Essay About Financial Accounting And Top Management Of Organizations

Financial & Managerial Accounting Report
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Abstract
Whats ethics got to do with accounting? Everything! Believe me,
everything. When
the word ethics is mentioned, what readily comes to mind is the question
of deciding
between doing what is right and doing what is wrong. But doing what is
right versus
doing what is wrong within what context? The idealist will say that
decisions of ethics
should not be conditional. But it is not as simple as it sounds, for
what constitutes “right”
to one person, may be “wrong” to another person. What bridges the gap,
guides, and
clearly distinguishes the line between right and wrong in political,
economic and social
systems are traditions, culture, laws and regulations. Even then, what
is unethical may not
necessarily be illegal, even though there exists a close relationship
between the two.
These dynamics apply to almost every legal profession, accounting not
exempted. This
paper examines the issues of ethics in accounting. It also looks at the
differences and
similarities between financial accounting to managerial accounting.
Introduction
According to Marshall et al, (What the numbers mean, 2003)
accounting involves
“identifying, measuring, and communicating economic information about an
organization
for the purpose of making decisions and informed judgments.” This
definition clearly
shows that there are stakeholders in the information generated by
accountants. These
include managers, shareholders, oversight and law enforcement agencies,
and the general
public. Since these entities rely on the reports generated by
accountants for critical
decision making, it is important that the information be reliable,
objective, and presented
in an easy to understand format. Ignoring or circumventing these values
renders the
information generated unreliable. It can lead to devastating
consequences as evidenced
by events which led to recent legislation such as the Sarbanes-Oxley Act
which seeks to
make top management of organizations accountable for the financial
statement produced
by their organizations through the internal controls they develop and
enhance, and to
oversee auditors who hitherto could have business interests other than
auditing in the
organizations they were responsible for auditing.
Financial versus Managerial accounting
Managerial accounting refers to the management of company resources
while
applying management accounting principles in decision making. One
important
characteristic of management accounting is that, it is internal to the
organization even
though external information such as financial accounting reports will
have some amount
of influence.
Financial accounting refers to the identification, recording,
computation, and reporting
of financial information to users who may have a stake in the
information reported. An
important characteristic of this information is that it is geared
towards users external to
the company.
A financial accountant generates information for external
consumption. These
products include the income statement, the balance sheet, the statement
of cash flow, and
the statement of owners equity. These statements are used to help
stakeholders make
critical decisions related to the business. A management accountant on
the other hand,
generates reports such as the schedule of cost of goods sold, and may
use reports
generated by the financial accountant. The schedule of cost of goods
sold is used to
evaluate and record internal costs associated with the production
process