Carly Faulkner

BSMA1

Group A

Accounting1

The need for accountancy and an understanding of the accounting profession The American Accountancy Association has defined accounting as ``the process of identifying, measuring, and communicating economic information to permit informed judgements and decisions by users of the information``. In other words accounting is concerned with providing both financial and non financial information that will help decision makers make good decisions. (Colin Drury) Every enterprise needs an accountant for a number of reasons including supervising profits, maintaining trust within the investing community, reporting revenue and controlling expenses with the information given as long as it is accurate, relevant, timely and communicated with clarity.

Accounting Principles and Guardians of Accountancy Principles Generally accepted accounting principles (GAAP) are regulations that were designed to help eliminate barriers to cross border trading in securities by ensuring that company accounts throughout the EU are made reliable and more transparent and that they can be easily compared. There are a common set of accounting principles, standards and procedures that companies use to compile their financial statements. Guardians Guardians of accounting are anyone of the accounting profession. Auditing is the profession whereby the person will be able to form an opinion to the accuracy truth and fairness from the accounts of business enterprises, charities, trusts and professional firms

Independence, Objectivity and Self-regulation Independence A major threat to high standards required of auditors is in the area of independence. Directors are responsible for the truth and fairness of the accounts. The essential attribute is independence of mind. However there are many situations which can determine this independence i.e. the auditor doesnt want to get sacked. Objectivity The auditor must have no bias. He must not get influenced by the situation. He must keep this apart from personal reflection or feeling independent of mind. Self-regulation The individual accounting institutes lay down their own code of ethics and disciplinary procedures.

Carly Faulkner

BSMA1

Group A

Accounting1

A history of the accounting profession In the end of the 18th century there were those who described themselves as accountants. In 1844 came the emergence of limited liability companies. Balance sheets had to be produced that were full and fair. In the 1840s auditing practices grew. In the 19th century legislation required the use of double book keeping there was further requirement for the provision of profit statements and balance sheets. In 1844 UK winding up act required accountants to act as liquidators. Public dislike of the profession is flourished. Financial accounting appeared before management accounting. Cost accounting procedures evolved in the 19th century.

The Role of the Cost and Management Accountant The major aspects of cost and management accounting are -Establishment and classification of costs. In a business it is very important to know what costs are. Management need accurate assessments of the cost of the goods and services they produce -Budgetary control Well run organisations maintain detailed budgeting system. ``This budget is a detailed plan, it would contain plans for income and expenditure in respect of a future period of time. It is prepared in advance of that time period and is based on the agreed objectives for that period of time, together with the strategy planned to achieve goals``. (Pauline Weetman) -Decision making Cost is a major factor in decision making, i.e.: Should we buy a carved table leg or make our own. Will we get a building contractor to build this wall or could we use our own employees. This information is needed to guide the decision maker in making a calculated decision.

Management Accountancy This information is for internal users to help management plan and control the activities of a business and to assist in the decision making process to help the business perform more effectively. This can be prepared for any period, historic and projected. Another definition from Colin Drury ``management accounting is concerned with the provision of information to people within the organisation to help them make better decisions and improve the efficiency and effectiveness of existing operations.``

Carly Faulkner

BSMA1

Group A

Accounting1

Financial Accountancy This information is mainly for external purposes (shareholders, banks, grant authorities, the revenue commissioner, investment analysts, payable employees, and interested parties.) the information describes the performance of a business over a specific period of time and the state of affairs at the end of that period. Another definition from Colin Drury 11financiall accounting is concerned with the provision of information to external parties outside the organisation.``

Income Statement The income statement is a measurement of what performance is like in a business. It shows income and expenses. Balance Sheet The balance sheet measures the wealth (capital) of the business at a particular moment in time it shows assets liabilities and capital