Evaluate the context and purpose of the accounting function in meeting organizational, stakeholder and societal needs and expectations.

 

Evaluate the context and purpose of the accounting function in meeting organizational, stakeholder and societal needs and expectations.

While making decisions and addressing the demands and expectations of stakeholders and society, accounting is essential. The accounting function's performance in fulfilling these duties is critiqued in the sections that follow.

Informing Decision Making

The key source of information for making decisions is accounting information. Stakeholders may learn about an organization's financial status, performance, and health via its financial statements. Accounting data does have certain drawbacks, such as its historical character and emphasis on financial data. The activities and prospects of a company may not always be fully depicted by accounting data. As a result, in order to make wise judgments, decision-makers must combine accounting information with information from other sources (Park, 2001).

 

Meeting stakeholder needs

Accounting data is used by stakeholders, such as investors, creditors, and workers, to make investment decisions, determine the credit risk, and analyse remuneration packages, respectively. To satisfy the demands of stakeholders, the accounting function must deliver accurate and trustworthy information. Yet, various stakeholders could have distinct information demands, and these needs might not always be met by accounting information. For instance, non-financial stakeholders like clients or neighborhood associations could need knowledge about a company's social and environmental performance, which isn't often reflected in financial statements (Antonucci, 2017).

 

Meeting Societal Expectations

The public expects businesses to conduct themselves morally and responsibly. By providing data on an organization's compliance with laws and regulations and its social and environmental effect, accounting helps to achieve these expectations. Aiming to guarantee that financial statements paint an accurate and transparent picture of an organization's activities, accounting standards and regulations. The need for firms to report on their non-financial performance, such as their environmental, social, and governance policies, is, nevertheless, expanding. To meet this need, accounting standards and laws may need to change (Po-Zen Wong, 2014).

 

In conclusion, accounting is essential for informing choices and satisfying societal demands and stakeholder expectations. Yet, accounting information has its limitations, and to reflect shifting social expectations, accounting standards and rules may need to change. To make wise judgments, decision-makers must combine accounting data with information from various sources.

 

Carefully appreciate how accounting function significantly help external and internal users to get the users of accounting information.

 

The process of documenting, categorizing, and summarizing financial transactions in order to provide information that may be used to make decisions is known as accounting. The accounting function offers benefits to both internal and external users.

 

Internal Users

 

Management: For management to make wise judgments regarding the company's operations, they require financial information. Management may make choices regarding investments, operations, and financing with the aid of financial statements that provide an overview of the company's financial situation, profitability, and cash flows (Jerry J. Weygandt, 2019).

 

Employees: To assess their performance and set their salary, employees require financial information. Employees may better comprehend the financial health of the firm by using financial statements from the accounting function, which provide an overview of the company's financial status, profitability, and cash flows (Jerry J. Weygandt, 2019).

 

Board Directors: To track the company's performance and make informed choices regarding the company's future course, the board of directors requires financial data. The board of directors may monitor the operation of the company and make choices regarding its future course of action with the aid of the accounting function's financial statements, which provide an overview of the firm's financial situation, profitability, and cash flows (Jerry J. Weygandt, 2019).

 

External Users

 

Investors: In order to assess the success of the firm and decide whether or not to invest in it, investors are interested in financial data. Financial statements that provide an overview of the company's financial situation, profitability, and cash flows are produced by the accounting function and are used by investors to guide their investment decisions (Jerry J. Weygandt, 2019).

 

Creditors: Financial data is required by creditors, including banks and suppliers, in order for them to assess the company's creditworthiness and decide how much credit they may grant. In order to enable creditors assess the company's capacity to pay back its obligations, the accounting function produces financial statements that offer a general picture of the company's financial status (Jerry J. Weygandt, 2019).

 

Government agencies: To determine the company's tax responsibilities, governmental organizations like tax authorities need financial data. The accounting department produces financial statements that provide a summary of the company's financial situation and aid in the determination of the company's tax obligations by the government (Jerry J. Weygandt, 2019).

 

In conclusion, the accounting function is crucial in supplying financial data to both internal and external users, since doing so enables them to make wise decisions for the business. The company's financial status, profitability, and cash flows are all outlined in the financial statements, which are essential for making decisions.

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