ASSIGNMENT 1 FRONT SHEET

Qualification BTEC Level 4 HND Diploma in Business

Unit number and title Unit 5: Accounting Principles

Submission date 5/3/2022 Date Received 1st

submission

Re-submission Date Date Received 2nd

submission

Student Name Nguyen Duc Quang Student ID BH00184

Class PBBA17102 Assessor name Hoang My Linh

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I certify that the assignment submission is entirely my own work and I fully understand the consequences of
plagiarism. I understand that making a false declaration is a form of malpractice.

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 Table of Contents
I. Introduction .................................................................................................................................................. 4

II. What is Accounting?..................................................................................................................................... 4

1. Definition.................................................................................................................................................. 4

2. Importance of Accounting ......................................................................................................................... 4

2.1 Maintains a record of all business transactions ................................................................................... 4

2.2 Facilitates decision-making for management ....................................................................................... 5

2.3 Communicates outcomes .................................................................................................................... 5

2.4 Complies with legal requirements ....................................................................................................... 5

3. Types of Accounting .................................................................................................................................. 6

3.1 Financial Accounting............................................................................................................................ 6

3.2 Managerial Accounting ........................................................................................................................ 6

4. Main users of accounting information ...................................................................................................... 6

5. Career opportunities in accounting ......................................................................................................... 10

III. The context and purpose of financial and management accounting. (P1,P2) .............................................. 11

1. Clarifying the roles and importance of accounting as an information system .......................................... 11

2. Distinguishing between financial accounting and management accounting ............................................ 11

3. Discussing about the organisational constraints and threats following the concepts of accounting
regulations (GAAP, IFRS from FASB) and principles as well asethics in accounting ....................................... 13

3.1 GAAP and IFRS definitions ................................................................................................................. 13

3.2 Compare the standards governing the recognition of transactions in accounting .............................. 14

3.3 Principles as well as ethics in accounting ............................................................................................ 15

IV. Conclusion ................................................................................................................................................. 16

V. References ................................................................................................................................................. 16
I. Introduction

You have most likely heard of accounting in many facets of your life; but have you ever truly
comprehended and know what accounting is, its relevance, and its professions? So, today's blog article will answer
all of your fundamental accounting questions. Accounting's meaning, purpose, and value in life, more over is
categorization, forms of accounting, and even job options, are all covered. As well as a more in-depth overview
of the world's accounting operational principles.

Accounting is always an important and necessary part of the management and operation of a business in
any nation and in any domestic or foreign enterprise.If there is no accounting information system, it is
impossible to make a socioeconomic choice or evaluate the success of company activities.
II. What is Accounting?
1. Definition.
Accounting is a term that describes the process of
consolidating financial information to make it clear and
understandable for all stakeholders and shareholders. The
main goal of accounting is to record and report a company’s
financial transactions, financial performance, and cash
flows.
Accounting standards increase the trustworthiness of
financial statements. The income statement, balance
sheet,
cash flow statement, and statement of retained profits are all part of the financial statements. Standardized
reporting enables all stakeholders and shareholders to evaluate a company's performance. Financial statements
must be transparent, trustworthy, and accurate.

2. Importance of Accounting.

2.1 Maintains a record of all business transactions

Accounting is significant because it preserves a systematic record of

the financial information of the firm. Users can compare current financial
 information to past
data when records are
kept up to date. It
allows consumers to
measure a company's
success over time by
keeping complete, consistent, and accurate information.The state has
management laws in place to govern the extraction of natural mineral water
sources for bottling into mineral water products for refreshment. The features
of the water source, the manufacturing and processing method, and the
variables in quality control, hygiene, and safety of bottled natural mineral
water must all be met. Mineral water sources that cannot guarantee these
factors will not be permitted to be exploited and circulated.

2.2 Facilitates decision-making for management

Accounting is especially important for internal users of the
organization. Internal users may include the people that plan, organize, and
run companies. The management team needs accounting in making
important decisions. Business decisions may range from deciding to pursue
geographical expansion to, instead, improving operational efficiency.

2.3 Communicates outcomes

Accounting is especially important for internal users of the

organization. Internal users may include the people that plan, organize, and
run companies. The management team needs accounting in making
important decisions. Business decisions may range from deciding to pursue
geographical expansion to, instead, improving operational efficiency

2.4 Complies with legal requirements

Accounting ensures that financial assets and liabilities are reported
accurately. Tax authorities, such as the Internal Sales Service (IRS) in the
United States and the Canada Revenue Agency (CRA), utilize standardized
accounting financial statements to evaluate a company's claimed gross
revenue and net income. Accounting systems aid in ensuring that a company's
financial statements are legally and correctly represented.
3. Types of Accounting

Accounting is divided into two types: financial accounting and management accounting.

3.1 Financial Accounting

The creation of accurate financial statements is part of financial accounting. The goal of financial accounting
is to measure a company's performance as precisely as feasible. While financial statements are intended for
external consumption, they may also be used to assist internal management in making choices.

Accounting principles and standards that are extensively used in financial accounting include GAAP
(Generally Accepted Accounting Principles), IFRS (International Financial Reporting Standards), and ASPE
(Accounting Standards for Private Enterprises). Accounting standards are significant because they enable all
stakeholders and shareholders to readily comprehend and analyze the financial statements that are published
from year to year..

3.2 Managerial Accounting

Managerial accounting examines the data obtained by financial accounting. It refers to the process of
compiling reports on the activities of a firm. The reports help the management team make tactical decisions.

Managerial accounting is a procedure that enables a company to maximize efficiency by examining

financial accounting, determining the best next actions to take, and then broadcasting the needed steps to all
internal business management.

4. Main users of accounting information

Accounting information is required by a large number of people in society, in addition to the managers
and owners of organizations and institutions, because accounting is a fundamental component of company
 information systems. Accounting information is used by many different parties in society for a variety of
objectives. As a result, the objective of financial statements is to meet the demands of users, which may
lead to better financial decisions. The success of economic decision-makers is dependent on the accuracy of
the accounting information presented. Users can be classified as internal or external. Accounting
information, for example, is connected to a variety of institutions and persons, including the government,
suppliers and workers of the firm, as well as the general public.

 Internal users of accounting information include:

• Management:

Using useful accounting information, management can plan, control, and make better decisions.
Managers must make economic decisions on a daily basis, such as how much supplies to purchase. Do we have
enough money? What did we earn last year? Did we fulfill our objectives? All of those inquiries and company
decisions need accounting knowledge. Accounting information is also required by management in order to
determine the organization's role and status. At the same time, required steps may be implemented by the
company to improve business results. Furthermore, managers are in charge of overseeing the organization's
output. As a result, accounting information may assist managers in improving their performance and doing their
duties more effectively.

• Employess:

Employees provide credit to the organization via their efforts. Employees are interested in the
company's profitability, economic stability, financial situation, and ability to evaluate the company's expansion
and professional development chances. As a result, individuals have a right to be worried about the
organization's internal activities. Accounting information assists employees in determining the financial health
or profitability of a business in order to assess their employment stability, the chance of future reward,
retirement benefits, and employment opportunities.

• Owners:

Owners of the company require financial information to assist them in making decisions in order to
minimize the risk of their investments. They analyze the feasibility and profitability of their investments using
accounting information because accounting information allows the owners to evaluate the potential of the
company organization to pay dividends. It also influences their decision-making process in the future. Small
business owners, for example, require accounting information to assess if the firm is successful and should be
sustained, improved, or discontinued.

 External users of accounting information include:

• Creditors:

Creditors are interested in accounting information because it allows them to determine a company's
creditworthiness. Credit terms and criteria are determined by an organization's financial condition. As a result, it
aids them in their analysis by providing precise financial data. Suppliers and lenders of funds, such as banks, are
examples of creditors. For a shorter amount of time, trade creditors are more interested in accounting
information than lenders. For example, the organization's financial accounts allow lenders to determine if the
organization has the ability to satisfy its loan obligations based on its current cash flow. At the same time, it can
assist lenders in risk-hedging.

• Investors:

Accounting information can assist prospective investors in determining the organization's likelihood of
success and profitability. They require the information because they are worried about the risks and returns
associated with investing. Because it is critical to determine the viability of making investments in the firm, they
must do an analysis before providing any financial resources to the organization.

• Customers:

Although it may appear unusual, many buyers examine an organization's financial statements before
making big purchases since they may wish to uphold product warranties and expand its product ranges.
Customers become interested in accounting information when they have a long-term relationship or contract
with the firm. They utilize the data to evaluate a company's financial status. They are concerned with the
organization's capacity to continue to exist and sustain operational stability. Accounting information assists
organizations to maintain a consistent stream of revenue.

• Regulatory Authorities:

Accounting information is required for them to verify that it complies with the laws and regulations and
protects the interests of the investors or owners who rely on it. For example, regulatory authorities check to see
if the organization is following the regulations.

• Labor unions:

Accounting information allows labor unions to determine if the organization's owners can afford to pay
higher wages and benefits to their members.

• Government:

The government, particularly tax authorities, is interested in financial data for taxes and regulatory
purposes. They want to know the earnings or sales for a specific time period for tax purposes. Furthermore,
information from companies in the form of financial reports will assist the government in properly developing
the strategic plan. For example, a tax authority will utilize accounting information to determine a company's
complicated tax shortfall.

• General Public:

The general public may or may not be directly interested in the organization. However, members of the
general public, such as researchers, students, and analysts, will occasionally require information regarding an
organization's finances in order to safeguard their interests or for other legitimate reasons. Students, for
example, require knowledge about the organization in order to make judgments concerning bursary demand.

• Competitor:

Competitors are companies or persons who offer similar products or provide similar services. They are
interested in the business's financial facts in order to determine how well an organization can compete. They
can know the development and modifications of the product or service by using financial information from
rivals' firms, allowing them to better their products and alter their strategy.

5. Career opportunities in accounting

You will no longer be concerned about

your employment after you have acquired all of
the required accounting abilities. After studying
accounting, you can work as a budget analyst,
controller, financial management, or public
accountant. And buying agents. Accountants have
a lot of alternatives right now, thanks to a
competitive income and several prospects for promotion. Accounting is divided into four majors:

1. Public accounting:

Public accounting services include compiling and releasing public financial reports for a corporation,
offering business consulting or personal financial planning services, and preparing tax returns.

2. Management accounting:

Management accounting is sometimes known as cost accounting, corporate accounting, industrial

accounting, or private accounting. Internally, management accountants support firm managers in making
decisions. Management accountants generate thorough reports and predictions for corporate managers.
These papers are not intended for public consumption. Management accountants build, implement, and
operate internal financial management systems that enhance performance management, strategy
management, and risk management by recording and analysing internal financial data. Accountants may rise
to senior positions in any industry as they acquire experience, taking on increasingly difficult duties.

3. Government accounting:

Government accounting is any accounting used to preserve and analyze the financial records of
government agencies, as well as audit private firms and people that engage in activities regulated or taxed by
the government. As a result, governmental accounting may employ financial accounting, tax accounting, and
other forms of accounting. Fund accounting is a way of categorizing resources in order to track the source and
usage of funds by government agencies. Pay accounting is a means for a government agency or division to
publicly and properly manage the tax dollars used to fund the agency or division.
 4. Internal auditing:

Internal auditors provide unbiased and impartial examinations of an organization's finances. Internal
auditors are largely in charge of discovering financial mismanagement or fraud as well as identifying strategies
to improve financial management and waste reduction.

III. The context and purpose of financial and management accounting. (P1,P2)
1. Clarifying the roles and importance of accounting as an information system
Other economic areas must expand quickly in order to keep up with a constantly
evolving society. Firms also have substantial
challenges in storing and managing financial and
accounting data. The role of the system will then be
maximized. The accounting information system will
store and process data in order to make the most
accurate and beneficial business choices possible.
Accounting information systems are intended
to connect an organization's management system
and operating system. In addition to its core purpose
of storing and processing data, the system also
conducts general statistics to offer accurate
accounting reports from which organizations may quickly resolve accounting concerns.
Accounting information systems assist businesses considerably since they help them save money and time.
By utilizing the technology, managers will avoid wasteful information storage errors. As a result, possible damages
are minimized, allowing businesses to avoid substantial financial losses.
Finally, the accounting information system has helped to address three major difficulties that private
enterprises confront today. To begin, support and increase business competitiveness; second, support business
decision-making; and third, support professional and business activities to help enterprises flourish prosperously.

2. Distinguishing between financial accounting and management accounting

Points of Financial Accounting Management Accouting
Difference
Aim The primary goal is to convey information
to third parties so that they may make
educated judgments. Creditors, investors,
clients, and other third parties are
examples of outside parties.
Regulatory The disclosure of financial statements is an
obligation imposed by the government on
Requirements
all public organizations. As a result, they
are controlled by accounting standard
boards, company law, and the
government.
Financial accounting statements are
prepared in accordance with 'Generally
Governing
Accepted Accounting Principles (GAAP).'
Principles This GAAP differs for nations with similar
characteristics.
Financial accounting has a temporal
horizon of 'past.' In most cases, it is one
Time Horizon
fiscal year.
Reporting It is ready for external or external partners.
Shareholders, suppliers, customers, the
Beneficiaries
government, banks, and so forth.
Outputs Profit and loss statements, balance sheets,
and cash flow statements are all
components of financial accounting
reports.
Relevance & Financial accounting data is completely
verifiable and correct. Everything has
Precision of
evidence to back it up here.
Data
In general, management accounting
information is intended to help management
make sound company choices.
It is entirely up to management. Although there
is no statutory necessity for its upkeep,
institutes such as CIMA, ICWAI, and others give
certain structure and forms.
There is no standardized methodology for
creating management accounting statements.
As a result, they are created in accordance with
the needs of the management team.
It does not have a specific time horizon, but its
primary focus is on estimating the future using
past data.
Internal parties such as the CEO, directors,
promoters, higher-level managers, and so on
will benefit from the reports provided here.
Management accounting reports analyze
goods, regions, functions, and so on on a
monthly, weekly, or yearly basis.
Management accounting data is not always
completely reliable. As a result, the data must
be relevant, current, and coherent. For
example, sales cannot be completely projected.
Independent Most nations need independent audits of
financial accounting reports. For example,
Audit
in the United States, CPAs undertake such
audits, but CAs conduct similar audits in
India.
An independent audit is not required in any
way. However, management might take the
initiative to undertake an independent audit at
its discretion in the interest of efficient and
effective management.

Confidentiality Financial accounting statements are Management accounting statements are

publicly publicized statements that are intended for management, and the secrecy of
exclusively intended for the general public. the statements is critical since they include
As a result, there is no concern about corporate secrets.
secrecy.

Segment It is concerned with the entire business
and serves as a goal in itself. Accounting
Reporting
regulations in various nations require
corporations to report in specific forms.
It focuses on a single area or sector for study.
As a result, segments might be a product line,
area, production unit, and so on.

Perspective It has a historical perspective. It has a futuristic perspective.

Nature of The information needed for financial In the preparation of management accounting
input accounting statements is of a financial reports, both financial and non-financial
information character. information is used.

3. Discussing about the organisational constraints and threats following the concepts of accounting
regulations (GAAP, IFRS from FASB) and principles as well asethics in accounting.
3.1 GAAP and IFRS definitions

• GAAP stands for widely recognized accounting rules and procedures used in the
preparation of financial accounts. The Financial Accounting Standards Board (FASB), a self-regulatory
organization, is the principal source of accounting principles used by auditors and accountants. GAAP
aims to improve the clarity, standardization, and comparability of financial data. The overarching goal
of GAAP is to guarantee that a company's financial statements are accurate, comparable, and
comprehensive. In the United States, GAAP is widely utilized.

• IFRS stands for International Financial Reporting Standards, which are also known as
international financial reporting standards. This is an accounting standard developed by the IFRS
Foundation and the International Accounting Standards Board (IASB) in London that addresses
 recordkeeping, account reporting, and other elements of accounting. Other sections of the financial
statements The basic goal of developing IFRSs is to provide common standards for business problems.

IFRS is developed in over 120 nations, including the European Union (EU).

3.2 Compare the standards governing the recognition of transactions in accounting

3.2.1 Treatment of inventory

The accounting approach for inventory expenses is one of the fundamental distinctions
between these two accounting standards. The LIFO (Last in First Out) method of computing inventory
is not permitted under IFRS. Inventory can be estimated using either the LIFO or FIFO (First in First Out)
approach under GAAP.

The rationale for not employing LIFO in accordance with the IFRS accounting standard is that it
does not depict an accurate inventory flow and may reflect lower levels of income than is actually the
case. The ability to employ either FIFO or LIFO under GAAP, on the other hand, allows businesses to
pick the most convenient technique for valuing inventories.

3.2.2 Intangibles

When comparing IFRS and US GAAP standards, the handling of intangible assets such as
research and goodwill is also taken into account. Intangible assets are only recorded under IFRS if
they will provide a future economic benefit. In this manner, the asset may be evaluated and assigned
a monetary value. Intangible assets, on the other hand, are recognized under GAAP at their present
fair market value, with no further (future) considerations.

3.2.3 Rules vs Principles

Another contrast between IFRS and GAAP is how they evaluate accounting procedures – that
is, whether they are based on rigid rules or principles that allow for some interpretation. GAAP
prescribes very explicit rules and procedures for the accounting process, leaving minimal opportunity
for interpretation. The safeguards are designed to prevent opportunistic entities from making
exceptions in order to maximize their revenues.

On the contrary, IFRS establishes principles that firms must observe and interpret to the best
of their abilities. Companies have some latitude in interpreting the same scenario in different ways.

3.2.4 Recognition of revenue

In terms of how revenue is recorded, IFRS is more broad than GAAP. The latter begins by
establishing whether income has been realized or earned, and it includes unique standards for
recognizing revenue across diverse sectors.

Revenue is not recognized until the exchange of an item or service has been completed,
according to the guiding principle. Once a good has been transferred and the transaction has been
acknowledged and documented, the accountant must evaluate the industry norms in which the firm
works.

IFRS, on the other hand, is founded on the notion that revenue is recognized when value is
supplied. It categorizes all income transactions into four categories: the sale of things, construction
contracts, service offering, and usage of another entity's assets. Companies that adopt IFRS
accounting rules use one of two techniques to recognize revenue:

• Revenue is defined as the cost that may be recovered within the reporting period.
• In the case of contracts, revenue is recognized based on the proportion of the whole contract
fulfilled, the expected total cost, and the contract value. The amount of revenue recognized
should be proportional to the percentage of work accomplished.

3.2.5 Classification of liabilities

When comparing IFRS and US GAAP standards, the handling of intangible assets such as
research and goodwill is also taken into account. Intangible assets are only recorded under IFRS if
they will provide a future economic benefit. In this manner, the asset may be evaluated and assigned
a monetary value. Intangible assets, on the other hand, are recognized under GAAP at their present
fair market value, with no further (future) considerations.

3.3 Principles as well as ethics in accounting

When generating financial accounts in accordance with GAAP accounting rules, liabilities are
categorised as either current or non-current, based on the time period given for the firm to settle the
loans.
 Obligations that the firm plans to repay within the next 12 months are classed as current liabilities,
whereas debts that have a payback period longer than 12 months are classified as long-term liabilities.

However, because IFRS does not provide a clear difference between liabilities, short-term and long-
term obligations are combined together.

IV. Conclusion
Generally speaking Accounting or accounting information is an essential aspect of the development of
any organization or corporation; it plays a key function and serves as the foundation for all transactions in the
world. Furthermore, the job opportunities and development environment of interdisciplinary accounting are
quite vast, so knowing it is useful knowledge for everyone of us in our future professions.

In this blog article, I have outlined what accounting is, how important it is, as well as the different types,
users, and career options that might arise from this profession. Not only that, but it also demonstrates the
significance and role of the accounting information system. Along with comprehending the distinctions between
the two major categories, as well as the concepts and norms that are commonly used across the world. I hope
this blog article adds value and is helpful in
the process of expanding your knowledge.
I'm hoping for a P for this blog entry.

Thank you for your time.

V. References

Corporate Finance Institute. 2022. Accounting. [online] Available at:

<https://corporatefinanceinstitute.com/resources/knowledge/accounting/accounting/> [Accessed 1 March
2022].

Borad, S., 2022. Difference between Financial and Management Accounting. [online] eFinanceManagement.
Available at: <https://efinancemanagement.com/financial-accounting/difference-between-financial-
andmanagement-accounting> [Accessed 1 March 2022].
Lim, C., 2022. ACC Main users of accounting information. [online] Academia.edu. Available at:
<https://www.academia.edu/32337287/ACC_Main_users_of_accounting_information> [Accessed 1 March
2022].

CPA 2022 Requirements by State | CPA Exam and Accountant Education. 2022. Types of Jobs with
Accounting Degrees | Accountant Careers. [online] Available at:
<https://www.accountingedu.org/careerresources/> [Accessed 1 March 2022].

Corporate Finance Institute. 2022. IFRS vs. US GAAP. [online] Available at:
<https://corporatefinanceinstitute.com/resources/knowledge/accounting/ifrs-vs-us-gaap/> [Accessed 2
March 2022].