Question

In: Accounting

A very well-known blogger states that “Running a business isn't just about the Benjamins. When you...

A very well-known blogger states that “Running a business isn't just about the Benjamins. When you make plans or decisions for your company, you need financial information, but nonfinancial information is often important as well” AS an accountant, how comfortable are you with using nonfinancial data (like sentiment analysis from social media) to augment or fine-tune product pricing and demand decision? Do you think this will become mainstream practice in the short-term in the accounting community?

Solutions

Expert Solution

Explanation

The decision making of an organisation largely depends on financial activity of an organisation but it is certainly essential to take non financial activities (like sentiment analysis, sexual discrimination, education and culture of an society) into consideration.

Financial and non financial activity cannot be compared with each other as it is difficult to analyse non financial activities into terms of money.

Financial data includes sales, purchase cost, salaries, wages, raw material cost, operation cost whereas non financial activities are relationship with customers, workplace culture within the organisation, safety of employees etc.

Non financial activities can largely impact decision making for example, if an litigation is filed by employees for harassment at workplace. It will affect the financial activities of an entity, in form of advocate fees and fines and penalties charged by a court of law.


Therefore, it can be concluded that organisations even though you will not be able to quantify non financial activities into terms of money, to make it a part of accounting in near future but also non financial activities cannot be ignored within the entity while decision making process.


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