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 Table of Contents
Introduction...................................................................................................................... 3

I. Understanding of the basic theory and practice of financial and managerial accounting
and its basic terms and concepts.....................................................................................3
Financial Accounting.................................................................................................... 3
Managerial Accounting.................................................................................................6

II. The value of financial and management accounting processes to a Business............7

Financial Accounting....................................................................................................7
Managerial Accounting.................................................................................................8

III. Demonstration of understanding of the current contemporary issues affecting the

accounting discipline .......................................................................................................8

Conclusion.....................................................................................................................11

Appendix........................................................................................................................ 12
References.....................................................................................................................13
Poster

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Introduction
Non-accountants should take note of the many reports that are part of a company's published
annual report and accounts since they offer a wealth of background knowledge about the
business and its operations. Today, a lot of this information is required by law or by standards
set by professions. The majority of the accounts section is required, with the exception of the
periodic summary. Because it informs shareholders and other users about the company's
earnings, cash flow, ownership of assets, and liabilities incurred, the information it includes is
regarded as essential (Appendix 1). Such data can offer the fundamentals for a deep
examination of the company's performance in order to evaluate its chances for the future
(Dyson & Franklin, 2020)

I. Understanding of the basic theory and practice of financial and

management accounting and its basic terms and concepts.

Financial Accounting

The basics of creating financial accounts, the legal framework surrounding financial statements,
and the qualitative traits of meaningful financial information are introduced in financial
accounting. It includes everything from the recording of transactions to the creation of financial
statements. The goal of financial accounting (FA) is to increase knowledge and comprehension
of the fundamental ideas and principles of financial accounting. Additionally, it offers the
technical know-how required to use double-entry accounting procedures (ACCA Global, no
date)

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 (ACCA Global, no date)

The five primary categories of financial data are represented by the statements used in financial
accounting and are as follows:

Revenues - Sales revenue for goods and services as well as revenue from additional sources,
such as interest and dividends, are all included in this.

Expenses - These are the expenses related to creating goods and services, including those for
marketing, payroll, and research & development.

Assets - These include privately owned tangible (like buildings and computers) and intangible
(like patents and trademarks) property.

Liabilities - These are all unpaid obligations, such as rent or loans.

Equity - You might obtain the company's equity, which is what a company is worth, by paying off
the company's obligations and selling off its assets (Investopedia, 2023)

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The cash method and the accrual method are the two main kinds of financial accounting and the
timing of when transactions are recorded is the primary distinction between them.

Accrual Method

The accrual approach of financial accounting records transactions without regard to how much
money was exchanged. When a bill is sent, revenue is collected and not when it actually
arrives (when the payment is paid). Expenses are noted when paid, not when an invoice is
paid. The impact of a transaction over time is recognised via accrual accounting (Investopedia,
2023)

Cash Method

The financial accounting cash technique is a simpler, less exacting way to create financial
statements: Only when there is cash involved are transactions recorded. Only when the
transaction has been concluded with the facilitation of money are revenue and expenses
recorded (Investopedia, 2023)

(Investopedia, 2023)

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Managerial Accounting

According to CIMA, Official Terminology (2005) management accounting is the application of

accounting and financial management principles to for-profit and not-for-profit enterprises in the
public and private sectors to create, defend, preserve, and grow value for stakeholders (Dyson
& Franklin, 2020).

Managerial accounting covers various aspects of accounting that aim to enhance the quality of
information provided to management regarding business performance measurements.
Managerial accountants utilize data pertaining to the costs and sales revenue of goods and
services produced by the company. Cost accounting, which is a significant subset of managerial
accounting, concentrates on determining the overall production costs of a company by
analyzing both the variable costs associated with each production phase and the fixed costs.
This enables businesses to identify and minimize unnecessary expenses while maximizing
profits (Investopedia, 2022)

Financial Accounting vs. Managerial Accounting (Appendix 2)

The primary difference between financial accounting and management accounting lies in their
target audiences. Financial accounting aids internal managers in making decisions, whereas
management accounting provides information to external parties. Managerial accounting
assesses financial performance through internal reports that scrutinize operations and aims to
facilitate informed decision-making. However, it is not an appropriate basis for preparing
financial statements.

Operational data is utilised in managerial accounting in particular ways to gather information.

Cost accounting, for instance, could be used to monitor overhead, fixed, and variable costs
throughout a production process. Afterwards, a business may opt to move to a lesser quality,
less priced sort of raw materials using this cost information (Investopedia, 2023)

Managerial accounting serves the purposes of planning, making decisions, and exercising
control within an organization. These three fundamental pillars form the basis of the field.
Additionally, forecasting future trends and tracking performance are vital elements incorporated
within managerial accounting.

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 II. The value of financial and management accounting processes to a
business.

Financial Accounting is important because it helps with the honest and correct reporting of
financial information, the financial accounting process is essential for organisations. Following
accounting regulations builds the company's credibility with stakeholders and inspires faith in its
financial stability. Furthermore, open financial reporting encourages trust and responsibility, both
of which are essential for luring in new investors and preserving strong bonds with current
owners (Dyson & Franklin, 2020)

Financial accounting abides by five fundamental principles that serve as guiding principles for
companies when preparing their financial statements. These principles form the basis of all
financial accounting technical guidance and are centered around the accrual method of
accounting.

Revenue Recognition Principle – According to this principle, revenue should be recognized

when it is earned. It outlines how much revenue should be recorded, when the revenue should
be reported, and under what circumstances revenue should not be included in the financial
statements.

Cost Principle – The Cost Principle determines the basis for recording costs. It governs the
amount of expenses that should be recorded, typically at the transaction cost, and also guides
the appropriate recognition of expenses over time for specific situations, such as depreciating
an asset over its useful life.

Matching Principle – This principle states that revenue and expenses should be recorded in the
same accounting period in which they are incurred. The objective is to avoid a scenario where a
company records revenue in one period but delays recording the associated costs until another
period, ensuring a more accurate representation of financial performance.

Full Disclosure Principle – The Full Disclosure Principle requires financial statements to be
prepared with transparency, including footnotes, schedules, or commentary that provides

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comprehensive information about the financial position of a company. This principle ensures that
a sufficient level of information is disclosed within the financial statements.

Objectivity Principle – The Objectivity Principle emphasizes that while financial accounting
involves estimations and professional judgments, financial statements should be prepared
objectively. It guides the use of technical accounting methods rather than relying on personal
opinions to maintain the integrity and accuracy of financial reporting (Investopedia, 2023).

Financial accounting serves as the structure that establishes the guidelines for preparing
financial statements. These rules govern how a company transforms its business activities into
a set of universally recognized and standardized financial reports. Financial accounting plays a
pivotal role in holding companies accountable for their performance and ensuring transparency
in their operations (Investopedia, 2023).

Managerial accounting plays a vital role in supporting businesses by offering crucial data for
strategic planning, cost management, and performance assessment. By employing tools such
as budgets, variance analysis, and performance reports, managers can pinpoint areas of
concern, seize potential opportunities, and make well-informed decisions to enhance
operational efficiency. This approach fosters proactive resource management and helps the
company achieve its objectives effectively (Dyson & Franklin, 2020).

Managerial accounting plays a crucial role in creating precise and comprehensive financial
statements for internal purposes and shaping a company's long-term plans. The absence of
effective managerial accounting can hinder corporate decision-making and lead to
misconceptions about the company's genuine financial situation. Unlike official documents,
managerial accounting records are not required to adhere to GAAP and can be utilized
internally for various objectives (Investopedia, 2022)

III. Demonstration of understanding of the current contemporary

issues affecting the accounting discipline.

Accounting differs from the more concrete sciences and is not a straightforward mechanical
process. This has several implications. In basic and intermediate accounting courses, the
examples provided are usually simple and may create the illusion that there is minimal
uncertainty or disagreement within the field.

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In various accounting scenarios, accountants must exercise judgment, which involves making
decisions on matters like the appropriate depreciation method and making estimations during
measurement processes. Furthermore, specific accounting standards necessitate choices to be
made, exemplified by IAS 16/AASB 116 Property, Plant and Equipment, where assets can be
measured either at fair value or on a cost basis after acquisition.

Accounting, not being an exact science, entails the establishment of principles and rules
through discussions and consensus-building. This process often involves politics and extensive
consultation with stakeholders, each advocating for their perspectives and self-interests (Wiley,
No date).

Major participants, such as the European Union and the United States, significantly influence
the formulation of accounting standards. For instance, during the global financial crisis, the
European Union's pressure led to the modification of international accounting standards,
allowing banks to retrospectively reclassify assets to improve their reported financial positions.
The implementation of these international accounting standards also affects the content and
structure of accounting requirements.

An important characteristic of international accounting standards is their principle-based

approach. Instead of providing rigid and specific rules, these standards emphasize outlining
principles and concepts that should be applied. The ultimate objective is to ensure that
accounting reports faithfully represent reality (as stated in the accounting Conceptual
Framework) and provide the necessary information for decision-making (Wiley, No date).

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(Wiley, No date)

The Pathways Vision Model depicted in the preceding figure highlights the inherent
uncertainties in accounting, underscoring the significant responsibility accountants bear in
shaping accounting outcomes. It showcases how accountants employ critical thinking to
acknowledge the complexities in recording economic activities and exercise professional
judgment to generate and convey valuable information. This information serves as a reliable
basis for decisions that contribute to the advancement of a thriving society.

This model also emphasizes the pivotal role of professional judgement, which the American
Accounting Association has identified as the defining attribute of the accounting profession. It
highlights the importance of conducting critical analysis before exercising professional
judgement. However, this does not diminish the significance of the technical knowledge you
have acquired. This knowledge forms the foundation of any analysis. Nevertheless, taking a
critical approach involves more than just applying technical knowledge. In order for accounting
to provide information that is useful for optimal decision-making, the question goes beyond

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whether we can account for an item in a certain way; it becomes how we should account for it

(Wiley, No date).

To answer this question, we need to consider various factors. These include exploring
alternative approaches, determining which alternative would provide the best information for
decision-makers, addressing any ethical considerations, and understanding how the information
is used or incorporated into share prices. This necessitates critical thinking, drawing on theory,
research, and an understanding of the principles of the discipline. It involves systematically
questioning, analyzing, and evaluating different aspects of the situation (Wiley, No date).

Conclusion
The published annual report and accounts play a pivotal role in shaping stakeholder decisions
and perceptions of companies listed on the London Stock Exchange. Stakeholders, through an
understanding of financial and management accounting principles, leverage this document to
evaluate the company's performance, make investment decisions, and assess its governance
practices. The value of financial and management accounting processes lies in their ability to
provide transparency, aid decision-making, and foster accountability within businesses.
Additionally, contemporary issues, such as sustainability reporting, technological

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advancements, and integrated reporting, influence the accounting discipline and further
enhance the utility of annual reports for stakeholders in the modern era (Investopedia, 2023)

Appendix

(Dyson &
Franklin, 2020)

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(Dyson & Franklin, 2020)

Reference list
 ACCA Global (no date) Financial Accounting (FA) Essentials on One Page, Available at:

https://www.accaglobal.com/gb/en/student/exam-support-resources/fundamentals-exams-study-
resources/f3/session-cbe-introduction/financial-accounting-fa-essentials-on-one-page.html

(Accessed 27.06.2023)

 ACCA Global (no date) How to approach Financial Accounting (FA), Image Resource,
Available at:

https://www.accaglobal.com/content/dam/ACCA_Global/Students/resourceFinder/pdf23-24/FA
%20Exam_ESSENTIALS%2023-24.pdf

(Accessed 27.06.2023)

 Investopedia (2023) Financial Accounting, Meaning Principles and Why it Matters,

Available at:

https://www.investopedia.com/terms/f/financialaccounting.asp

(Accessed 29.06.2023)

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  Investopedia (2022) Managerial Accounting, Meaning, Pillars and Types, Available at:

https://www.investopedia.com/terms/m/managerialaccounting.asp

(Accessed 29.06.2023)

 John R.D & Ellie F., (2020) Accounting for Non-Accounting Students, 10th ed. United
Kingdom, Pearson Education, Available at:

https://studylib.net/download/25970106

(Accessed 27.06.2023)

 Wiley (No date) Contemporary Issues in Accounting, Available at:

https://catalogimages.wiley.com/images/db/pdf/9780730344803.excerpt.pdf

(Accessed 03.07.2023)

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