Accounting - "The language of business"

The undeniable function of accounting is to record the firm’s business activities and the organization’s,  financial transactions,  including, but not limited to, the jobs of identifying, collecting, summarizing, and analyzing the financial information of that organization (Fernando, 2021).

Accounting division works as an integral part of an organization, providing financial reports, accurate information about the operation and development of an organization to interested users and units. At the same time, it also consults business owners with accurate numbers, financial data for their managerial and strategic decisions.

Purpose and scope of accounting in a complex operating environment

The purpose: The purpose of accounting is to collect and provide data related to the organization such as business activities, financial position, financial statements, cash flows, capital sources during the operation period, and business transactions. The data will then be reported to business owners, stakeholders, and those interested in this business or organization. This data is also essential for business operations. Accounting report provides accurate and detailed data to business owners or managers about  firm’s financial situation and operative efficiency, such as revenue and profit,   for the purpose of the effective controlling and managing of business as well as the future’s strategic planning.

The scope: Accounting activity must be implemented, not only in the business organizations or enterprises, but also in the other institutions like governments, universities, and nonprofit entities, or even for the individual. And its scope is not only just simply understood as recording all financial transactions that the companies made but also tracing the flow of money related to the activities of the company such as capital, revenue, profit, other expenses. 

Critically evaluate the accounting function in informing decision making and meeting the needs and expectations of stakeholders and society

Accounting plays an indispensable role for any business as well as its stakeholders:

- To the business owner and the business entity: They are the parties directly related to the accounting function. From the financial data collected by their accounting division, business managers can easily monitor and adjust their business and operation processes on the right track and on the regular basis. Besides, it also assists the managerial and administrative work of the business owners, by providing an accurate data so that the business owner can make the right decisions for the company's future development.

- To investors, shareholders, and other parties interested in the business: it will provides useful information,  and data related to the company's financial position and business activities, thereby is the basis for making investment decision or evaluating the value for that business.

- For the State: the accounting information of each enterprise will make it easier for the State to understand the general situation and development of enterprises or monitor its business activities, thereby making policy decisions, solutions, and support suitable for the enterprises.

Major branches of accounting and job skills and competencies

- Accounting includes many sub-branches, and each branch focuses on a particular part related to the business's finances. And each branch has different approaches and analysis to be able to report, and provide business information. In which, there are 3 main branches:

+ Financial accounting: Mainly focuses on recording, synthesizing, clarifying financial transactions and business activities, providing reports and information related to the business's finances.

+ Management accounting: This is the branch regulating the management of cash resources and monitoring of financial activities of the business.

+ Tax accounting: Focuses on tax-related issues of the business. It helps  firms calculate and settle income taxes or other related taxes applied to that business activity (Freshbooks, nd).

- Job skills and competencies: Accounting is an activity that requires certain professional skills to be able to report all transaction and financial situations in the organization.

+ Specialized knowledge: Accounting specialists need to have a deep understanding of knowledge related to this major. They need to have specialized knowledge that can help to record the financial data properly, understand these data, the financial statements of the business, and be able to analyze and evaluate the source of the data. This knowledge could only be gained from the proper training and years of experiences.

+ Analysis and problem solving: accounting focuses mainly on the numbers and financial data of the organization, so analytical skills are very important in this field for the accountants and financial analysts. They need to make analysis and evaluation from the data or financial statements to conclude the financial performance, profit, or other financial-related issues of the business.

+ Communication: All parts of the organization must always connect each other for the smooth operation of the whole business entity and accountants also need to have information exchanges with other departments and also like connecting with customers to solve and serve customers' needs.

+ Organization: Accounting involves working with a large amount of data and information about customers and business finances, so accountants also need organizational skills to manage records, documents and manage the business's money.

+ Technological skills: Computer literacy is important for the work of all staff. Especially for accountants, they needs to be able to use, not only the basic Office package but also the specialized accounting software to make sure the accuracy and privacy of the firm’s financial data.

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

Accounting systems:

The accounting system is an essential system for any financial institution of businesses in all fields. This system tracks all finance-related issues of the business including transactions, business activities, revenue, profit, expenses, and capital of the business (Debitoor, n.d). Indeed, these financial data will, firstly, be recorded systematically by proper software. Then, those data can be used for different purposes of the business owners and operators or provided to departments and stakeholders such as accountants, managers, business owners, and shareholders to understand the financial situation of the business.

The accounting system brings many benefits to businesses, assisting the finance department with more convenience and efficiency in their daily jobs. The system helps to avoid data errors, and the financial data of the business will also be recorded precisely and systematically; thereby providing accurate data to support business owners in operating and managing the business’s cash flow or making appropriate decisions according to the firm’s financial situation. In addition, this system also helps to increase the security of business’s information, avoiding the leaking of sensitive data which should be confidential within the firms.

The role of technology in modern-day accounting:

Today, technology has become a global trend, which pushes all enterprises to stay updated with the newest innovation to avoid being left behind. Many companies in different fields have applied technology to optimize their operation, and accounting is no exception. In fact, technology plays a very important role in accounting and has a great influence which could change the operation of the financial department within a company, for example but not limited to:

+  Improve productivity and efficiency in working with big data in accounting

+  Ensure the accuracy of financial data

+ Increase the security of corporate financial information and data

+ Easily access and search data for the working process and activities of the business.

The application of technology in accounting will bring great benefits to businesses. Computer and software have replaced the calculators or paper files for calculating and storing financial data. Some accounting software allows the data about revenues and expenses to be imported directly from the sales or marketing department, which saves a lot of time and effort for the accountants. This also helps the company to save costs for time consumption and labor force.

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

Ethics is an indispensable part of the accounting profession. The codes of ethics include independence and objectivity, integrity, confidentiality, professional competence, and professional behavior (IFAC, n.d). These rules help ensure and enhance the honesty and fairness of each individual and business, which is essential in building mutual trust between seller and buyers, manufacturer and consumers, partner and partner or a company and its stakeholders. Besides, following the code of ethics is also a legal liability of all companies, especially when it is related to taxation. The liability of trustfulness in accounting is not only put on the shoulders ò accountants but also the matter of business owner and managers. Compliance to the code of ethics in accounting will help firms avoid legal responsibilities later.

As a matter of fact, there have been some serious violations of the rules and ethical standards which end up with litigation and bankruptcy. Some businesses might adjust the data in the balance sheet at the end of the period, or falsely declare documents, financial statements intended to evade taxes, or misrepresent financial data, inflate profits. The above acts have dishonestly and inaccurately reflected the financial situation of the enterprise, seriously violating the ethical code of the enterprise. For example, in 2015 there was a serious financial scandal of Toshiba. The company was found to have committed financial fraud of up to $1.22 billion, inflating profits to hide losses due to its inefficient business operations (Phuong, 2015). Such conduct has seriously violated ethics codes for the business, and then the scandal has seriously affected the image of the company in front of its investors because it implies a poor cooperate governance.

References:

Debitoor.com. n.d. Accounting system - What is an accounting system?. [online] Available at: <https://debitoor.com/dictionary/accounting-system> [Accessed 24 October 2021].

Fernando, J., 2021. Accounting Definition. [online] Investopedia. Available at: <https://www.investopedia.com/terms/a/accounting.asp> [Accessed 19 October 2021].

FreshBooks. n.d. The 8 Branches of Accounting: Their Uses and How They Work. [online] Available at: <https://www.freshbooks.com/hub/accounting/8-branches-of-accounting> [Accessed 20 October 2021].

IFAC. n.d. Revised Code of Ethics - Completed. [online] Available at: <https://www.ethicsboard.org/projects/revised-code-ethics-completed> [Accessed 26 October 2021].

Phuong, L., 2015. Bê bối ‘làm xiếc’ báo cáo tài chính ở Tập đoàn Toshiba. [online] Báo Công an Nhân dân điện tử. Available at: <https://cand.com.vn/Quoc-te/Be-boi-lam-xiec-bao-cao-tai-chinh-o-Tap-doan-Toshiba-i358986/> [Accessed 30 October 2021].