceptual framework. Formulation of financial statements in accordances to meet their basis required is done in proper manner (Gao, 2013). Merits and demerits of absorption and marginal costing are also explain under this report.
(a): Determining relevant stakeholders as per conceptual framework
Stakeholders are said to be one of the primary parts of any business. They are directly of indirectly associated with decision making in future planning of any kind of activities that are done by an organisation. As per the Conceptual framework which is assist the IASB in formulating and revising IFRS that relies on consistent concepts to aid in regulate development of accounting policies. There are various stakeholders those are operating for an organisation. Some of them are:
Internal stakeholders: These are those parties who already responsible to serve an organisation as board member, staff and investors.
Employees are working in the departments for the purpose of earning money and remain employed in an organisation (Maskell, Baggaley and Grasso, 2011).
Owners responsible for making appropriate decision regarding upcoming plans in order to increase profitability for an organisation.
Investors are responsive enough regarding income generating from their investments made during the period of time.
External stakeholders: It refers as those individual that are committed to taken active participation in an organisation from outside of an organisation. It consists of customers, partners and other.
- Customers wants business to provide upper quality of products and services at very minimal costs.
- Suppliers are held reliable for business to regulate business in order to purchase their products on an continuous basis.
- The community is determine the business to contributes effectively to their local environment and overall population at the same point of time.
(b): Construction of financial statements meets their requirements
In every business, it has been determine that financials statements are prepared on the basis of recording business financial situations. This consists of standard reporting which consists of balance sheet, profit and losses statements as well as cash flow statements. It standard as more essential elements of business data and principal techniques of communicating financial data regarding an entity to external stakeholders (Fan and Zhang, 2012).
- The balance sheet used to provide a clear image of an entity as of a particular date. This lists the entity assets and debt in case of corporation and the stockholder those are associated with the company.
- Income statement determine an overall summary of total profit and revenue a company incurred during an appropriate period of time. This is more similar as moving image of an organisations operations on regular basis.
- Cash-flows statements used to provide specific information about all necessary financial transactions those are done only in cash. There are mainly three types of activities from which information can collected such as operational, investing and financing activities.
- Statements of changes in equity or stockholder equity used to reconciles the beginning of the period as equity of the company is associated with the closing balances of their account.
(a): Advantages and disadvantage of absorption and marginal costing
Absorption costing: It refers as one of the costs which are applicable to production process. It used to consider both variable and fixed costs at the same time. It is not taken into account more reliable for appropriate decision making. In other words, the costs of finished units in stock will consists of direct material, labour and other overhead costs.
- Advantages: It can provide crucial information about the company to determine profit level in more better manner as it was actually in the given accounting period. It ensure that all costs are must be covered at the time of computation of net incomes.