ASSIGNMENT 1 FRONT SHEET

Qualification BTEC Level 4 HND Diploma in Business

Unit number and title Unit 5: Accounting Principles (5038)

Submission date 26/02/2024 Date Received 1st submission 26/02/2024

Re-submission Date Date Received 2nd submission

Student Name Nguyen Thanh Long Student ID BH01034

Class BA06301 Assessor name Tran Minh Giang

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I certify that the assignment submission is entirely my own work and I fully understand the consequences of plagiarism. I understand that
making a false declaration is a form of malpractice.

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I. INTRODUCTION .................................................................................................................. 4
II. THE ACCOUNTING FUNCTION IN AN ORGANISATION .................................. 4
1. Definition of Accounting ................................................................................................ 4
1.1. Financial Accounting .......................................................................................... 5
1.2. Managerial Accounting....................................................................................... 5
1.3. Cost Accounting ................................................................................................... 5
1.4. Tax Accounting .................................................................................................... 5
2. Purpose of the Accounting Function............................................................................. 6
3. The main user of the Accounting Information ............................................................ 7
3.1. Internal users ....................................................................................................... 7
3.2. External users ...................................................................................................... 7
4. The roles and importance of Accounting as an information system .......................... 9
4.1. Introduction of Accounting Information System ............................................. 9
4.1.1. Definition of Accounting Information System .................................................. 9
4.1.2. Function of Accounting Information System .................................................. 10
4.2. Interrelationship between Accounting Function and Marketing Function ... 11
4.3. Career opportunities in accounting ................................................................. 12
4.4. Skills and Abilities Required for Accounting Positions ................................. 13
4.4.1. Requirements for the Accounting Industry .................................................... 13
4.4.2. CGMA Competency Framework ..................................................................... 14
III. THE CONTEXT AND PURPOSE OF FINANCIAL AND MANAGEMENT
ACCOUNTING ........................................................................................................................... 16
1. Roles and importance of accounting ........................................................................... 16
2. Distinguish between financial accounting and management accounting ................. 16
3. Organizational Constraints and Threats in Accordance with Accounting
Regulatory Concepts (GAAP, IFRS from FASB) and Accounting Principles and
Ethics ............................................................................................................................ 18
IV. CONCLUSION .............................................................................................................. 21

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I. INTRODUCTION

A business's survival and growth require various factors such as finance, human resources,
products, and many other elements. However, successful companies demand effective financial
management, as understanding the financial information of a business makes management easier
and helps investors make informed decisions. Therefore, the role of accounting in a business is
crucial for every organization. Recognizing this situation, as an accounting intern at EY, one of
the top four leading financial and accounting firms in Vietnam, with a long history dating back to
1849, I understand the importance of accounting in the business world.

EY is a globally recognized audit service provider, part of the Big4, along with Deloitte,
KPMG, and PwC. Recently, the group has focused on emerging countries, particularly in
Southeast Asia, with a small customer base and significant development potential.

The content of this article includes the definition of accounting, the general role of
accounting in a business, and career opportunities. It also delves into the importance and role of
systems like AIS and the objectives of audit functions in an organization. The article compares
financial accounting and managerial accounting, outlining goals, scope of activities, and the level
of compliance with IFRS and GAAP principles. Finally, the article emphasizes the high regard for
the accounting function within an organization in the context of mandatory regulatory and ethical
constraints.

With the mission of creating an official information page for clients to gain a better
understanding of basic accounting knowledge, I will provide the most useful information about
the accounting industry.

II. THE ACCOUNTING FUNCTION IN AN ORGANISATION

1. Definition of Accounting
Accounting involves the collection, analysis, and communication of financial information.
The ultimate purpose is to assist users in making more informed decisions (Mclaney, 2018). The
accounting process includes summarizing, analyzing, and reporting these transactions to
regulatory bodies, management entities, and tax authorities. Financial reports used in accounting
are concise summaries of financial transactions during the accounting period, providing an
overview of the company's activities, financial condition, and cash flows (Fernando, 2023).

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 Accountants may be tasked with recording specific transactions or working with specific
sets of information. For this reason, there are several broad groups that most accountants can be
grouped into.

1.1. Financial Accounting

Financial accounting refers to the processes used to generate interim and annual financial
statements. The results of all financial transactions that occur during an accounting period are
summarized in the balance sheet, income statement, and cash flow statement. The financial
statements of most companies are audited annually by an external CPA firm.

For some, such as publicly-traded companies, audits are a legal requirement.6 However,
lenders also typically require the results of an external audit annually as part of their debt
covenants. Therefore, most companies will have annual audits for one reason or another.

1.2. Managerial Accounting

Managerial accounting uses much of the same data as financial accounting, but it
organizes and utilizes information in different ways. Namely, in managerial accounting, an
accountant generates monthly or quarterly reports that a business’s management team can use to
make decisions about how the business operates. Managerial accounting also encompasses many
other facets of accounting, including budgeting, forecasting, and various financial analysis tools.
Essentially, any information that may be useful to management falls underneath this umbrella.

1.3. Cost Accounting

Just as managerial accounting helps businesses make decisions about management, cost
accounting helps businesses make decisions about costing. Essentially, cost accounting considers
all of the costs related to producing a product. Analysts, managers, business owners, and
accountants use this information to determine what their products should cost. In cost accounting,
money is cast as an economic factor in production, whereas in financial accounting, money is
considered to be a measure of a company's economic performance.

1.4. Tax Accounting

While financial accountants often use one set of rules to report the financial position of a
company, tax accountants often use a different set of rules. These rules are set at the federal, state,
or local level based on what return is being filed. Tax accounts balance compliance with reporting
rules while also attempting to minimize a company's tax liability through thoughtful strategic

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decision-making. A tax accountant often oversees the entire tax process of a company: the
strategic creation of the organization chart, the operations, the compliance, the reporting, and the
remittance of tax liability.

2. Purpose of the Accounting Function

Accounting is one of the crucial functions for almost every business. It can be handled by
an individual accountant or a small accounting team in a small company, or by large financial
departments with dozens of employees in larger corporations. Reports generated by various
accounting streams, such as cost accounting and management accounting, are invaluable in
helping management make informed business decisions.(Fernando, 2023)

The purpose of accounting is to accumulate and report financial information about the
performance, financial position, and cash flows of a business. This information is then used to
make decisions on managing the business, investing in the company, or obtaining loans. This
information is accumulated in accounting records with standardized accounting transactions,
recorded through common business transactions like customer invoices or supplier invoices, or
through more specialized transactions known as journals.(Bragg, 2017)

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3. The main user of the Accounting Information
Many people in society require accounting information beyond the managers and owners
of the organization because accounting is a fundamental part of the information system of
companies. Different parties in society use accounting information for various diverse purposes.
Therefore, the purpose of financial reporting to serve the needs of users can lead to better financial
decisions. The effectiveness of economic decision-makers depends on the accuracy of the
accounting information provided. Users can be internal and external (Lim, no date).

3.1. Internal users

Managers: Plan, control, and make better decisions by using useful accounting information. At
the same time, to bring improvement in business results, the organization can implement
necessary measures. Additionally, managers are responsible for controlling the organization's
products. Therefore, accounting information is very helpful for managers to improve
performance and perform their work better (Lim, n.d.).

Employees: Employees contribute to the organization under their labor. Employees care about
profit, economic stability, financial condition, and the ability of the organization to assess
opportunities for expansion and career development. Hence, they have the right to care about the
internal activities of the organization. Accounting information helps employees understand the
financial health or profitability of an organization to determine their job security, future reward
potential, retirement benefits, and employment opportunities (Lim, n.d.).

Owners: Owners of the organization need financial information to help them make decisions to
avoid risks for their investments. They use accounting information to analyze the existence and
profitability of their investments because accounting information allows owners to estimate the
organization's business dividend-paying capacity. It also helps them determine any future course
of action (Lim, n.d.).

3.2. External users

Creditors: Creditors are interested in accounting information because accounting data allows
them to determine the creditworthiness of the business. Credit terms and credit standards are set
based on the financial health of an organization. As a result, it helps them analyze by using accurate
financial accounting information for suitability (Lim, n.d.).

Investors: Accounting information can help potential investors evaluate the potential success and
profitability of the organization. They need information because they care about risk in investment
and profitability. Because the important thing is to evaluate the feasibility of investing in the

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company, they need to analyze before providing any financial resources to the company (Lim,
n.d.).

Customers: Customers concerned with accounting information when there is participation or a

long-term contract between them and the organization. They use information to assess the financial
situation of a business. They are concerned about the ability of the organization to continue to exist
and maintain the stability of its operations. These accounting information allows the organization
to maintain a stable source of business (Lim, n.d.).

Regulatory bodies: Accounting information is essential for them to ensure that it complies with
rules and regulations and protects the interests of investors or owners based on that information.
For example, regulatory bodies monitor whether the organization operates according to the
provided rules (Lim, n.d.).

Figure 1 :Main users of financial information relating to a business

(Atrill And McLaney, 2020)

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4. The roles and importance of Accounting as an information system
4.1. Introduction of Accounting Information System
The Accounting Information System (AIS) is a crucial component of organizational
processes, facilitating the collection, processing, and dissemination of financial and accounting
data. The Accounting Information System plays a pivotal role in the flow of information within
an enterprise, influencing decision-making and strategic planning.

Figure 2: The Accounting Infomation System (Atrill And McLaney, 2020)

4.1.1. Definition of Accounting Information System

An information system is a formal process for collecting data, processing the data into
information, and distributing that information to users. The purpose of an accounting information
system (AIS) is to collect, store, and process financial and accounting data and produce
informational reports that managers or other interested parties can use to make business decisions
(AccountingEdu.org, 2021)

The accounting information system consists of four stages that need to have certain
features common to all information systems in the enterprise, including the following stages:

• First, identifying and capturing relevant information involves gathering and

identifying pertinent data.
• Second, recording, in a systematic way, the information received in a logical and
methodical manner.
• Third, analyzing and interpreting information involves tasks such as evaluating
and correctly interpreting the information collected.
• Lastly, the process of providing information in a way that is appropriate for the needs
of the user.

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4.1.2. Function of Accounting Information System
The role of providing information and supporting management and operations of a business
is evident in the following five functions:

Providing Reports for External Users:

This function involves generating structured reports, such as Financial Statements, and tax
reports to serve external stakeholders, including shareholders, creditors, and government
regulatory agencies. These reports are prepared and presented following established regulations
and templates, ensuring consistency across all types of businesses (Ngo, 2022).

Supporting Daily Operations:

The accounting information system, through the collection of operational data in business
cycles, provides valuable information for evaluating the process of executing daily activities. It
assesses the ongoing business cycle, offering insights into the effectiveness of operations and
evaluating completed activities (Ngo, 2022).

Assisting Management Decision-Making:

Essential information for managerial decision-making in businesses is diverse, requiring

flexibility from the accounting information system to meet the varied needs of information users.
Since such information often lacks specific standards or predefined reports, the accounting
information system must be flexible enough to meet timely and comprehensive information
requests from various management levels (Ngo, 2022).

Planning and Control:

The information provided by the accounting information system is crucial for strategic
planning and control to achieve organizational goals. Through continuous data collection and
analysis, it facilitates comparisons, trend analysis, and forecasting, contributing to effective long-
term planning and goal achievement (Ngo, 2022).

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4.2. Interrelationship between Accounting Function and Marketing Function
The accounting function has a close correlation with various departments, as it is
responsible for providing and processing financial resources for different organizational units.
Other organizational functions rely on the accounting function to obtain relevant information to
efficiently fulfill their responsibilities. However, for accounting to accurately reflect the financial
and business status of the organization, other organizational functions also send information to the
accounting function.

Finance and Accounting:

Accounting and finance share a symbiotic relationship crucial for a company's success.
While accounting generates financial documents and transactions, finance utilizes this information
to guide decision-making. Accurate accounting data is vital for budgeting, financial planning, and
investment analysis, emphasizing the interdependence of these tasks.

Operations and Accounting:

Financial transactions resulting from operational activities require meticulous recording

and analysis. The accounting department collaborates with operations to manage inventory,
capture costs, and allocate resources efficiently. The seamless integration between these two
critical organizational aspects is facilitated by accurate accounting data, supporting operations in
recognizing opportunities to enhance efficiency.

Human Resources and Accounting:

Costs related to employee salaries, benefits, and compensation form a significant part of
accounting activities. Working in tandem with human resources ensures that labor costs are
accurately reflected in financial records. The accounting function plays a crucial role in supporting
human resources tasks such as payroll processing and benefits management while ensuring
compliance with regulations.

Marketing and Accounting:

Investing in marketing campaigns can be costly. Accounting aids in tracking and

evaluating marketing expenses, assisting businesses in determining their return on investment. The
interaction between accounting and marketing helps organizations use resources wisely and
enhance the effectiveness of their marketing initiatives, a critical element for strategic decision-
making.

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Information Technology and Accounting:

Information technology is an integral component of modern accounting procedures. Data

security, database management, and accounting software are crucial IT factors supporting the
accounting function. Technology and accounting seamlessly integrate to ensure efficient data
management, timely reporting, and compliance with evolving regulatory requirements.

Supply Chain Management and Accounting:

From procurement to production and distribution, the supply chain requires a complex
network of operations. Accounting is essential for recording these transactions, ensuring
accountability and transparency. Collaboration between accounting and supply chain management
is necessary to manage costs, inventory valuation, and overall financial sustainability.

Legal and Accounting:

Organizations must prioritize legal compliance, and accounting procedures must adhere
to all relevant laws. To ensure that financial activities comply with regulations, the accounting
department works closely with legal departments. Through this relationship, legal risks are
minimized, ethical cultures are promoted, and the financial stability of the organization is
safeguarded.

These interdepartmental relationships highlight the comprehensive nature of the

accounting function within an organization. The connections between departments contribute to
smooth operations and play a significant role in achieving the overall goals of the business.

4.3. Career opportunities in accounting

Job opportunities in the accounting industry are vast, and according to several surveys, the
demand for accounting professionals is projected to continue rising over the next 10 years due to
the increasing financial complexities faced by businesses. With a growth rate of around 10%, the
demand for accounting personnel surpasses the average growth rate in many other professions. As
of the end of 2020, Vietnam had over 810,000 active businesses. On average, each business
requires 5-6 accountants to sustain operations, with an average income ranging from 7-9 million
VND per person. The new resolution on enterprise development for the 2021-2025 period, with a
vision to 2030 led by the Ministry of Planning and Investment, aims to have 1.3 - 1.5 million
businesses. This implies a high demand for recruiting accountants (Ly, 2023). This growth is
attributed to the economic development, international economic integration, leading to an increase
in the number of enterprises and organizations requiring accounting services.

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Job opportunities in accounting are widely distributed across various sectors, including businesses,
non-profit organizations, and government agencies. Firstly, within businesses, this field has the
highest demand for accounting services. Businesses of all scales and industries require accountants
to perform tasks related to financial accounting. Secondly, non-profit organizations, such as
charities and social organizations, also need accountants to manage the financial aspects of their
operations. Additionally, government agencies like the Ministry of Finance and the Ministry of
Planning and Investment have a demand for accountants to carry out public financial-related tasks.
Furthermore, job opportunities in accounting are diverse, ranging from positions like accountants,
audit managers to financial directors. Accountants are responsible for fundamental accounting
tasks such as recording, classifying, summarizing, and preparing financial reports. Accounting
managers oversee and operate the accounting department, ensuring the effective functioning of the
company's accounting system. Or financial directors, high-level management positions in a
business, are responsible for all financial activities of the enterprise.

This table provides an overview of the types of accounting services that businesses can
utilize, as well as career opportunities in the accounting industry. Specifically, services provided
to business managers to aid them in decision-making and planning include comprehensive
accounting, which provides information about the financial status of the business, cost accounting
providing information about production costs, and analytical accounting to support decision-
making. Alternatively, services provided to external stakeholders such as shareholders, banks,
suppliers, and tax authorities include financial reporting, legal financial reporting, financial
statement auditing, tax consulting, etc. The choice of accounting service depends on the business's
needs to find suitable candidates for recruitment.

4.4. Skills and Abilities Required for Accounting Positions

4.4.1. Requirements for the Accounting Industry
Lucia Smeal, an assistant professor at Franklin College, emphasizes the expanding role of
accountants: "Accountants must think strategically, drive business value, and be proactive in
business decisions." Accounting is a profession that requires attention to detail. The job demands
diligence, precision, including tasks such as preparing documents for daily economic activities
within the unit: sales invoices, delivery notes, import vouchers, etc. Analyzing the financial
situation, budgets, costs, and revenue of the company. Recording and verifying accounting books.
Managing cash in the unit and bank accounts. Handling accounting data, preparing reports on the

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unit's performance to provide information to managers, such as financial reports, profit reports,
cost reports, etc. (Ngọc, 2022).

Accountants need to meet requirements for specialized knowledge, professional skills, and
professional ethics. In terms of specialized knowledge, this forms a solid foundation for
accountants to accurately, comprehensively, and timely perform accounting tasks. Accountants
need to master accounting principles and financial standards. Regarding professional skills,
accountants need the ability to carry out accounting tasks accurately, comprehensively, and timely.
Concerning professional ethics, accountants need qualities like honesty, integrity, and awareness
of legal compliance. Additionally, accountants also require soft skills such as communication to
convey financial information clearly to relevant parties. They need to collaborate with other
departments in the business to efficiently complete tasks, address issues promptly, limit damage
to the business, and possess other skills like time management, resilience to pressure, etc. These
requirements enable accountants to perform their duties effectively, meeting the needs of
businesses and society.

4.4.2. CGMA Competency Framework

From a psychological perspective, competencies are a synthesis of an individual's
psychological characteristics and attributes. These competencies align with specific requirements
of a particular activity to ensure its high effectiveness. The CGMA Competency Framework is an
internationally recognized standard for accounting competency, acknowledged by businesses and
organizations worldwide. Meeting the requirements of the CGMA competency framework helps
accountants enhance their professional competence, soft skills, and provides career advancement
opportunities. The CGMA Competency Framework (2019 version) is designed to help
management accountants, finance professionals, and their employers understand the knowledge
requirements and assess the necessary skills for both current and future roles. This framework is
reinforced by the need for objectivity, integrity, and ethical behavior. Competency-based training
and competency-based human resource management are becoming dominant trends and have
proven to enhance workforce quality. The competency framework contributes to improving the
workforce. The professional competency framework is an effective measurement tool, helping
government agencies, businesses, training institutions, learners, and workers understand what
needs to be done and how to achieve desired goals. In other words, the competency framework
helps translate the organization's strategy, goals, and values into specific behaviors. Understanding
the value of the competency framework for human resource training functions and human resource
management, this effort will promote coordination among stakeholders to build the most complete

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and reasonable competency framework, including continuous commitment to acquiring new skills
and knowledge (CGMA Competency Framework 2019 version 2021).

The CGMA Competency Framework is designed to help management accountants, finance

professionals, and employers understand the knowledge requirements and assess the necessary
skills for both current and desired roles in the future. The CGMA Competency Framework (2019
version) was developed through three stages of research: direct interviews, roundtable discussions,
and online surveys. Participants included mid to senior-level financial and non-financial
employees from various industries in both public and private sectors. A total of 130 organizations
from 14 countries participated in direct interviews. Roundtable conferences were held in 20
countries across Asia, Europe, Africa, and the Americas. Over 5,000 responses were received for
the online survey, including CIMA members, employers, students, a broader financial community,
and scholars.

Accordingly, the CGMA competency framework for management accounting includes five
knowledge areas: Technical Skills, Business Skills, People Skills, Leadership Skills, and Digital
Skills. Especially, digital skills, in addition to being an independent knowledge area, also permeate
across other knowledge areas. These updates directly reflect the findings of the three stages of
research. The competency framework includes knowledge and skills, and each of these areas
comprises a series of competencies identified at four levels: Foundational, Intermediate,
Advanced, and Expert. Each mastery level aligns with the organization's hierarchy.

Specifically, the foundational level corresponds to employees, the intermediate level

corresponds to supervisors, the advanced level corresponds to managers, and the expert level
corresponds to operators. The importance of technical skills will be high for employees but
decreases as they progress in their careers. For those operating at the advanced level, requirements
for technical skills and expertise will be lower and will focus more on leadership skills (Hương,
2022).

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III. THE CONTEXT AND PURPOSE OF FINANCIAL AND MANAGEMENT
ACCOUNTING
1. Roles and importance of accounting
The accounting system is described as "the accounting regulations and procedures that an
entity applies to carry out accounting records and financial reporting" (according to Vietnamese
Auditing Standards VSA 400). Its objective is to provide crucial information for the operation,
development, and management of a business. Accounting professionals, consultants, business
analysts, boards of directors, CFOs, auditors, regulatory agencies, and tax authorities can all utilize
the system, which is regularly updated to meet evolving requirements.

Accounting involves storing and processing information as an information system to

provide the most beneficial and reliable information to support the company's strategic decisions.
Utilizing statistical data to generate accurate accounting reports, companies can swiftly address
accounting issues and enhance collaboration throughout the work process. The accounting
information system is a key factor in how much money and time companies can save. Managers
can steer clear of unnecessary information storage errors when using the system. Therefore,
minimizing inherent risks to a certain extent helps businesses avoid significant financial losses.

In summary, the accounting information system has addressed a third of the main
challenges currently causing difficulties for private enterprises. First, it supports and enhances the
competitive capabilities of businesses. Second, it aids in the decision-making process of
businesses. And third, it supports production and business operations to help businesses continue
to grow and prosper.

The accounting information system is crucial for companies as it assists in decision-

making, encourages business growth, and enhances brand value.

2. Distinguish between financial accounting and management accounting

Criteria Management accounting Financial accounting

Purpose Providing information to support Provide information for

production operations preparing financial reports

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 Information users Are members inside the Shareholders, lenders,
business: Owners, Board of customers, suppliers and
Directors, managers, governments (tax authorities,
supervisors, ... financial management
agencies...).
Legality of Internal in nature, under the It has a legal nature, meaning
accountin authority of each enterprise in that the bookkeeping,
g accordance with the specific recording, presentation and
characteristics, management information provision system
requirements, conditions and of financial accounting must
management capabilities of each comply with unified regulations
enterprise. if it wants to be recognized.

Characteristics • Both the form of artifacts • Mainly expressed in the

of information and the form of value. form of value.
• Mainly focus on the future • Is information reflecting
economic transactions
• Information is collected
that have arisen and
for management's
occurred.
decision- making
• Is pure accounting
functions and is often not
information, collected
readily available
from accounting
documents.
Scope of Relating to the management of Related to financial
information each department (workshop, management on an enterprise-
department) down to each wide scale.
individual involved.

Two fundamental facets of accounting—financial accounting and managerial

accounting—serve as vital sources of information for businesses. This enables enterprises to attain
a thorough comprehension of both financial processes and overall management conditions.
Despite the existence of these two distinct accounting terms, many individuals often find it
challenging to distinguish between them. Let's delve into the disparities between these two
concepts.

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Scope:

Financial Accounting: Influences the entire business and has a wide range of applications. It
provides data on assets, liabilities, equity, revenue, expenses, and the company's cash flow based
on past performance and current circumstances. It adheres to generally accepted accounting
principles (GAAP) or international financial reporting standards (IFRS) to ensure consistency and
comparability.

Management Accounting: Focuses on specific aspects of the company, such as products or

services, market segments, departments, or operations. It has a limited application scope and
contains in-depth analysis, evaluation, and future predictions for various topics. Management
accounting is a more specialized field created to meet the specific needs of internal management.

Limitations:

Financial Accounting: Aims to record, analyze, and report financial transactions of an

organization according to both international and national accounting principles, such as GAAP or
Vietnamese Accounting Standards (VAS). The reports include income statements, balance sheets,
and cash flow statements commonly used to present financial data.

Management Accounting: Focuses on collecting and processing internal data without adhering
to global accounting standards. It involves tracking costs, planning for the future, and creating
internal reports such as management summaries and financial forecasts.

In summary, both essential components of accounting – financial and management accounting –

provide businesses with sources of information. Consequently, businesses gain comprehensive
insights into financial processes and overall management conditions. Despite having two separate
terms, many individuals remain uncertain about how to differentiate them. Let's explore how these
two concepts differ.

3. Organizational Constraints and Threats in Accordance with Accounting Regulatory

Concepts (GAAP, IFRS from FASB) and Accounting Principles and Ethics

In recent times, the surge in business internationalization and the integration of financial
markets has propelled the move towards the international unification of accounting standards. This
push for a common set of rules is aimed at ensuring consistency and comparability of financial
information across diverse organizations. Stakeholders such as investors, creditors, customers,
partners, and regulators rely heavily on financial information to make informed business decisions.
Accounting regulations play a pivotal role by providing a set of principles and procedures that

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facilitate the recording and presentation of financial information. This not only aids stakeholders
in comprehending and comparing financial data from different organizations but also alleviates
the burden on international companies in the preparation of financial reports.

The Financial Accounting Standards Board (FASB), an independent private-sector

organization, plays a crucial role in establishing accounting standards for financial reporting within
the United States. The FASB adheres to the Generally Accepted Accounting Principles (GAAP),
a comprehensive set of approved accounting methods and practices (Matos, 2023).

To achieve universal accounting standards, the FASB collaborates with the International
Accounting Standards Board (IASB), responsible for International Financial Reporting Standards
(IFRS) (CFI Team, 2023).

GAAP

Generally Accepted Accounting Principles, commonly known as GAAP, represent a set

of standards encompassing the intricacies, complexities, and legalities of corporate and business
accounting. The Financial Accounting Standards Board (FASB) utilizes GAAP as the
cornerstone for its comprehensive set of approved accounting methods and practices (Matos,
2023).

The FASB, an independent organization in the private sector, relies on GAAP to

establish the foundation for its accounting standards, ensuring adherence to a unified framework
for financial reporting.

Key Features of GAAP:

• Relevance
• Reliability
• Consistency
• Comparability
• Understandability
The utilization of GAAP promotes uniformity and transparency in financial reporting,
allowing stakeholders to comprehend and compare financial information across different entities.
This standardization not only aids in decision-making but also alleviates the burden on
international companies when preparing financial reports.

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Figure 3 Main principles of the gaap framework

Figure 3 Main principles of the gaap framework

IFRS:
International Financial Reporting Standards (IFRS) is a globally recognized accounting
framework for organizing and reporting financial information. Originating from the International
Accounting Standards Board (IASB) based in London, IFRS has become the mandatory
accounting framework in over 120 countries. It necessitates businesses to report financial results
and positions according to similar rules, ensuring significant uniformity in financial reporting,
thereby facilitating comparisons (Bragg, 2023).

Ethics in Accounting:

Ethics in accounting comprises principles and regulations aimed at ensuring the integrity
and objectivity of financial information. It goes beyond mere distinctions between right and wrong,
encompassing standards of good and bad behavior that accountants must adhere to. The five ethical
principles in accounting are Integrity, Objectivity, Professional competence and due care,
Confidentiality, and Professional conduct.

Limitations and Threats:

Two crucial accounting principles, Materiality, and Conservatism play a pivotal role in
maintaining the integrity and reliability of financial information. However, certain limitations and

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threats are inherent in accounting regimes and ethics. Accounting regulations, often designed for
large and complex organizations, may not seamlessly adapt to smaller entities or those operating
in specific industries. This can lead to financial information complexity and reduced transparency,
potentially limiting organizations' ability to tailor information to their specific needs. Moreover,
threats of accounting fraud, bias, or violations of professional ethics may also pose challenges.

In conclusion, while accounting regulatory concepts and ethical principles provide a robust
framework for financial reporting, organizations must navigate challenges and tailor these
standards to their unique contexts to ensure meaningful and transparent financial information.

IV. CONCLUSION
In summary, within a market economy, accounting assumes a pivotal role in reflecting and
furnishing economic information to cater to the managerial demands of enterprises. For business
administrators, it serves as the foundation for decision-making in managing production and
business activities, overseeing supplies, capital, and assets of the business. On a governmental
level, it forms the basis for verifying compliance with financial and accounting regimes,
determining optimal tax calculation methods to curtail tax losses, mitigating errors in tax policy,
and formulating appropriate economic policies. Investors and other stakeholders rely on
accounting as the cornerstone for making investment and financing decisions. Different branches
of accounting align with the primary users of accounting information.

The relationship between the accounting function and other organizational functions is one
of mutual dependence and complementarity. Accounting provides essential information to other
functions within the organization, enabling them to fulfill their roles effectively, and vice versa.
To meet the needs and expectations of the organization, its stakeholders, and society at large, a
close and effective relationship between the accounting function and other organizational
functions is imperative. This relationship should be established and maintained to ensure the
delivery of accurate, timely, and valuable accounting information to relevant parties.

Opportunities within the accounting industry are abundant, spanning various fields and
levels. Essential skills and abilities are imperative for holding accounting positions. Specifically,
a profound understanding of the CGMA Competency Framework offers a comprehensive
perspective, outlining the skills truly essential in the business realm.

Accounting stands as an integral component of overall business information. It constitutes

a crucial part of the decision-making process, facilitating accurate resource allocation decisions

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by weighing various factors. Throughout the lesson, a clear distinction has been made between
financial accounting and management accounting. Accounting regulations, principles, and ethics
play a pivotal role in ensuring the accuracy and integrity of accounting information. However, it
is crucial to acknowledge that these regulations and guidelines, while beneficial, may also impose
certain limitations and pose threats to businesses.

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