2. the accounting function

What are the two main aims of the accounting function?

To process all accounting transactions accurately and completely, and provide correct, up-to-date information to stakeholders.

What is organisational structure and what determines it?

How activities, functions and staff are grouped, coordinated and managed. It depends on organisational size, type, objectives, strategy, people and business needs.

How do profit-making and not-for-profit organisations differ?

Profit-making organisations aim to generate profits that satisfy owners and compare results with financial targets. Not-for-profit organisations aim to provide services or meet specific needs.

What are examples of not-for-profit organisations?

Charities, community interest companies, sports clubs, friends' societies and mutual societies such as credit unions.

How does organisational size affect the accounting function?

Small organisations often have staff performing multiple tasks; large organisations have specialised departments. Rapid growth can increase control and compliance risks.

What are the four main sections of a large accounting function?

Transaction processing, financial accounting, management accounting and treasury management.

What is transaction processing?

Maintaining accounting records including payroll, sales ledger, purchases ledger, cash book and general ledger.

What is financial accounting responsible for?

Preparing statutory financial statements and external reports for regulators, including taxation information.

What is management accounting responsible for?

Preparing budgets, forecasts, cost reports and performance information to support planning, control and decision-making.

What is treasury management responsible for?

Managing the organisation's cash flows, financing requirements and availability of funds.

What is the difference between tall and flat organisational structures?

Tall structures have many management levels and narrow spans of control; flat structures have fewer management levels and wider spans of control.

What are the advantages and disadvantages of a tall structure?

Advantages: clear authority, responsibilities, supervision and career progression.

Disadvantages: slower communication, higher management costs and more bureaucracy.

What are the advantages and disadvantages of a flat structure?

Advantages: faster communication, fewer management costs and greater employee responsibility.

Disadvantages: wider spans of control, manager overload and potentially weaker supervision.

What is organisational culture and what influences it?

Culture is 'the way we do things around here'. It is influenced by managers, owners, management style, controls, staff and technology.

What are the four types of accounting function culture?

Teamwork: shared responsibility

individualism: separate responsibilities

control: strict rules and procedures

laissez-faire: informal controls based on trust.

How can organisational culture affect the accounting function?

It influences staff morale, efficiency, compliance, internal controls and behaviour. Culture may change with new management, employees or technology.

What ethical responsibilities does the accounting function have?

Economic: support profitability and efficiency; social: good governance, fair supplier treatment and community consideration; environmental: reduce waste, energy use and pollution.

What is ethical budgeting and what are budgetary slack and goal congruence?

Ethical budgeting sets realistic, achievable targets. Budgetary slack is deliberately adding unnecessary costs or understating income. Goal congruence means departmental goals align with organisational objectives.

What is a centralised accounting function?

Accounting tasks and data processing are performed centrally, usually at head office, regardless of where other business activities occur.

What are the advantages and disadvantages of centralised accounting?

Advantages: specialised staff, consistent controls, efficiency and economies of scale. Disadvantages: less local flexibility, possible delays and distance from operational departments.

What is a decentralised accounting function?

Accounting data is stored and processed locally by separate departments or locations, which may operate independently.

What are the advantages and disadvantages of decentralised accounting?

Advantages: local responsiveness, flexibility and understanding of operations. Disadvantages: duplicated work, inconsistent procedures, higher costs and potentially weaker central control.

What is outsourcing and what tasks are commonly outsourced?

Outsourcing means using an external provider for routine or specialised activities, often under a service level agreement (SLA). Examples include payroll, debt collection, tax and legal services.

What are the advantages and disadvantages of outsourcing accounting tasks?

Advantages: specialist expertise, cost savings, automation and economies of scale.

Disadvantages: reduced direct control, confidentiality risks, provider dependence and service-quality issues.

What factors determine whether accounting should be centralised, decentralised or outsourced?

Organisation size, location, complexity, available expertise, costs, control requirements, technology and the need for local responsiveness.

What is management information and what is a Management Information System (MIS)?

Management information supports planning, control, performance measurement and decisions. An MIS processes and organises data from accounting and other departments into useful information.

What are the four main purposes of management information?

Planning future activities, controlling operations, measuring performance and supporting informed decision-making.

How is management information used for planning and control?

Planning considers available resources, deadlines and alternative outcomes. Control compares actual results with plans, identifies deviations and supports corrective action.

How is management information used for performance measurement and decision-making?

Performance is assessed using measures such as budgets, scorecards and KPIs. Accurate, timely information helps managers evaluate alternatives and make better decisions.

What are strategic, tactical and operational information?

Strategic: long-term objectives and direction; tactical: medium-term resource allocation and monitoring; operational: day-to-day tasks and activities.

Give examples of strategic, tactical and operational information in manufacturing.

Strategic: demand forecasts, new products and competitor analysis; tactical: variances, departmental accounts and inventory turnover; operational: reject rates, materials, labour and stock levels.

Give examples of strategic, tactical and operational information in services.

Strategic: sales growth, market share, profitability and capital structure; tactical: staff utilisation, customers per employee and satisfaction ratings; operational: timesheets, waiting times and customer feedback.

What performance measures are important in manufacturing businesses?

Production quality, reject rates, inventory turnover, material and labour usage, changeover times, common parts and product diversity.

What performance measures are important in service businesses?

Staff utilisation, customer satisfaction, waiting times, customer feedback, profitability and the number of customers served.

How do organisational requirements affect the design of an MIS?

The MIS must reflect the organisation's size, industry, objectives and management levels, providing relevant information and KPIs for planning, control, performance measurement and decisions.