0.6 Accountancy’s impact on stakeholders and society (2024)
Who are our internal stakeholders?
Accountants, investors, employees, business owners, shareholders, executives
Who are our external stakeholders?
Customers, suppliers, government, society, local community, creditors, distributors
How does accounting affect internal stakeholders?
The management decides the budget according to income and expenditure,
Accountants forecast future income and expenses,
Investors need to understand what they are funding and be convinced as to whether the organisation is credible,
The management and employees make better decisions in the future by referring to old accounts and whether forecasts match actual accounts,
Shareholders need to be assured that the resources they invested in the business are being used and managed well.
How does accounting affect external stakeholders?
Customers, suppliers and distributors are directly affected by change in costs of the company (change in the cost of products and services, payment to suppliers and from distributors),
Customers also check the business practices, credibility and social responsibility of a company before buying from it – by checking financial statements and accounts;
The government is involved with the accounts of a company due to reporting systems (such as IFRS and GAAP) and compliance;
Creditors need to be assured of a company’s performance before they extend credit to it.
Financial management is base of all successful ventures. Financial decisions taken by firms have an impact on the consumer level, because ‘micro’ financial decisions in a firm affect ‘macro’ economic state indirectly.
Businesses need to allocate their resources well, forecast budgets accurately and analyse their financial position because that they produce goods and services that consumers (society) rely on; if they manufacture a good, the type of good, cost of the good – all depends on how they read their financial records.
Therefore even if we don’t realise it in our everyday lives, accountancy will have an impact on us regardless, because any service we rely on, relies on the way its organisation manages their finances.
Proper accounting helps organizations ensure accurate reporting of financial assets and liabilities. Tax authorities, such as the U.S. Internal Revenue Service (IRS) and the Canada Revenue Agency (CRA), use standardized accounting financial statements to assess a company's declared gross revenue and net income.
Accounting information, one of the most important products offered by accounting, must enable all types of investors, current and potential, to identify, measure and evaluate all the operations and activities of an enterprise in order to determine its efficiency.
The accounting process provides financial data for a broad range of individuals whose objectives in studying the data vary widely. Three primary users of accounting information were previously identified, Internal users, External users, and Government/ IRS.
The primary role of stakeholders is to define business goals and develop plans that help them achieve those goals. In addition, these stakeholders periodically review business operations and strategies to find more efficient methods. They also access employee performance to ensure they align with growth objectives.
A stakeholder has a vested interest in a company and can either affect or be affected by a business' operations and performance. Typical stakeholders are investors, employees, customers, suppliers, communities, governments, or trade associations.
Accounting plays a critical role in the functioning of the economy. It provides the information needed to make informed decisions about investment, resource allocation, and economic policy. Accounting helps ensure that financial markets are efficient and transparent, essential for economic growth and stability.
By providing accurate and timely financial information, accountants help businesses make risk-informed decisions and safeguard their financial stability. Auditing and Assurance: Accountants conduct audits to ensure the accuracy and reliability of financial information.
Accountants are capable to manage the tax matters of an entity, file returns, make representations before tax authorities, and settle the tax liabilities of an entity under various laws. Various tax planning advice, investments etc services can be provided by accountants.
Accounting standards are important because they enhance the transparency, comparability, and credibility of financial reporting, providing stakeholders with reliable information to make informed decisions.
Knowledge of accounting helps investors determine an assets' value, understand a company's financing sources, calculate profitability, and estimate risks embedded in a company's balance sheet.
Accounting is the best way to track profits and losses, keep money organized, and ensure your business is tax-compliant. Some accounting objectives include assisting with decision-making, budgeting, and planning.
The purpose of accounting is to accumulate and report on financial information about the performance, financial position, and cash flows of a business. This information is then used to reach decisions about how to manage the business, or invest in it, or lend money to it.
Financial statements are important to investors because they can provide information about a company's revenue, expenses, profitability, debt load, and ability to meet its short-term and long-term financial obligations.
Management accounting information can meet external stakeholders' needs by providing insights into financial performance, aiding decision-making, and ensuring transparency, aligning with stakeholders' expectations for reliable and relevant data.
Introduction: My name is Edwin Metz, I am a fair, energetic, helpful, brave, outstanding, nice, helpful person who loves writing and wants to share my knowledge and understanding with you.
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