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The need for accountancy and an understanding of the accounting profession The American Accountancy Association has defined accounting as ``the process of identifying, measuring, and communicating economic information to permit informed judgements and decisions by users of the information``. In other words accounting is concerned with providing both financial and non financial information that will help decision makers make good decisions. (Colin Drury) Every enterprise needs an accountant for a number of reasons including supervising profits, maintaining trust within the investing community, reporting revenue and controlling expenses with the information given as long as it is accurate, relevant, timely and communicated with clarity.
Accounting Principles and Guardians of Accountancy Principles Generally accepted accounting principles (GAAP) are regulations that were designed to help eliminate barriers to cross border trading in securities by ensuring that company accounts throughout the EU are made reliable and more transparent and that they can be easily compared. There are a common set of accounting principles, standards and procedures that companies use to compile their financial statements. Guardians Guardians of accounting are anyone of the accounting profession. Auditing is the profession whereby the person will be able to form an opinion to the accuracy truth and fairness from the accounts of business enterprises, charities, trusts and professional firms
Independence, Objectivity and Self-regulation Independence A major threat to high standards required of auditors is in the area of independence. Directors are responsible for the truth and fairness of the accounts. The essential attribute is independence of mind. However there are many situations which can determine this independence i.e. the auditor doesn’t want to get sacked. Objectivity The auditor must have no bias. He must not get influenced by the situation. He must keep this apart from personal reflection or feeling independent of mind. Self-regulation The individual accounting institutes lay down their own code of ethics and disciplinary procedures.
In 1844 UK winding up act required accountants to act as liquidators. Financial accounting appeared before management accounting.e.: Should we buy a carved table leg or make our own. Will we get a building contractor to build this wall or could we use our own employees. i.Carly Faulkner BSMA1 Group A Accounting1 A history of the accounting profession In the end of the 18th century there were those who described themselves as accountants. In the 19th century legislation required the use of double book keeping there was further requirement for the provision of profit statements and balance sheets. Balance sheets had to be produced that were full and fair. This information is needed to guide the decision maker in making a calculated decision.`` . In the 1840’s auditing practices grew. historic and projected. The Role of the Cost and Management Accountant The major aspects of cost and management accounting are -Establishment and classification of costs. Management Accountancy This information is for internal users to help management plan and control the activities of a business and to assist in the decision making process to help the business perform more effectively. This can be prepared for any period. Another definition from Colin Drury ``management accounting is concerned with the provision of information to people within the organisation to help them make better decisions and improve the efficiency and effectiveness of existing operations. Cost accounting procedures evolved in the 19th century. It is prepared in advance of that time period and is based on the agreed objectives for that period of time. (Pauline Weetman) -Decision making Cost is a major factor in decision making. In a business it is very important to know what costs are. Public dislike of the profession is flourished. Management need accurate assessments of the cost of the goods and services they produce -Budgetary control Well run organisations maintain detailed budgeting system. ``This budget is a detailed plan. it would contain plans for income and expenditure in respect of a future period of time. In 1844 came the emergence of limited liability companies. together with the strategy planned to achieve goals``.
Carly Faulkner BSMA1 Group A Accounting1 Financial Accountancy This information is mainly for external purposes (shareholders. payable employees. the revenue commissioner. banks.) the information describes the performance of a business over a specific period of time and the state of affairs at the end of that period. Balance Sheet The balance sheet measures the wealth (capital) of the business at a particular moment in time it shows assets liabilities and capital .`` Income Statement The income statement is a measurement of what performance is like in a business. investment analysts. and interested parties. It shows income and expenses. grant authorities. Another definition from Colin Drury 11financiall accounting is concerned with the provision of information to external parties outside the organisation.