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Accountant Principle

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5038

Accountant Principle

Uploaded by

minhne18122001
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Table of Contents

I. Introduction.............................................................................................................................................2
II. Contents..................................................................................................................................................2
1. The role of accounting in an organisation.............................................................................................2
1.1 Definition of accounting..................................................................................................................2
1.2 General role of accounting in an organisation.................................................................................2
1.3 Different types of accounting..........................................................................................................4
1.4 The main users of accounting information......................................................................................5
1.5 Career opportunities in accounting.................................................................................................6
2. The context and purpose of financial and management accounting.......................................................6
2.1 Clarifying the roles and importance of accounting as an information system..................................6
2.2 Distinguishing between financial accounting and management accounting in terms of purpose and
scope....................................................................................................................................................7
2.3 Discussing about the organisational constraints and threats following the concepts of accounting
regulations (GAAP, IFRS from FASB) and principles as well as ethics in accounting...............................9
III. Conclusion............................................................................................................................................12
IV. References...........................................................................................................................................13

1
I. Introduction
As a trainee working in the SME units of a major accountancy firm, with headquarters in central London and
UK branches in Birmingham and Southampton. Last year the group's turnover was £200 million, 25% of
which came from schools outside the UK, mainly in Southeast Asia, and they have a small branch in
Vietnam. I joined the company as an intern, and the company's senior management asked me to prepare a
blog for the purpose of marketing and promoting my accounting services to customers new and current. The
name of the blog is “The role of accounting in an organization”.
The goal and main content of the blog mentioned include 2 parts, part 1 introduces the role of accountants
in the organization, this part will talk more about the definition and role of accountants, types of
accountants in businesses, types of accountants in businesses, main users of accounting information and
career opportunities in the field of accounting. The second part of the blog discusses the background and
purpose of financial accounting and management accounting, in this part will clarify the role and importance
of accounting as an information system, then that's analysis. Distinguish between financial accounting and
management accounting in terms of subject matter and scope, and finally discuss organizational limitations
related to the concepts of accounting regulations (GAAP, IFRS from FASB) as well as as principles and ethics in
accounting.
II. Contents
1. The role of accounting in an organisation
1.1 Definition of accounting
Accounting related to collect, analyze, measure and communicate financial information. The ultimate aim is
to help those using this information to make more informed decisions. Unless the financial information
being communicated can lead to better decisions being made, there really is no point in producing it.
Source: Atrill and McLaney (2019)
1.2 General role of accounting in an organisation
- Accouting plays a vital role in every organization, regardless of size or industry. Accounting helps
organizations to:
+ Track their financial performance: accounting systems track all of an organization's financial
transactions, including income, expenses, assets, and liabilities. This information is used to generate financial
statements, which provide a snapshot of the organization's financial health.
+ Make informed business decisions: accounting data can be used to make informed decisions about
pricing, product development, marketing, and other areas of the business. For example, an organization can
use accounting data to determine which products are most profitable and which markets are most lucrative.

2
+ Comply with financial regulations: organizations are subject to a variety of financial regulations,
both at the local and national levels. Accounting systems help organizations to comply with these regulations
by ensuring that their financial records are accurate and complete.
+ Attract and retain investors: investors want to see that the organizations they invest in are well-
managed and financially sound. Accounting information provides investors with the data they need to make
informed investment decisions.
- In addition to these general roles, accounting can also be used to support specific organizational goals.
For example: An organization that is planning to expand into a new market can use accounting data to assess
the risks and rewards of the expansion. Or, an organization that is looking to improve its efficiency can use
accounting data to identify areas where costs can be reduced.
Source: (indeed, 2023)
- It helps organizations to track their financial performance, make informed business decisions, comply
with financial regulations, and attract and retain investors. This is a specific example of how accounting is
used in organizations
For example
According to the 2022 consolidated financial statements of Sabeco, the company's cost of materials
accounted for the largest proportion of production and operating costs, with a ratio of 72.3%. Specifically,
Sabeco's cost of materials in 2022 was VND 28,729 billion, up 11.2% from 2021.
- Sabeco's cost of materials includes the following items:
+ Drinks: This is the main raw material cost for the production of beer, wine, and soft drinks, including
barley, hops, sugar, water, etc.
+ Packaging: This is the cost of raw materials for packaging products, including bottles, cans, and
cartons, etc.
+ Fuel: This is the cost of raw materials for operating factories, including electricity, water, and gas,
etc.
+ Other raw material costs: These are other raw material costs, including secondary packaging and
additives, etc.
In 2022, the cost of materials increased mainly due to the increase in input prices, especially the prices of
barley, hops, and sugar.

3
Table1: Analysis table of Sabeco's raw material costs in 2022
Item Value (billion VND) Percentage (%)
Drink 23.779 82,8
Packaging 3.756 13,0
Fuel 1.194 4,1
Other raw material costs 65 0,2
Total 28.729 100

Source: (Sabeco, 2023)


1.3 Different types of accounting
- There are many different types of accounting, each with its own specific focus. Some of the most
common types of accounting include:
+ Financial accounting: Financial accounting is the process of recording, summarizing, and reporting
financial transactions. It is used to create financial statements, which provide a snapshot of an organization's
financial health. Financial statements are used by investors, creditors, and other stakeholders to make
informed decisions about the organization.
+ Managerial accounting: Managerial accounting is the process of using accounting data to help
managers make informed business decisions. It is used to track costs, analyze performance, and forecast
future results. Managerial accounting information is not typically shared with the public, but it is essential
for internal decision-making.
+ Cost accounting: Cost accounting is the process of tracking and analyzing the costs associated with
producing goods or services. It is used to improve efficiency and profitability. Cost accounting information
can be used to set prices, make product development decisions, and identify areas where costs can be
reduced.
+ Revenue accounting: revenue in a way to understand is the total amount of money received from
the sale of goods, service services, financial activities and some other activities that bring in money for the
company. Normally revenue accounting is only a small department and should be managed by the chief
accountant. Revenue accountants will undertake 2 main tasks: They must be responsible for making
statistics and synthesizing sales documents. After completing the recording of sales documents, they must
review the financial situation of the customer.
+ Tax accounting: Tax accounting is the process of preparing and filing tax returns. It is used to ensure
that organizations comply with all applicable tax laws and regulations. Tax accountants also help
organizations to minimize their tax liability. Tax accounting is quite simple and is done by day, month,
quarter, year. Tax accountants must collect, organize, processand store invoices and documents on a daily

4
bas Monthly tax reports must be made quarterly Annual: At the beginning of the year, the license tax
obligation must be fulfilled. At the end of the year, they must finalize corporate income (CIT), personal
income (PIT), then make financial statements.
+ General Accounting: General accounting is one of the most important types of accounting in
businesses. It helps to cover all accounting - financial data in the business. With great influence in the
business, general accounting also requires many steps to be performed by each, every month, quarter, and
year. Daily must collect, process, store and make payment, collect, export - import invoices. On a monthly
basis, the general accountant must: Consider public - debt of both customers and suppliers, input and output
invoices. Prepare tax reports, use of invoices, payroll, bonus and deductions according to salary. Valuation of
inventory, depreciation of fixed assets, and cost of goods sold analysis. Quarterly, the general accounting
tasks to do are: Check the accounting vouchers and invoices recorded in the accounting books. Make a
value-added declaration (VAT) and calculate PIT and CIT. Then prepare financial statements, quarterly
management report.
Source: (Coursera, 2023)
1.4 The main users of accounting information
- Internal Users:
+ Management: Managers at various levels use accounting information to set goals, plan strategies,
monitor performance, and make informed decisions about the company's operations.
+ Employees: Employees across different departments use accounting information to assess their
performance, evaluate their contributions to organizational goals, and understand the financial health of the
company.
+ Owners/Shareholders: Owners or shareholders use accounting information to assess the
profitability and value of their investment in the company.
- External Users:
+ Investors: Investors, such as individuals, institutions, or venture capitalists, use accounting
information to analyze the financial performance and stability of a company before making investment
decisions.
+ Creditors: Banks, lenders, and suppliers use accounting information to evaluate the
creditworthiness of a company before extending loans or offering favorable terms.
+ Government and Regulatory Agencies: Government bodies and regulatory agencies rely on
accounting information to ensure compliance with financial reporting regulations, taxation requirements,
and other legal obligations.
+ Customers: Customers may use accounting information to assess the financial stability and
trustworthiness of a company before engaging in business transactions.

5
Source: Atrill and McLaney (2019)

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1.5 Career opportunities in accounting
- Accounting offers a wide range of career opportunities in various industries and sectors. There are
some popular career paths in accounting:
+ Public Accountant: Working in public accounting firms, you can provide services such as auditing,
tax planning, consulting, and financial advisory to clients. This role often leads to becoming a Certified Public
Accountant (CPA).
+ Corporate Accountant: Many businesses have internal accounting departments where accountants
manage financial records, prepare financial statements, analyze costs, and help with budgeting and
forecasting.
+ Government Accountant: Working for government agencies at the local, state, or federal level,
accountants ensure compliance with regulations, perform audits, and manage public funds.
+ Forensic Accountant: In this specialized field, accountants investigate financial crimes, such as fraud
and embezzlement. They analyze financial data, trace funds, and provide expert testimony in legal
proceedings.
+ Financial Analyst: Analyzing financial data, conducting market research, and making investment
recommendations are key responsibilities of financial analysts. They help individuals and organizations make
informed decisions regarding investments, mergers, acquisitions, and other financial matters.
+ Tax Specialist: Tax accountants specialize in tax planning, preparation, and compliance for
individuals, businesses, and corporations. They stay updated on tax laws, minimize tax liabilities, and ensure
accurate filings.
+ Internal Auditor: Internal auditors review organizational operations, systems, and controls to
identify risks, improve efficiency, and ensure compliance with policies and regulations.
+ Management Accountant: These accountants work closely with management teams, providing
financial information and analysis to assist in strategic decision-making, cost control, and performance
evaluation.
+ Risk Advisor: Accountants who specialize in risk assessment and management help businesses
identify potential risks, implement controls, and develop strategies to mitigate financial and operational
risks.
Source: (Team, 2022)
2. The context and purpose of financial and management accounting
2.1 Clarifying the roles and importance of accounting as an information system
- Recording and capturing financial transactions: Accounting systems record and organize financial
transactions such as sales, purchases, and expenses. This systematic recording ensures that every business
activity is properly documented and tracked.

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- Processing and summarizing financial data: Once the transactions are recorded, accounting systems
process and summarize the data into useful formats like financial statements, reports, and ledgers. This
analysis enables managers and stakeholders to understand the financial health of the organization.
- Providing timely and accurate information: Accounting information systems generate timely and
accurate financial information, enabling decision-makers to assess the current state of the business, identify
trends, and make informed decisions. This information helps in setting operational and strategic goals.
- Facilitating internal and external reporting: Accounting systems are responsible for preparing financial
statements like the balance sheet, income statement, and cash flow statement. These statements are vital
for communicating the company's financial performance to shareholders, investors, lenders, and other
stakeholders.
- Supporting budgeting and planning: Accounting systems provide historical financial data that can be
used as a basis for forecasting future revenues, costs, and cash flows. This assists in creating budgets, setting
targets, and evaluating actual performance against planned benchmarks.
- Ensuring compliance with laws and regulations: Accounting information systems help organizations
adhere to legal and regulatory requirements. By maintaining accurate records and producing financial
statements according to accepted accounting principles, companies demonstrate transparency and
accountability.
- Assisting in performance evaluation: Accounting systems enable the assessment of an organization's
financial performance by measuring key metrics such as profitability, liquidity, solvency, and efficiency. This
evaluation helps in identifying areas for improvement and monitoring progress towards goals.
Source: (quandrantalpha, 2023)
2.2 Distinguishing between financial accounting and management accounting in terms of purpose and
scope
Table 2: Distinguishing table between financial accounting and management accounting

Financial accounting Management accounting


Purpose Provide information about a The purpose of management
company's financial performance accounting is to provide
and position to internal and information and analysis to help
external users. This information is managers make informed
used to make informed decisions decisions about the planning,
about the company, such as operation, and control of a
whether to invest in it, lend it business.
money, or buy its products or
services.

8
User object The users of financial accounting The users of management
information: Managers, owners, accounting information are
employees, investors, creditors,… primarily the internal users of
the organization, including
managers at all levels such as a
front-line supervisor, a
department manager, a division
manager, a CEO
Scope The scope of financial accounting The scope of management
includes the recording, accounting is broad and
summarizing, and reporting of encompasses a wide range of
financial transactions and events activities, including: cost
to provide information that is accounting, budgeting,
useful for decision-making performance measurement,
decision support, strategic
planning
Reporting period The reporting period of financial The reporting period of
accounting is the period of time management accounting is the
for which a company reports its period of time for which
financial performance and management accountants
financial position. It is typically prepare reports for internal
quarterly or annually users of the organization. The
reporting period for
management accounting can be
daily, weekly, monthly,
quarterly, or annually
Statutory Compulsory by law: Books and There is no compulsion.
Compulsory reports of financial accountants in
all businesses must be consistent.

(Franklin, 2019)

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2.3 Discussing about the organisational constraints and threats following the concepts of accounting
regulations (GAAP, IFRS from FASB) and principles as well as ethics in accounting.
* Generally Accepted Accounting Principles (GAAP)
GAAP is a set of detailed accounting guidelines and standards meant to ensure publicly companies are
compiling and reporting clear and consistent financial information. Any company following GAAP procedures
will produce a financial report comparable to other companies in the same industry. This provides investors,
creditors and other interested parties an efficient way to investigate and evaluate a company or organization
on a financial level. Under GAAP, even specific details such as tax preparation and asset or liability
declarations are reported in a standardized manner.
- There are some Key Principles of GAAP
+ Principle of Regularity: GAAP must always be followed by accountants and businesses when
handling financial information. At no point can a company or financial team choose to ignore or modify any
of the regulations.
+ Principle of Consistency: Accountants are responsible for using the same standards and practices for
all accounting periods. If a method or practice is changed, or if you hire a new accountant with a different
system, the change must be fully documented and justified in the footnotes of the financial statements. This
principle ensures that any company’s internal financial documentation is consistent over time.
+ Principle of Sincerity: This principle states that any accountant or accounting team hired by a
company is obligated to provide the most unbiased, accurate financial report possible. Although a business
may be in a bad financial situation, one that may even compromise its future, the accountant may only
report on the situation as it is.
+ Principle of Permanence of Methods: This principle requires accountants to use the same reporting
method procedures across all the financial statements prepared. Though it is similar to the second principle,
it narrows in specifically on financial reports—ensuring any report prepared by one company can be easily
compared to one another.
+ Principle of Non-Compensation: All negative and positive values on a financial statement, regardless
of how they reflect upon the company, must be clearly reported by the accounting team. Accountants
cannot try to make things look better by compensating a debt with an asset or an expense with revenue.
+ Principle of Prudence: Formally reported data must be fact-based and dependent on clear, concrete
numbers. It’s easy to start wandering into speculation when you talk about finance especially when thinking
about the future of the company and this principle makes sure to keep accountants firmly grounded in
reality. Businesses can still engage in speculation and forecasting, but they cannot add this information to
formal financial statements.
+ Principle of Continuity: When compiling reports, accountants must assume a business will continue
to operate. The principle applies regardless of the status of the company.
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+ Principle of Periodicity: Essentially, this principle requires accountants to report financial
information only in the relevant accounting period. For example, if an accounting team is compiling a report
on the revenue earned within a quarter, the report must focus only on that exact period. This is intended to
prevent any possibility of fudging numbers or data across time, if a company earns more one quarter than
the next, the accountant must truthfully represent this fact instead of changing the period dates or altering
the data to hide or reduce the difference.
+ Principle of Materiality: Accountants must, to the best of their abilities, fully and clearly disclose all
the available financial data of the company. They are obligated to acquire this information from the
business, which is why an accounting team’s requests may seem intensely thorough when requesting
financial information.
+ Principle of Utmost Good Faith: Any person or party involved in, or responsible for, the financial
side of a business must be honest in all reports and transactions. Along with several other principles, this
serves to maintain an ethical standard and responsibility in all financial dealings.
Source: (Crial, 2022)
* International Financial Reporting Standards (IFRS)
International Financial Reporting Standards (IFRS) are a set of accounting standards that are issued by the
International Accounting Standards Board (IASB). IFRS are designed to provide a common set of accounting
standards for companies around the world to use. This makes it easier for investors and other users of financial
statements to compare the financial performance of companies from different countries.
- IFRS covers a wide range of accounting activities. There are certain aspects of business practice for
which IFRS set mandatory rules.
+ Statement of Financial Position: This is the balance sheet. IFRS influences the ways in which the
components of a balance sheet are reported.
+ Statement of Comprehensive Income: This can take the form of one statement or be separated into
a profit and loss statement and a statement of other income, including property and equipment.
+ Statement of Changes in Equity: Also known as a statement of retained earnings, this documents
the company's change in earnings or profit for the given financial period.
+ Statement of Cash Flows: This report summarizes the company's financial transactions in the given
period, separating cash flow into operations, investing, and financing.
In addition to these basic reports, a company must give a summary of its accounting policies. The full report is
often seen side by side with the previous report to show the changes in profit and loss.
Source: (Samani, 2023)

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* Principles and ethics in accounting
The principles and ethics of accounting are important because they guide accountants to act in a
professional and responsible manner. These principles and ethics are essential for maintaining the public's
trust in the accounting profession and ensuring that financial information is accurate and reliable.
- Integrity: Accountants should be honest and ethical in all of their dealings. This means being truthful
and accurate in their financial reporting, and avoiding any conflicts of interest.
- Objectivity: Accountants should be objective and unbiased in their work. This means avoiding personal
opinions or biases in their financial reporting, and making judgments based on sound accounting principles
and evidence.
- Professional competence and due care: Accountants should have the necessary skills and knowledge to
perform their jobs competently. They should also exercise due care in their work, which means taking
reasonable precautions to avoid errors and omissions.
- Confidentiality: Accountants should keep confidential all information that they obtain in the course of
their work. This means not disclosing such information to any third party without the client's permission,
unless required to do so by law.
- Professional behavior: Accountants should conduct themselves in a professional manner at all times.
This means being respectful of their clients and colleagues, and avoiding any behavior that could discredit
the accounting profession.
The basic accounting principles are a set of guidelines that companies and other organizations follow when
reporting financial information. These principles help to ensure that financial statements are accurate, reliable,
and comparable.
Source: (Singh, 2023)
- The basic accounting principles are:
+ Revenue recognition principle: Revenue is recognized when it is earned and realized. This means
that revenue is not recognized until the goods or services have been delivered to the customer and the
payment has been received or is reasonably assured.
+ Expense recognition principle: Expenses are recognized when they are incurred. This means that
expenses are recognized when the company becomes liable to pay them, regardless of whether they have
been paid yet.
+ Matching principle: The matching principle states that expenses should be matched with the
revenues they generate. This means that expenses incurred to generate revenue in one period should be
recognized in the same period as the revenue.
+ Cost principle: The cost principle states that assets should be recorded at their historical cost. This
means that assets should be recorded at the amount that was paid for them when they were acquired.

12
+ Economic entity assumption: The economic entity assumption states that a business is a separate
entity from its owners. This means that the financial records of the business should be kept separate from
the personal financial records of its owners.
+ Full disclosure principle: The full disclosure principle states that all relevant financial information
should be disclosed in the financial statements. This means that companies should disclose all information
that is necessary for users of the financial statements to understand the company's financial position and
performance.
+ Going concern principle: The going concern principle states that a company expects to continue
operating in the foreseeable future. This means that the company's financial statements are prepared on the
assumption that the company will remain in business for at least the next year.
+ Monetary unit principle: The monetary unit principle states that all financial transactions should be
recorded in a single monetary unit. This means that companies must choose a currency and record all
financial transactions in that currency.
Source: (Accountants, 2009)
For example: Sabeco has started applying IFRS to its 2016 financial statements. Sabeco has applied IFRS to
all of the company's financial statements, consolidated financial statements, separate financial statements,
and cash flow statements. Currency, balance sheet, income statement, explanatory report. Examples of
Sabeco's application of GAAP standards include revenue accounting standards and cost accounting
standards. According to revenue accounting standards, Sabeco's revenue is recognized when the business
has fulfilled its obligations under the contract and the customer has received economic benefits from the
goods and services provided. In the 2022 financial report, Sabeco recorded revenue from sales and service
provision of VND 39,696 billion. This revenue includes revenue from sales of beer, soft drinks and other
products. According to cost accounting standards, costs are recorded when incurred and allocated to related
accounting periods. In its 2022 financial report, Sabeco recorded production and business costs of VND
27,548 billion. This cost includes raw material costs, labor costs and manufacturing overhead costs applying
IFRS has brought great benefits to Sabeco, contributing to improving operating efficiency and enhancing the
company's competitiveness. In 2022, Sabeco's total assets will reach VND 37,094 billion, growing 12.8%
compared to 2021. Of which, short-term assets account for 65.8% of total assets, growing 15.6% compared
to 2021.
Source: (Sabeco, 2023)
III. Conclusion
The blog has assisted us in better understanding accounting, as well as the role of accountants in a business,
types of accountants, primary users of accounting information, and future job options. after completing a
major in accounting. The next step is to define the role and significance of accounting as an information
system, the goal and scope of financial accounting and management accounting, and lastly the concepts of
GAAP accounting regulations, IFRS from the FASB, and accounting industry ethics and standards. Accounting
13
is clearly a critical component of every organization. If a company wants to grow in a sustainable way, it
needs a professional accounting service with reliable information to generate acceptable financial reports.
IV. References
Atrill, P. and McLaney, E.J. (2019). Accounting and Finance for Non-specialists. 11th ed. Pearson Education.
Accountants. IFo. (2009). Code of Ethics for Professional Accountants. [Online]
Available at: https://www.ifac.org/_flysystem/azure-private/publications/files/Code-of-
Ethics_July_2009_FINAL_02_23_10.pdf [Accessed 18 Oct 2023].
Coursera. (2023). 8 Types of Accounting: Careers, Degrees, and Salaries. [Online]
Available at: https://www.coursera.org/articles/accounting [Accessed 18 Oct 2023].
Crial. (2022). Generally Accepted Accounting Principles (GAAP) Guide. [Online]
Available at: https://www.forbes.com/advisor/business/generally-accepted-accounting-principles-gaap-
guide/#what_is_gaap_section
[Accessed 18 Oct 2023].
Franklin. (2019). Priciples of accounting, Volume 2: Managerial Accounting. [Online]
Available at: https://openstax.org/books/principles-managerial-accounting/pages/1-2-distinguish-between-
financial-and-managerial-accounting [Accessed 18 Oct 2023].
indeed. (2023). Accounting Skills: Key Duties, Roles and Responsibilities of Accountants. [Online]
Available at: https://www.indeed.com/hire/c/info/accounting-skills?co=US#1 [Accessed 18 Oct 2023].
Sabeco. (2023). Bao cao tai chinh hop nhat 2022. [Online]
Available at: https://www.sabeco.com.vn/Data/Sites/1/media/co%20dong/bao%20cao%20tai%20chinh/
2022/29-03-2023/2022FS-CONSO-VN.pdf [Accessed 18 Oct 2023].
Singh. (2023). What Is Accounting Ethics?. [Online]
Available at: https://www.wallstreetoasis.com/resources/skills/accounting/accounting-ethics [Accessed 18
Oct 2023].
Team indeed. (2022). 22 Careers in Accounting With High Salaries. [Online]
Available at: https://www.indeed.com/career-advice/finding-a-job/accounting-careers [Accessed 18 Oct
2023].
Niti Samani. (2023). What is IFRS?. [Online]
Available at: https://www.deskera.com/blog/ifrs/ [Accessed 18 Oct 2023].
quadrantalpha. (2023). What is the Role of Accounting Information System?. [Online]
Available at: https://quadrantalpha.com/accounting-information-system-roles/ [Accessed 18 Oct 2023].

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