Introduction of Business Accounting Question and Answer
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Question 1: IAS1 and its objectives
The implications of a financial statement are considered to be a critical attribute of an organisation to encourage the healthy presentation of financial performance in the domestic as well as international markets. The thorough following and due diligence of financial statements are perennially important to further establish harmony and accord with the associated stakeholders. The importance of financial statements is further considered to strengthen the professional integrity of organisations, which additionally leads to favourable financial situations for an organisation. As per statements and explanations of Hussey & Ong (2021), the importance of financial statements is further strengthened by the strategic usage and implementation of International Accounting Standards (IAS) by organisations. More specifically, the usage of IAS can be further broadened by the usage of IAS1, which is largely attributed to the suitable and strategic presentation of financial statements by Marks and Spencer’s in an accounting year. The specific objectives, features, attributes and importance of IAS1 are further discussed as follows.
The objectives of IAS 1 are primarily based on the ability of organisations to compare the financial presentations with the available historical records. This objective is an important and critical aspect of Marks and Spencer’s to further encourage the suitable information presented by commercial establishments, entities and organisations (xero.com, 2022). The objectives of IAS 1 also comply with making minuscule amendments and changes to its existing paradigms for empowering more published information of IAS 1. The basic amendments made in the IAS 1 structures and paradigms include changing the name of the balance sheet as a statement of financial position. The additional amendments include changing the name of the Income statement to a statement of comprehensive income. The objectives of IAS 1 can be further aligned with the specific features and attributes of IAS 1, which mainly include businesses following a going concern concept and ensuring a sustained interval of financial reporting. This is specifically important to achieve excellence in the organisational structure for financial reporting and presentation.
Question 2: Importance of adapting the conceptual framework
The preparation of a financial statement is considered to be a critical aspect for an organisation, entity or business establishment to ensure harmony and a coordinated approach for encouraging successive organisational growth. In order to achieve business growth and solidity in financial reporting the major area of emphasis is being provided with the field of a conceptual framework. The application and implementation of a conceptual framework is a critical aspect for Marks and Spencer’s as it enforces a compulsory binding to abide by legislation, principles and ethical standards involved in the accounting process. Therefore, the importance of adopting a conceptual framework by organisations to justify reliable and credible presentation of financial statements is perennially significant (business2community.com, 2022). Moreover, the adaptation of conceptual framework is further important to underline the various elements and factors involved in the financial reporting as well as highlighting the necessary assumptions taken for the preparation of financial statements.
The importance of conceptual framework is further important for Marks and Spencer’s to determine the qualitative aspects of financial statements. The determination of qualitative aspects is an important area of relevance as it conveys the significance of preparing financial statements and how the financial statements portray the actual performance metrics of an organisation. The recognition and realisation of elements involved in the preparation of financial statements can be further attributed to the potential benefits the financial statements carry in the industry. Rikhardsson & Yigitbasioglu (2018), further explained and demonstrated that major elements involved in the preparation of financial statements include Assets, Liabilities, Incomes and Expenses and the significance of these elements determine the overall profit-making attributes of an organisation. The importance of conceptual framework in the preparation of financial statements can further imply the regulatory and legislative principles necessary for publishing reliable and credible reports of accounting to justify the long-run organisational sustainability in domestic and international markets.
Question 3: Potential users of the company published financial statements
The preparation and presentation of financial statements in an organisation are considered an area of relevance and importance for justifying the actual financial position in the industry and market. Therefore, a substantial level of stress by organisations on presentation of financial statements is a necessary factor, which mainly considers the appropriate utilisation of statements. The major stress on presentation of financial statements can be further refined to the available users or parties associated with the financial statements (finextra.com, 2022). The potential users of a company's published financial statements can be further categorised based on internal and external stakeholders associated with the bandwidth of Marks and Spencer’s. The internal stakeholders mainly consist of key personnel involved within an organisation, which mainly includes labourers, employees, supervisors, functional level managers, investors and the board of directors. The relevance and importance of internal stakeholders particularly investors is a key attribute of a financial statement as substantial amounts of financial and business interests are attached by the parties.
The rise and increase in the credibility of financial statements of an organisation can add to the financial interests of investors, thereby bringing an additional influx of capital, which enables the organisation to facilitate and improvise new investment appraisals and projects. The presence of investors by significant proportions is generally considered a favourable situation for that particular organisation. The role of external stakeholders is also considered to be critical as well as important to justify the coherent progress of an organisation. As per statements and opinions of Osadcha et al. (2018), the external stakeholders mainly consist of common shareholders, government and bureaucratic bodies, customers, investment analysts and suppliers. The role of each element in the organisational paradigms of Marks and Spencer’s is crucial for encouraging harmony with external stakeholders for justifying the prolonged continuity of business processes (Corporate.marksandspencer, 2021). The role of external stakeholders is more crucial for retail companies for empowering the increased levels of engagement with the organisation. The potential users of financial statements in Marks and Spencer’s can be further related to the needs of information possessed by the relevant users of financial statements. A detailed discussion on the needs of information possessed by the relevant users is mentioned as follows.
The primary need for information from financial statements is attributed to achieving an understanding of Marks and Spencer’s management. This is an important need as a fair evaluation of the company understanding leads to an increased level of organisational inclination. Hussey & Ong (2021) further explained and stated that the need of information also includes the curiosity of stakeholders to identify the potential competitors of the organisation. The identification of competitors further enables stakeholders to know how Marks and Spencer’s are looking to align its business strategies for achieving a competitive edge. Decision-Making is also an important need for information attributed to stakeholders as strategic and quick decisions lead to a company's growth, thereby fulfilling the collective and individual interests of accounting information users.
Users of a Financial Statement
(Source: cdn.wallstreetmojo.com, 2022)
Question 4: Qualitative characteristics of presentation of financial information
The qualitative attributes of selection and presentation of financial statements in an organisation are further classified based on the importance of conceptual framework. The qualitative characteristics of a conceptual framework further include comparability, verifiability, timeline and understanding. The traits of comparability mainly include the ability of Marks and Spencer’s to further compare its current financial statements with its previous financial records to determine the actual business progression. As per observations and explanations of Demirkan, Demirkan & McKee (2020), the second trait of verifiability allows organisations to verify and publish their respective financial performances with the help of outside or external sources.
The third trait of timeline allows Marks and Spencer’s to adhere to strict time constraints for meeting their respective business goals, objectives and milestones. The timeline feature also includes the scope of organisations to implement a necessary business decision within a specified time range (Sutton, Cordery & Zijl, 2015). The fourth aspect of understanding is mainly associated with the level of stakeholder association as it mostly relates to the assessment of financial stronghold for Marks and Spencer’s. The major qualitative aspects of conceptual framework can be further signified by the implications of IAS 1 and how IAS 1 considers them. Ritonga (2020) further explained and demonstrated that all the major qualitative characteristics are duly covered under IAS 1 and special emphasis is being provided to uphold the incremental level of organisational integrity (Sana'a, 2016).
The relevance of qualitative aspects in conceptual framework and IAS 1 can be further synchronised with the preparation and presentation of Statement of Financial Position (SOFP). The presence of a healthy SOFP or balance sheet for Marks and Spencer’s is detrimental to complying with all the above-mentioned key qualitative aspects. As per the explanations and demonstrations of Rikhardsson & Yigitbasioglu (2018), a healthy SOFP often adheres to complete transparency of financial position, thereby upholding organisational integrity. Moreover, the added impetus to comply with past financial performances allows Marks and Spencer’s to justify the ethical codes of professional conduct, thereby leading to a significant rise in the number of accounting information users.
(Source: Created by Learner)
Hussey, R., & Ong, A. (2021). Accounting for business : Practicalities and strategies. Business Expert Press.
Demirkan, S., Demirkan, I., & McKee, A. (2020). Blockchain technology in the future of business cyber security and accounting. Journal of Management Analytics, 7(2), 189-208. Retrieved from: https://www.researchgate.net/profile/Irem-Demirkan-2/publication/339509334_Blockchain_technology_in_the_future_of_business_cyber_security/links/5f28388992851cd302d6c5da/Blockchain-technology-in-the-future-of-business-cyber-security.pdf [Retrieved on: 23.04.2022]
Osadcha, O. O., Akimova, A. O., Hbur, Z. V., & ?rylova, I. I. (2018). Implementation of accounting processes as an alternative method for organizing accounting. Financial and credit activity problems of theory and practice, 4(27), 193-200. Retrieved from: https://fkd.net.ua/index.php/fkd/article/download/1563/1579 [Retrieved on: 23.04.2022]
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business2community.com, 2022, Business Accounting [online], Retrieved from: https://www.business2community.com/uk/accounting/best-accounting-software [Retrieved on: 23.04.2022]
finextra.com, 2022, Business Accounting [online], Retrieved from: https://www.finextra.com/the-long-read/393/open-banking-for-business-uk-retail-banks-growth-engine [Retrieved on: 23.04.2022]