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In terms of working on the presented assignment,, much attention was paid to the concept of accounting and its role in the modern financial world. Without a doubt, this issue remains actual in the sphere of contemporary business and since it is a key element ensuring the efficiency of fiscal turnover, its importance cannot be underestimated under any circumstances. As this term encompasses and is presented in a wide range of operations, the aspect of its functioning is diverse. That is why there is a reasonable necessity in outlining the major characteristics related to this field. Thus, the leading goal of this article is to initiate a discussion concerning particular features of accounting and evaluate its crucial significance in the field of finance that has always been a characteristic of market relations and dominates nowadays, with the special focus on the influence of this practice on external stakeholders of businesses.
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To begin with, the operational activities of any organization have a significant impact on its internal and external stakeholders. The role of accounting reveals itself in both categories differently. This mechanism is called to attenuate the business conditions for either party and help them to conduct their affairs in a more fruitful manner. By providing them with financial information, accounting assists in the process of making reasonable vital decisions the importance which is impossible to neglect on a daily basis if they expect to prosper in their undertakings (Granof, 2008, p. 52). Moreover, accounting unites such diverse categories of stakeholders as owners, managers, investors, creditors, suppliers, customers, and government, the success of their decisions and collective actions is believed to have an apparent influence on the company’s financial performance and personal well-being of all participants involved.
Besides, accounting is divided into two peculiar fields – management and financial accounting. It is obvious that these two sections differ from each other and each of them possesses a unique value. However, they are identical in their objectives – to ensure financial sustainability and satisfaction of its stakeholders. While the first one focuses on the comprehensive course of running a business, the second one is tasked with ascertaining the fiscal efficiency of this process. While the management accounting strives for providing a critical overview of the current flow of the information, the financial accounting assists in evaluating the enterprise’s financial history and the effectiveness of current performance.
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As a result, the role of accounting in contemporary business affairs cannot be minimized under any pretext. However, if its significance for internal stakeholders is clear as it provides them with a reliable income and guarantees stability for the nearest future, the rationale behind the benefit for the external parties requires further clarification. Specifically, financial accounting helps external stakeholders make more informed decisions regarding their further actions in relation to a particular company. The information obtained gives investors a clear understanding of whether a business is worth funding. They want to know the expected volume of return from their investments. Creditors or banks also make use of the business’s accounting data as it determines their worthiness and financial health. The interest of suppliers to the acquisition of such information lies in the opportunity to predict the volumes of their own operational expenses. With the help of accounting, customers are able to assess the financial position of the company and hence the quality of the services or goods it provides. The government relies on the access to such data as it enables them to determine the legitimacy of performance of the enterprise and calculate the number of tax returns into the state treasury,
For instance, the valuable experience of Samsung Group may serve as a perfect example of efficient accounting practices. Owing to the accurate work of its experts and the numerous conducted researches, the employers succeeded in underlining the main tendencies of the modern market, and developed effective strategies (Robert, 2014, p. 12). These tactics include some organizational changes based on the alterations of the inner management and the redistributions of the financial obligations in the company. However, due to such an approach and a precise examination of the internal and external environment, the company has achieved a deep understanding of the current state of things determining the contemporary business dimension. Reasonably, since the quality and quantity of the goods and services increased, this had a favorable effect on the external stakeholders of the company as well.
Any company or its separate department operates according to specific standards predetermined by the bodies responsible for the supervision and control of such activities. Financial operations are subjected to these regulations more than any other sphere of business. Relatively speaking, accountancy is guided by the Generally Accepted Accounting Principles and controlled by the Financial Accounting Standards Board (FASB) which have a tremendous impact on the financial system of the United States of America. Their financial reporting system as well as the contribution standardizing financial processes have become a particular language with the help of which modern companies may communicate in the realm of market economy and reach an agreement. The interdependence between financial conditions and operational results is also worth taking into consideration (Stickney, 2000, p. 148). The invisible links can be also remarked in the context of the operations conducted by private firms, not-for-profit organizations, and some local or state governmental institutions.
More specifically, GAAPs are focused on the embedded standards and external regulations and are called to provide financial statements to ensure sustainable development for the majority of the firms. Furthermore, the role of GAAPs manifests in ensuring adherence to the following core principles such as recognition, measurements, presentation, and disclosure (Weil, 2014, p. 78). Their coherence can be noted in ordinary practice, as the major enterprises and industries operate in accordance with these notions.
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At the same time, the role of the Financial Accounting Standards Board (FASB) cannot be omitted. It is tasked with regulating the operations of the companies of the public and private sector, as well as the not-for-profit organizations following Generally Accepted Accounting Principles (FASB). In the United States, their influence is rather apparent, as they are to determine the distinguishing principles and tendencies in financial accounting and the standards of reporting. As a rule, such operations cover the major business affairs and are highly recognized by US major financial institutions such as the Securities and Exchange Commission and the Financial Accounting Foundation. The violation of FASB regulations may be subjected to severe criticism and penalties. To be more precise, the role of the FASB corresponds to the directions aimed to improve the financial accounting and reporting standards for the leading stakeholders. Consequently, the comprehension of these principles possesses a unique quality in the aspect of the economic politics of the United States and its world-known partners.
To conclude, it is essential to highlight that the role of financial accounting in contemporary business is tremendous for both internal and external stakeholders by providing valuable information necessary for making important operational decisions. Due to the holistic nature of accounting a deep understanding of the major organizing principles of companies can be achieved by their management. The adherence to the Generally Accepted Accounting Principles facilitates the relationship between various profit, non-profit institutions, and the controlling organs of the state. The Financial Accounting Standards Board functions also cannot be underestimated in the context of the American business realm as they provide the participants of market business relations with the understanding of basic accounting principles and reporting standards.
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