Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
the international. On the other hand, organizations might find the accounting department inefficient because of the managements comprehension regarding the data provided. Therefore, the accounting managers should explain the alternatives or other formula for computation that they utilized to achieve the most desirable results (Siegel, 2000). Changing of calculations only proves that the department understands the complexities and difficulties in the business environment that with the use of the traditional accounting computation may lead the entire organization into confusion.
market price of the share, expectations of the shareholders. To ensure optimum funds utilization. Once the funds are procured, they should be utilized in maximum possible way at least cost. To ensure safety on investment, i.e, funds should be invested in safe ventures so that adequate rate of return can be achieved. To plan a sound capital structure-There should be sound and fair composition of capital so that a balance is maintained between debt and equity capital.
Choice of sources of funds: For additional funds to be procured, a company has many
choices like Issue of shares and debentures Loans to be taken from banks and financial institutions Public deposits to be drawn like in form of bonds.
Choice of factor will depend on relative merits and demerits of each source and period of financing.
Investment of funds: The finance manager has to decide to allocate funds into profitable
ventures so that there is safety on investment and regular returns is possible.
Disposal of surplus: The net profits decision have to be made by the finance manager. This
can be done in two ways:
Dividend declaration - It includes identifying the rate of dividends and other benefits like
bonus.
Retained profits - The volume has to be decided which will depend upon expansional,
innovational, diversification plans of the company.
Management of cash: Finance manager has to make decisions with regards to cash
management. Cash is required for many purposes like payment of wages and salaries, payment of electricity and water bills, payment to creditors, meeting current liabilities, maintainance of enough stock, purchase of raw materials, etc.
Financial controls: The finance manager has not only to plan, procure and utilize the funds
but he also has to exercise control over finances. This can be done through many techniques like ratio analysis, financial forecasting, cost and profit control.
NON FINANCIAL MANAGERS ROLES WITHIN AN ORGANISATION AND THE NEED FOR THEM TO UNDERSTAND FINANCIAL AND ACCOUNTING IMPORTANCE AND TERMINOLOGIES.
To be competitive in today's market, technical managers need to understand: Key information on accounting concept, Tax planning, Project funding - from banker's perspective and from the perspective of other possible sources of finance, Due diligence in selectig contracts, Able to manage and control expenses both (capital Revenue and expenses) and all the minute socting details attached with the projects, To understand accounting practices in budgetary control and variance analysis. Analyze financial statements, the ways how to save taxes,
Concepts like relevant costing and scarce/ limited resources An understanding of accounting and finance is a prerequisite for understanding the financial success and financial stability of any organisation, which is summarised in the balance sheet, income statement and cash flow statement. The challenge of identifying, measuring and communicating economic information is not straightforward, and a deeper understanding of accounting requires an appreciation of both the strengths and limitations of data. This informs the analysis and interpretation of financial statements. Because non financial managers are technically very competent and very strong in the knowledge for the serving department, but they lack in understanding importance of accounting and financial terminologies which is very important for every department's manager to realize the importance and make their understanding in these fields so that every one in an organisation work for the shared objective and for the success of an organisation.
Lenders - Lenders are stakeholders who supply funds to the enterprise on short and/or long-term
basis. Lenders are typically financial institutions that provide short term overdrafts, invoice financing for debtors, term loans for expansion plans, leasing finance for equipment purchases or
mortgages for property purchases. Financial Institutions use financial statements to decide whether to grant a company with fresh working capital or extend debt securities (such as a longterm bank loan or debentures) to finance expansion and other significant expenditures.
Suppliers and customers - Suppliers are stakeholders who provide products and services to the
company on credit terms that allows the company to pay for the goods and services at a later time. Suppliers use financial statements to assess the creditworthiness of the business. Customers are stakeholders that suppliers, to evaluate the financial strength and staying power of the company as a dependable resource for their business.
Competitors - Competitors are stakeholder who compete for customers in the same market as
the enterprise. Competitors use financial statements to benchmark their own financial results to identify variances to target for improvement or exploit as an opportunity. Potential competitors may use financial statements to assess how profitable it may be to enter an industry.
Media - The media are stakeholders who use the information supplied by enterprises to publish
in their mass communication outlets. The media use financial statements to analyse and provide a commentary on the performance and position of an enterprise that they think would be of interest to their readership.
Labour unions - Labor unions are stakeholders who represent the best interest of the employees
of an enterprise. They use financial statements to gauge how much of a pay increase an enterprise is able to afford in an upcoming wages negotiation.
Supporters and opponents - Other external stakeholders include people who may support or
oppose the actions and activities of an enterprise. They include politicians, lobbyists, issue groups, consumer advocates, environmentalists, think tanks and foundations. They use the financial statements to provide objective evidence for their position. www.ledgeraccountingsoftware.net
Certain important qualitative elements are omitted from the financial statements because they are incapable of being measured in monetary terms like the quality and reputation of the management team, employee and other, There are still items in the assets side of the balance sheet which has no real value and are merely deferred charges to future incomes like preliminary / pre-incorporation expenses and other. There are still the following issues or challenges in preparing the financial statements which may amount to overstatement of the accounting profit of an entity: The basic nature of financial statements is historic. These statements are neither complete nor exact. They reflect only monetary transactions of a business. The following limitations may be noted:
Issues or Challenges:
When to and how much to recognize revenue in the Income statement, The constant challenge of when to expense or to capitalize the expenses. It is important to determine definitely what is revenue expenditure and capital expenditure otherwise the accounting profit will be overstated or understated - for example, capitalization of borrowing costs,etc Method of depreciations and the rates to depreciate into the income statement are selected by management to suit their business needs. Are the rates intentionally been made lower or the depreciation rates are higher to accelerate the depreciation of the fixed assets, Adequacy of provisions and method of providing for doubtful debts. Are the trade debtors recoverable and to what extent the accounting method for provision for doubtful debts shows the realistic picture, Basis of valuation of assets- when can costs change to reflect current values? Using replacement or current costs? Consolidation challenges -what to eliminates to reflects the overall group performance. Some items might be omitted to show a higher accounting profits. Many items are left to the personal judgement of the accountant. For example; provision of depreciation, stock valuation, bad debts provision etc. depend on the personal judgement of accountant. And most importantly The financial position of a business concern is affected by several factors-economic, social and financial, but financial factors are being recorded in these financial statements. Economic and social factors are left out. Thus the financial position disclosed by these statements is not correct and accurate.
References:
ACCA F9 (Financial Management) & ACCA F7 (Financial Reporting) were thoroughly studied for complete understanding Few websites were studied for understanding and guidance
www.ledgeraccountingsoftware.net www.opentuition.com