Introduction to Accounting and Finance PDF

Introduction to Accounting and Finance MGT 133 – Introduction to Accounting and Finance for Managers Dr Barbara Voss 01 October 2024 WHAT IS ACCOUNTING? The language of business Developed from a capitalist thinking To record business transactions Becoming more...

Introduction to Accounting and Finance MGT 133 – Introduction to Accounting and Finance for Managers Dr Barbara Voss 01 October 2024 WHAT IS ACCOUNTING? The language of business Developed from a capitalist thinking To record business transactions Becoming more powerful along the years (see GAAP, IASB) Linked to the powerful entities: PwC, EY, KPMG, Deloitte Types of services around accounting: audit assurance taxation management consulting valuation market research actuarial corporate finance 2 FATHER OF ACCOUNTING Luca Pacioli (1445-1517) is known as the father of accounting and bookkeeping. He wrote Summa de Arithmetica in 1494. The first professional organisations for accountants were established in Scotland in 1854, starting with the Edinburgh Society of Accountants and the Glasgow Institute of Accountants and Actuaries. 3 ACCOUNTING AS LANGUAGE Communicating how the collection of information Analysing complex sources of information Aiming to communicate accounting information (mostly common in financial reports or annual reports) Communication is not just about numbers, it also concerns about narratives and notes. Accounting is moving towards forms of accountability Accountability for and to users of the accounting information Government Customers/Clients Owners Suppliers Employees Communities Competitors Financial lenders 4 ACCOUNTING FOR ACCOUNTABILITY Agyemang (2024, p. 2) found researchers have these questions to understand accountability: 1. Who accounts to whom? 2. Accountability for what? 3. How and when is accountability discharged? 4. What are the consequences of accountability? ‘(...) [in any] accountability relationships hide the power imbalances that underpin [those]...there are voices that are heard and voices that are silent...we need to recognise that there are economic impacts and societal impacts of the accountability, and both are important. We need to see that there is a temporal aspect to the questions and how we answer them may depend on the period we are considering’ (Agyemang, 2024, p. 2) 5 FINANCE A subset group of accounting information Ways of raising and investing funds for a business Funds from investors/shareholders Funds from owners Funds from lenders Investments in equipment Investments in inventories Investments in other businesses For this module, there is little point These two have overlaps. Both are to make a distinction between concerned with the decision- accounting and finance making process. 6  MANAGEMENT ACCOUNTING VS FINANCIAL ACCOUNTING Financial Accounting is primarily concerned with the needs of owners and lenders. Management Accounting seeks to meet the needs of the business’ owners. Management Accounting Financial Accounting Nature of the reports produces Tend to be specific purpose Tend to be general purpose Level of detail Often very detailed Usually broad overview Usually subject to accounting Regulations Unregulated regulation As short as required by Reporting interval Usually annual and bi-annual managers Often based on projected Time orientation future information as well as Almost always historical part information Tends to contain financial and A focus on financial Range and quality of non-financial information, information with emphasis on information often uses non-verifiable objective verifiable evidence information Source: Atrill & McLaney (2022, p. 11). 7 CHALLENGES FACING ACCOUNTING Increase sophistication of customers Availability of resources (scarcity and quality) Rapid changes in technology Expertise and knowledge creation (see Steve Jobs’ death and its impact on Apple) Increase volatility of financial markets (see many financial crises) Inflation and cost of living Governmental pressures (lack of) Accountability Ethics of the businesses Every day corporate scandals 8 REFERENCES Atrill, P., & McLaney, E. (2022). Accounting and finance: For non-specialists (12th ed.). Harlow, UK: Pearson. Agyemang, G. (2024). "Let's have a relook at accountability." The British Accounting Review 56(1). 9 QUESTIONS? 10