ACCOUNTING

ENVIRONMENT
 TYPES OF BUSINESS ORGANISATIONS

*Sole Trader

An individual who owns his or her own business organisation.

Advantages Disadvantages
Easy Set-Up. No Continuity.
Keeps All Profit. Unlimited Liability.
Easy Decision-Making. Insufficient Capital Raising.

*Partnership

Where between 2-20 partners join to operate a business organisation.

Advantages Disadvantages
Losses Are Shared. No Continuity.
Sufficient Capital Raising. Unlimited Liability.
Additional Skills & Expertise. Conflicts Can Occur.

*Deed of Partnership

A formal agreement to begin a partnership, such as the ratio at which profits and
losses are shared, and the capital or equity contributed by each partner.

*Limited Liability Partnership (LLP)

Where partners are responsible for the partnership’s debts only up to the amount
they originally invested in the business.

*Unlimited Liability Partnership (ULP)

Where partners are fully responsible for the partnership’s debts of the business
and personally liable for the financial obligations of the business.
*Private Sector Organisations

An organisation that is owned, controlled and managed by individuals or groups of

individuals. Their main objective is to maximise profit.

Advantages Disadvantages
Profit Maximisation. High Set-Up Costs.
Innovation & Productivity. Profits Are Shared.
Sufficient Capital Raising. Insufficient Financial Information.

*Public Sector Organisations

An organisation that is owned, controlled and managed by the central government

or local government. Their main objective is to provide a service.

Advantages Disadvantages
Creating Employment. High Political Influence.
Sufficient Capital Raising. Slow Decision-Making Process.
Providing Goods & Services. Lack Of Productivity & Competition.
*Business Stakeholders

An individual or group that has an interest in the operations of a business and is

affected by the actions of the business organisation.

➢ Owners – Owners look at the overall profitability of the business to monitor the
business performance with their rivals. Owners look at the income statement.

➢ Managers – Managers assess the accounts to monitor the business performance

and make decisions based on the financial data available.

➢ Employees – Employees assess the accounts to monitor the business performance

and whether they have job security. Employees look at the income statement.

➢ Customers – Customers look the financial stability of the business, and then assess
the supply of goods and services is secure and consider to trade with the company.

➢ Suppliers – Suppliers assess the company accounts to monitor the stability of the
business, and assess what credit terms and interest to be offered and charged.

➢ Lenders – Lenders assess the company’s ability to pay back any money that lends
the business. The lenders look at the statement of financial position.

➢ Government – Government looks at the profits of the business to monitor whether

the business is paying enough tax.
 USE OF TECHNOLOGY IN ACCOUNTING

*Introduction

The technology has made a huge impact on the accounting industry. However, the
emerging technology on the accounting industry allow the accountants to record
transactions, prepare and present financial information easily and efficiently.

*Internet Access

The internet access provides a perfect marketplace for customers who can access
business websites to place an online order or make an online payment. The internet
access enables the organisation to connect with all its customers and build a strong
relationship with them. However, the internet access saves travel costs and speeds
up the decision-making process in the business.

*Computer Hardware & Software

The computer hardware are the physical aspects of the computer, such as monitor,
mouse, keyboard, motherboard and hard drive. These can be password protected to
prevent from unauthorised accessing.

The computer software are the data and instructions that are being sent to the
computer hardware, such as operating systems and computer programs. These can
be password protected to prevent from certain unauthorised accessing.
*Accounting Software

The accounting software enables financial statements to be produced more easily

and efficiently than traditional hand-written methods. However, the accounting
software helps to records all transactions, generate revenue invoices, purchases
invoices, credit notes, debit notes and month end statements, and automatically
updates the customer and supplier accounts. Therefore, the accounting software
will help to generate financial statements and management reports.

Advantages Disadvantages
Less Error Occurrence. High Installation Cost.
Efficient Data Entered. Regular Data Back-Ups.
Documents Are Shared Online. Trained Staff Required.

*Spreadsheets

A spreadsheet is a computer application used by organisations to record, organise,

analyse, and store data in a tabular form. However, as accounting professionals use
spreadsheets to record and prepare financial statements, the spreadsheets are an
essential tool for accounting professionals to make better business decisions.

Advantages Disadvantages
Cost-Effective. Regular Data Back-Ups.
Easy Data Organisation. Trained Staff Required.
Easy Calculation & Analysis. Potential Error Occurrence.
*Data Loss

An incident where computer data is destroyed or deleted. However, data loss can
be intentional or accidental. Therefore, the data needs to be saved regularly and
use complex and secure passwords to protect against data loss.

*Security

Many organisations regard their financial information as sensitive and confidential

as security is the main goal of every business, especially when handling confidential
financial information. However, as hackers steal organisations sensitive information
and share among third parties this will lead to damaging organisations reputation.
Therefore, preventing from unauthroized access to software is a crucial factor.

Action Benefit
Install Firewall Software. Blocks Internet Trafficking.
Install Anti-Virus Software. Blocks Viruses & Threats.
Install Anti-Spyware Software. Blocks Unauthorised Users.
Use Complex & Secure Passwords. Blocks Unauthorised Accessing.
 PROFESSIONAL ETHICS

*Introduction

The professional ethics are the personal and corporate rules that govern behaviour
within a particular organisation or profession. These principles are professionally
accepted standards of business behaviour. Professionals use these rules as a guide
to perform their jobs based on sound and consistent ethical principles.
*Principles of Professional Ethics

Integrity – Accountants cannot produce financial statements or financial reports

that intentionally omits data that could lead to misleading information.

Objectivity – Accountants must be free from bias or conflict of interest and must
not be under the influence of others.

Confidentiality – Accountants have a legal obligation to maintain the confidentiality

of financial information, as by not passing on any information among third parties.

Adopt Professional Behaviour - Accountants have to comply with all relevant laws
and regulations, as not to bring the accounting profession into disrepute.

Professional Competence & Due Care – Accountants’ knowledge and skills must be
of an appropriate level to provide a professional service to their clients.
*Accounting Roles

Accounts Payable – This role is responsible for keeping a check on the money that
goes out of the business, to pay for expenses.

Accounts Receivable – This role is responsible for checking that the business has
received all the money it is entitled, to avoid irrecoverable debts.

Payroll – This role is responsible for ensuring that all staff are paid on time, and
the government receives the correct amount of tax.

Financial Statements & Reporting - This role is responsible for the preparation of
financial statements and financial reports for internal and external usage.

Accounts Auditing – This role is responsible for controlling the business finances,
putting systems in place to show compliance and protect against fraud and theft.

*Public Interest

To act in the public interest, accountants must work towards the highest levels of
ethical and professional standards. Accountants must produce high quality financial
statements that are audited to ensure accuracy. The accountants who behave in an
unethical manner are dealt with through strict structures of disciplinary measures.