Question

1.Why is it important for an accountant to understand their business and industry as well as managements informational needs in addition to knowing how to generate financial statements?

Note: You may use S&S as the context while answering this question. However, please present your own examples.

2.You are likely using various forms of social media (e.g., Twitter, Facebook). Please explore the idea of how would this non-financial information external to the company be of use? What other nonfinancial information would be useful? Could you think of financial information that is external to the organization that might be useful to management as well?

Answer 1

As per policy, only one question is allowed to answer at a time, so answering question 1:

Answer 1)

An Accountant must understanding the business of the organization and the industry to which it belongs. This is important for an accountant because

a) To know the most active accounts.

b) To know the vital accounts on which the organisation’s base exists.

c) To know the frequency of the transactions in various parts of business operations.

d) To schedule the daily working of the Accounts Department.

e) To constitute the strength of the Accounts Department and assigning works to juniors.

Like in an Manufacturing company, an Accountant has to pay more attention on Huge Material purchase account, Direct labor expense accounts and Customers accounts. But in a Textile or Garments company, an Accountant has to concentrate more on day to day expenses, labor work timings and cash management.

As understanding of business is important for an Accountant, so important is also to know what managements informational needs are, apart generating regular financial statements:

The management is the apex body of the company who controls the daily operations and financial position of the company. So have complete and proper control on the daily movement of the various activities, the management needs a few information from Accountants about the various activities having in the company. Like to have control on the production, the Accountants have to provide reports like daily production vs. targets, materials used vs. budgetary norms, position of various material stock. For the control of marketing of products, the accountants has to report about the daily sales, cash collection and payments made, closing balance of debtors and creditors and closing balance of various products. For the control on Labor movements, the accountants have to provide reports like daily worked hours vs. budgetary hours, the overtime hours and attendance of the workers. For the control on Finance, the accountants have to report to the management on daily bank and cash position apart collections and payments.

So, An accountant has to be well versed with the organization’s business and management’s informational needs.

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