Accountants and Accounting Practices - Literature review Example

College Accounting or accountancy is the measure, honest disclosure and provision of financial information meant to help investors, managers, tax authorities and others that might be of concern, to appropriately make decisions about the allocation of vital resources (Perks, 1993).Throughout the world, various accounting bodies regulate and monitor the works of accountants; this is mainly done by setting appropriate standards as well as evaluating the accountants. Those that have demonstrated competency are usually referred to using various titles which include certified public accountant, chartered accountant, or chartered certified accountant. Such individuals with certification are usually granted particular responsibilities. These include the ability to certify after critical analysis, a company’s financial records and statements (Christodoulou, 2001). They also take accountability of any acts of misconduct. There are qualified accountants as well as non-qualified accountants. Non-qualified accountants can get employed by qualified accountants or may decide to work independently. However, working independently will deprive them of particular privileges. Big Four Auditors are the world’s leading employers of accountants. They are a big international network that offers a whole range of professional services. These include legal services, offering audits, corporate finance, and assurance, actuarial, consulting, and advisory (Christodoulou, 2001). However, many of them are usually employed in the public sector, commerce, and various industries. Accounting is the process of measuring, analyzing and communicating of financial information majorly on economic entities(Needles, 2013).According to accounting, an economic entity is generally any organization or unit in society, for example, hospitals, schools, and companies. Accounting is also referred to as the language of business by particular individual in the field (Bishop, 2013). It’s also important to note that accounting and financial accounting are usually used as synonyms. As a field, it can be further divided into various sub fields, these include management accounting, tax accounting, auditing, and financial accounting (Christodoulou, 2001). Financial accounting deals with a company’s financial information, providing financial data, for example, statements on finance, which can be used to guide investors, suppliers, and regulators i.e. externals. Financial accounting provides information that is usually used to guide external stake holders of a business organization (Horngren, 2006). Management accounting on the other hand collects data, analyzes it, and provides information intended to guide the management team of the business organization. Unlike financial accounting, management accounting reports or provides information meant for internal use (Richard P, 1981). The process of summarizing financial transactions is usually referred to as book keeping, where double entry book keeping system is the most commonly used. A lot of financial organizations facilitate accounting, for example, standard setters, professional bodies as well as established accounting firms. Managing is the process of coordinating the efforts of other individuals so as to reach the intended objectives and goals by effectively and efficiently utilizing the available resources. It includes a whole range of processes, for example, controlling, staffing, planning, and leading any an organization or financial entity in accomplishing and dealing with its goals (Richard, 2003). It also entails resourcing, which is the manipulation and deployment of financial resources, natural resources, human resources, and technological resources (Christodoulou, 2001). According to Henry Fayol (1841-1925), it is an activity that involves the identification of the missing skills, procedures, rules, identifying and sticking to the identified mission, as well as manipulating the human resources within an organization so as to improve the efficiency and effectiveness of that particular organization or enterprise. Christodoulou (2001) explains that in order for this to occur, organizations must develop an efficient and effective internal communication system, and this would play a role in motivating its workforce (Christodoulou, 2001). From the above description by Fayol, it can be deduced that management is therefore not the manipulation of automated programs or machines and the mechanisms that run them, but it’s the manipulation of human capital and available resources with a goal of leading a financial entity to success (Chorafas, 2007). Management, therefore, is omnipresent, and has a very wide range of uses and applications. Therefore, management must have humans, for example, accountants to provide financial statements meant to be used internally to guide the management team, a positive organization endeavor, human motivation, economic measure, for example, profits, and proper communication especially internally, goals and plans (Chorafas, 2007). Henri Fayol bases his arguments on the functionalist point of view, looking and critically analyzing the key functions of management so as to draw a conclusion to its vital existence and importance to a financial entity or enterprise (Chorafas, 2007). From this he clearly draws 6 major functions of management and this include coordinating, organizing, forecasting, controlling, commanding, and planning. Henri Fayol is a major contributor to majority of both the old and contemporary concepts on management (Cardy, 2008). Standard setting is a careful and critical procedure that aids in identifying levels of achievement or proficiency or and the cut scores relating to that achievement. They are mainly studies of research conducted by organizations on behalf of other organizations to determine cut scores on the proficiency of a particular field (Nedelsky, 1954). There are two types of standard setting studies, these include the item centered studies and the person centered studies. Item centered standard setting majorly relate to non-reference tests as well as criterion reference tests. However, person centered studies focus on critically evaluating the examinee (Cardy, 2008). It might seem appropriate, but it has a few challenges and the major one being that the examinees can never be captive populations as can be a list of particular items (Zeiky, 2001). This is mainly influential when it comes to the management looking for appropriate and qualified individuals to fill its ranks. It’s a very important tool guide for the human resource aspect of management. A budget is a quantitative expressing of a plan that is usually defined or put for a period of time. This quantitative expression can include costs, assets, cash flows, expenses, assets, revenues, liabilities as well as resource quantities (Cardy, 2008). Sheffrin (2003) explains that this concept emanates from a French word, which is called, Bougette. This is a term which means a quantified plan for a coming accounting period that is fully financial(Sheffrin, 2003).It expresses key plans of the business as well as the events and activities in measurable terms. Budgeting is divided into business startup business, corporate budget, event management budget, and government budget. A business startup business is the act of calculating and quantitatively stating how much it would cost to start a small business (Cardy, 2008). Corporate budget is budget by a company; it doesn’t necessarily have to be a finished budget but is usually compiled annually. An event management budget is simply a tool for an event organizer; it quantitatively expresses shows what is required in an event (Cardy, 2008). A government budget is a summary of the intended use of the collected revenues in a country. Postmodernism is a late 20th century theoretical framework that emphasizes on the movement in architecture, and arts and critics that came after the shift from modernism (Cardy, 2008). The theoretical framework has staunch interpretations on literature, history, art, philosophy, culture, economics, and literacy critics. It has been used with a variety of movements in music, art and literature (Chorafas, 2007). The theoretical frame work gives a lot of detail on various fields as mentioned above and these include economics. Economics is simply a social science that critically analyzes ways of life of population i.e. income generating activities and sources of livelihood. With postmodernism, we are able to draw clear conclusions on the changes of that occurred in income generating activities from the modernization period to the post-modern period that most societies are in right now (Chorafas, 2007). Relating to management and how accounting practices aid managers in improving the management of various financial entities, Sources state that the first book of accounts was written in India by Chanakya (Chorafas, 2007). This was during the time of emperor Mourya. This shows that accounting is 1000 years old and can be traced to past civilizations. With post-modernism, we can clearly see improvements in accountancy, through critics and skeptical remarks, the field has been improved to greatly aid external parties to a financial entity i.e (Chorafas, 2007). suppliers, but most effectively to guide managers in the proper running of internal activities of financial entities, with the incorporation of new cross accounting managerial skills such as standard setting and budgeting techniques. So, how really does an accountant aid in the management process? In today’s very competitive business environment, organizations or financial entities need to fight for customers. Accountants play a very vital role in ensuring commercial success of any financial entity, this they make possible through their increasingly valuable skills and knowledge that if effectively used gives a business a competitive advantage against its competitors in the industry under consideration (Cardy, 2008). Mangers of organizations will always have concerns on an enterprises performance, for example, profitability and sales. To properly satisfy these concerns and make informed decisions about them, managers need particular data to be supplied to them by accountants in the form of final accounts. These data is very crucial, because it guides managers in assessing what is likely to happen if a particular action, actions are taken or what is likely to happen in the case no action at all is take. In the current post-modern world, an accountant input has been crucial and is very influential in various activities of businesses. They serve various roles within and enterprise, but majority of them the role of advising the management and there are instances where some get to the managerial positions (Chorafas, 2007). Accountants as well as other members of the management team can easily understand and improve standard setting as well as budgeting. Through the great deal of knowledge the accountants have, they critically evaluate the information they have to see which form standard setting would work best for the financial entity of concern, whether its item based or person based. Additionally, the information collected by accountants and later critically analyzed, provides important data that can be used to influence the qualitative expression of a business’s plan within a given period i.e. budget which is a very important terminology in both micro and macroeconomics (Chorafas, 2007). This is because, with a budget line, one can draw clear tradeoffs between goods put out for sale or services being offered. It forces managers to put into consideration that conditions are always going to change and that counter measure should be taken immediately by speculating or foreseeing problems in the near future. Budgeting also helps managers to coordinate activities in the organization (Chorafas, 2007). This is mainly done by making them analyze how their operations interact with the operations of other departments in the organization. Bibliography BISHOP, P. (2013). Peggy Bishop and why accounting is the language of business. Knowledge @ Wrton High school. CARDY, R. L. (2008). Mangement, people, performance, change. New York: McGraw Hill. CHRISTODOULOU, M. (2001). UK auditors critisized on banks crisis. wall street journal. Top of Form CHORAFAS, D. N. (2007). Strategic business planning for accountants: Methods, tools and case studies. Oxford: CIMA. Bottom of Form HORNGREN, C. (2006). Cost accounting: A managerial emphasais. New jersey: Pearson Prentince Hall. NEDELSKY. (1954). Absolute grading standards for objective tests. Education and psychological measurements, 3-19. NEEDLES. (2013). Principles of financial accounting. financial accounting stories. PERKS. (1993). Accounting and society. London: Chapman & Hall. RICHARD P, W. (1981). Evaluations of accounting journal and department quality. The accounting review, 596-612. RICHARD, B. (2003). Voccational business. Training, developing and motivating people, 51. SHEFFRIN, S. M. (2003). Economics, principles in action. upper saddle river, 502. ZEIKY. (2001). So much has changed: How the setting of cut scores has evzolved since the 1980s. setting performance standards, 19-52. Read More