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    Introduction

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    2 views5 pages

    Introduction

    Uploaded by

    akanksha.assurex1176

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 5

    Introduction

    This report is centred on the role of management accounting in supporting decision-


    making in UK SMEs by providing the correct financial information. It evaluates the
    accountability role of accounting to stakeholders and society with concerns about
    regulation and ethicalities. In addition, the current report contains a descriptive
    analysis of the organisations, either sole traders or businesses based in various
    types of partnerships as well as not-for-profit organisations utilising the financial
    ratios to establish the past-year performance of the organisations. Anticipated
    solutions to budgetary control are also going to be discussed in detail with special
    reference to cash budgeting as a tool for controlling costs.

    The context and purpose of accounting

    Concept of Accounting

    Accounting is a constructive, cumulative, realistic and skilful process of ascertaining,


    recording, analysing, summarising and interpreting the economic activities of an
    entity. It reports financial information about an entity for decision-making purposes
    with regard to principles and standards for use by investors, creditors and managers.
    Management accounting refers to the systematic and purposeful gathering,
    processing, presentation and interpretation of financial and/or non-financial data for
    use within an organisation by executives, managers and other decision-makers in
    the organisation. It is strategic and has a long-term outlook that includes looking at
    how the organisation can get the best out of operations, finance and direction.

    Financial accounting according to CIMA (2005) is a systematic process of


    identifying, measuring and recording the financial transactions of an organisational
    entity in a period in compliance with the accounting standards and of legal
    requirements (ethernet.edu.et, 2024). It includes financial statements, income
    statements, balance sheets and cash flow statements among others, which give
    information about the financial part of the organisation to people outside the
    company, such as investors, regulatory authorities and creditors among others.
    Management accounting is mainly RBI, customised according to management
    purposes, and OSH predictive. Financial accounting is used in reporting to users
    outside the business and it is closely regulated to conform to particular norms and
    format and is backward looking. While only financial accounting is compulsory,
    management accounting is considered as an extra value however indispensable for
    internal choices.

    Purpose of the accounting function within an organisation

    Accounting as a functional area has several important roles in an organisation such


    as De Byrne Consulting plays a significant role to ensure the organisation records
    the financial aspect accurately. It is a continuous and systematic process of
    documenting the financial activities of the business and systematically presenting the
    summarised data to analyse the business performance, financial success and
    financial stability of the business.

     The income statement discloses a company’s revenues, expenses and profit


    or losses made in a specific period to enable a user to assess efficiency.

     The statement of financial position shows the organisational condition at a


    moment in time and contains assets, liabilities and equity.

     The cash flow statement links up the income statement and balance sheet
    and varies between sources of inflow and uses of outflow and that explains
    the concept of liquidity and cash control

    It also ensures statutory compliance as accounting that follows and respects laws
    and legal requirements and assists organisations like De Byrne Consulting to meet
    tax and legal requirements.

    Accounting function within the organisation for the regulatory and ethical
    constraints

    It is there to implement the policies within the framework of certain legal and ethical
    standards in order to produce the most accurate and transparent accounts. Legal
    contingents that guide firms on matters of reporting include the FRC in the UK and
    IFRS on the international scene. They keep a check on companies that report their
    financial data with high levels of transparency and comparability. Failure to adhere to
    these reportorial directives results in legal consequences, investor’ strikes, and
    reputational compromises. The four main ethical rules are:

     Prudence: This means that in preparing the estimates the company should
    be very careful and should not overstate the business worth or income.
     Consistency: Ensuring that the same methods are used throughout for the
    purpose of reporting.

     Objectivity: Elimination of biased or prejudicious information and the conduits


    of conflicts of interest in financial reporting.

     Relevance: See that information provides solution-oriented data and is timely.

    Developing ethical principles ensures that customers in the accounting field have
    confidence in their auditors. Ethical violations can lead to scandals and, therefore
    organizational reputation loss besides legal penalties and ramifications to the
    persons involved.

    Context and purpose of the accounting function in meeting organisational,


    stakeholder and societal needs and expectations_200

    The accounting function at De Byrne Consulting plays a crucial role in ensuring


    financial transparency, compliance, and decision-making support for both the
    organization and its stakeholders. The primary purpose of accounting within the
    company is to provide accurate financial information that meets the needs of internal
    management, investors, and external regulators. By producing reliable financial
    statements, De Byrne Consulting can meet stakeholder expectations related to
    performance, profitability, and risk management. For stakeholders such as clients,
    employees, and investors, accounting ensures the business operates in a
    sustainable and profitable manner, providing confidence in the company's financial
    stability. Accurate and timely reporting allows the company to plan effectively,
    manage resources, and make informed strategic decisions. Additionally, by adhering
    to regulatory standards and ethical accounting practices, De Byrne Consulting meets
    societal expectations for corporate responsibility and integrity.

    The role of accounting in informing decision-making meeting organisational,


    stakeholder, and societal needs

    In this case, the accounting function assumes the central position, preparing data
    that can help make the right decisions at De Byrne Consulting. For the organisation it
    serves managerial functions such as budgeting, estimating or predicting future
    events, and directing appropriate resource utilisation for the surge of organisational
    operations. Again, for stakeholders especially clients and investors, accounting
    provides disclosure to matters of profitability and financial soundness thus creating
    confidence. Furthermore, being a profession, accounting also provides solutions to
    societal needs for accountability, following ethical standards & regulations that make
    them accountable & sustainable. This includes giving full details of the
    organisation’s performance, position, and financial condition in order to support the
    organisation’s strategic planning and decision-making, to balance stakeholder
    demands and to promote sustainability of De Byrne Consulting.

    The benefits of budgets and budgetary planning for Robes in Roses encompass
    enhancement of control over its financial resources, facilitation of control over its
    cash resources, and setting of goals about financial resources. The budget assists
    the owner in determining when or if the money that the business is getting back into
    the positive territory has to be and making decisions on how to minimise the
    overdraft. However, limitations including, approximate estimates for variables like
    sales profit may not necessarily represent the real sales profit. Budgets also do not
    have the flexibility to incorporate changes that may be occasioned by certain events,
    and relying too much of the budget may lead to poor returns, due to failure to effect
    some changes that should have been affected.

    Problems Revealed by budgetary planning and Control for effective


    organisational decision-making

    In order to address problems revealed by budgetary planning, Robes in Roses could


    implement several corrective actions:

     Adjust sales strategies: When actual sales are less than the projected amount
    in the budget, it should be traced to marketing or by creating sales incentives.

     Control costs: Cut down on unimportant consumptions, renegotiate contracts


    with your suppliers or postpone some purchases.

     Increase cash reserves: The short-term loans or injecting personal capital


    cover the cash shortfalls for the short term.

     Revise drawings: Lessen personal drawings for a while to achieve focus on a


    positive cash position.
     Monitor performance: On a continuous basis compare actual results with the
    previously set budget to facilitate control and make the right adjustments on
    time.

    Budgetary control solutions and their impact on organisational decision

    Applying solutions of budgetary control, there are effective measures on the use of
    funds, thereby Robes in Roses maintains operational financial stability. Similarly,
    changing business strategies or sales strategies can always help the business
    generate more revenues, help the business to work on its overdraft or help it to meet
    the cash flow objectives that have been set. Specific expense reductions, for
    example, elimination of frivolous expenses or negotiation of acquisition price with
    suppliers, help to avoid spending more money than necessary leaving the money for
    better solutions in various sundry circumstances. Eliminating personal drawings
    permits cash to be used to fund business needs without jeopardising its liquidity.
    Thus, comparing the financial results with the budget on an ongoing basis, the owner
    should be able to make the best decisions about resource utilisation and respond
    quickly to the financial problems, in order to achieve sustainable business success in
    the long run.

    Conclusion

    In order to conclude the aforementioned report, it can be stated that the study has
    effectively portrayed the concept and inherits of the management accounting
    procedures in relation to the business De Byrne Consulting. Apart from this, the
    piece of information has showcased financial calculations, accounting ratios and
    budgets pertaining to a number of organisations thereby delving deep into the
    concepts of the same. Moreover, the impact of the concerned accounting on the
    firm’s decision-making process has been emphasised in detail.

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