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Financial accounting

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Introduction

ABSTRACT The primary role of accounting information is to provide information for decision-making purposes. Both financial and managerial accounting rely on the same basic accounting database. However, there are important differences between the two disciplines. Neither financial nor managerial accounting is a subset of the other. They each have a distinct purpose and audience. Financial accounting is defined as measuring and recording business transactions and providing financial statements that are based on generally accepted accounting principles (Matteson, 2004). Financial accounting is concerned with external reports to owners, creditors, and shareholders. One objective of financial accounting is to provide information that is useful in making investment and credit decisions; in assessing the amount, timing, and uncertainty of future cash flows; and in learning about the enterprise's economic resources, claims to resources, and changes in claims to resources. The object of financial accounting is to assist accountants in their stewardship function: the safeguarding of the organization's assets. The central outputs of financial accounting are auditing financial statements such as balance sheets and income statements. ...read more.

Middle

Some students tend to equate legal and ethical behavior. That is, if an action is legal, they consider it to be ethical. Ethical standards are necessary for the smooth functioning of an advanced market economy. One advantage of approaching ethical issues in the management accounting and financial management is that there is a code of ethics by a professional body (the Institute of Management Accountants) that can be used as a framework. According to the IMA website, individuals in both management and financial management face constant ethical dilemmas (2005) Ethics deals with human conduct in relationship to moral rights and wrongs. Managers must predict the outcome of a situation or decision and take responsibility for the results. This is true in most areas of company management. IMA members have set criteria for analyzing and reporting any ethical issues and misconducts from managers, companies and employers. To help management in assessing these situations, the Institute of Management Accountants has developed the following five "Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management." ...read more.

Conclusion

* If the ethical conflict still exits after exhausting all levels of internal review, there may be no other recourse on significant matters than to resign from the organization and to submit an informative memorandum to an appropriate representative of the organization. Often there is a perception that unethical behavior is normal in the business community. A solid ethics program can be very useful in defending a company and individuals against criminal penalties. Good ethics is also simply sound business. Too often, business ethics is portrayed as a matter of resolving conflicts in which one option appears to be the clear choice. However, ethical dilemmas faced by managers are often more real-to-life and highly complex with no clear guidelines, whether in law or often in religion. Ethical conflict exists when there is a presence of a) significant value conflicts among differing interests, b) real alternatives that are equality justifiable, and c) significant consequences on "stakeholders" in the situation (Wallin, 2004). An ethical dilemma exists when one is faced with having to make a choice among these alternatives. ...read more.

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