The relationship between Accountability and accounting
The relationship between Accountability and accounting remains one of the critical aspects of organizational management. There is a need to explore the difference and the link that is established between these two crucial elements of corporate governance. The understanding of not for profit organizations is based on the aims of such organizations. An important consideration is the focus on addressing societal problems instead of focusing on profits. This is an essential element that will influence the trajectory of this research. Further, the definition of Accountability is based on the ability of an individual or department to be held liable for a given task or role. On the other hand, accounting focuses on the development and implementation of financial systems that influence the transactions involved in any business.
The relationship between these two elements is based on the abilities that one presents in the process of carrying out accounting functions. Accountability is construed as the successful implementation and management of accounting books. Different types of accounting imply varied meanings in the context of organizational management. For instance, management accounting involves the development of accounting books to facilitate the decision-making process in an organization (Sharma & An 2018). Financial accounting follows the financial transaction in an organization, while social accounting provides an in-depth analysis of the different sectors of the economy (Hall & O’Dwyer 2017). All the different types of accounting are critical in influencing the management of any organization as well as the decision-making process involved in organizational management. The significance of Accountability is entrenched in the understanding of the vital policies that will influence the performance of the given organization (Yates 2020). The value of being considered accountable plays an integral role in enhancing perception and performance of the members of the given organizations. This research must provide an analysis of the interaction between Accountability and accounting in nonprofit organizations.
The discourse on the relationship between accounting and Accountability must consider the different elements that highlight the connection across the departments in an organization. The link between accounting and Accountability requires introspection of the significance of the accountant in an organization. Yates (2020) argues that an accountant is an individual tasked with the management of financial records and transactions in an organization. These could include the social accounting, management accounting ads well as financial accounting (Sharma & An 2018). In many instances, accountants are majorly linked to the financial performance of any given organization. Hall & O’Dwyer (2017) opine that financial management requires an in-depth understanding of the different elements of an organization’s performance.
Accountability is, therefore, the overall performance and demonstration of integrity and forthrightness in carrying out accounting functions in an organization. The central element of Accountability is the careful and knowledgeable approach that every accountant takes in performing his or her duties in the organization (Honig & Pritchett 2019). An accountant is considered accountable if he or she demonstrates the highest level of professionalism in carrying out their roles in the organization. The evaluation of Accountability is reliant on the successful collection of financial information that is considered useful to the organization, especially in evaluating performance and progression (Yates 2020). Financial statements such as balance sheets, statements of cash flows, income statements, statements of financial position, and even statements of change in equity are critical elements of accounting that will indicate the level of Accountability demonstrated by the accountant (Sharma & An 2018).
In retrospect. Cordery et al. (2019) highlight that Accountability is not tied to the ability to provide these financial statements. However, Accountability is the demonstration of integrity in carrying out these reports. As such, the accountant is expected to remain honest and
straightforward ion the reporting of the financial statements (Atkins & Maroun 2018). All the different types of accounting are reliant on the ability of the accountant to remain accountable in meeting the tasks assigned to him or her. The significance of accounting and Accountability to nonprofits is considered by Basri et al. (2016) as a fundamental expectation considering the need to establish proper checks and balances that will facilitate the budgetary issues in such organizations.
Further, these nonprofits rarely have consistent sources of income except through fines, donations, and other grants. As such, every coin is significant hence the need for Accountability in the management of financial records (Atkins & Maroun 2018). The role of Accountability is established in the different types of accounting as a means of developing the performance of every organization. It is, therefore, essential to consider the various elements and the influence of Accountability in defining these aspects of organizational performance.
Financial Accounting
The role of financial accounting is integral to the performance of an organization. Hamilton (2019 argues that financial accounting formulates the financial statements that are construed as reflections of an organization’s economic performance. The different decision-making process is hinged on the results of these financial statements (Cordery et al. 2019). The idea of Accountability is based on the ability of the accountant to clearly outline the financial transactions of any organization minus any preconceived biases or coercion (Atkins & Maroun 2018). A significant consideration is a need for these statements to be available for public scrutiny. Research by Hamilton (2019) postulates that the financial statements of all organizations, both profit and for nonprofits, are often viewed as public documents that are open to public scrutiny. It is, therefore, necessary that the financial statements reflect the actual state of affairs in the given organization. The basis of Accountability is established in the reliance of accounting to provide the statements that reflect the status of the said organization.
An example of such a financial statement is the balance sheet. The balance sheet is construed as a statement that reflects the status of an organization at a given time (Honig & Pritchett 2019). These statements are essential as they outline the assets, the liabilities as well as the shareholder capitals that the organizations have (Yates 2020). The assets are the things that the organization claims as its, while liabilities are debts owed to external parties (Atkins & Maroun 2018). The balance between these two elements determines whether an organization is making profits or losses. The ability of the accountant to outline these elements honestly is the true mark of Accountability in the given organization.
Management accounting
The basis of management accounting is the formulation of policies that run an organization. Research indicates that management accounting is explored as a process that defines the decision making process and outcomes in any organization (Honig & Pritchett 2019). The evaluation of the different choices in an institution is based on the reports provided through management accounting. Management accounting, therefore, relies on accounting information as the basis for all decisions, especially those that facilitate the planning, organizing, staffing, and controlling functions in the organization (Atkins & Maroun 2018). A key aspect is that management accounting involves the reliance on professional know-how and expertise in the synthesis of accounting information (Cordery et al., .2019). Therefore, the idea of abiding by the decisions that are already made in an organization reflects the essential elements of management accountability.
Some of the vital elements involved in management accounting include the key performance indicators and budgets that are developed in the organization (Atkins & Maroun 2018). The understanding of accounting will facilitate the establishment of control, especially in balancing the assets and liabilities, incomes, and expenditure in the organization. Honig & Pritchett (2019) argue that the managerial decision-making process is reflective of the accounting information that is provided in the organization. There is a need to explore the influence of accounting on these factors.
Social accounting
The presence of any organization in an area reflects on the economy as well as the social environment. Based on the data collected in accounting, the effects of institutional activities should be shared with members of the surrounding communities as means of creating relationships that will enhance the sustainability of the organization (Honig & Pritchett 2019). Further, various segments of the economy are interrelated in terms of the effects on each other (Cordery et al. 2019). Therefore, the influence of social accounting is entrenched in the development of strategies that will enhance the sustainability of an organization. The cumulative effects of Accountability are, therefore, established in the actual reports that developed and used in the decision-making process across the nonprofit organization.
Primarily, each of the types of accounting reflects the significance of Accountability in the process of accounting. The presentation of valid and credible accounting data is central to the quality of decisions that are made in the organization (Basri et al. 2016). For instance, financial statements will highlight possible losses in an organization and necessitate remedial actions. Social accounting will highlight the impact of the entity on the immediate environment, while management accounting will facilitate the formulation of policies that favor all shareholders (Hall & O’Dwyer 2017). The legitimacy theory identifies the idea of a social contract that defines the responsibility of every organization to the social environment within which it exists (Deegan 2019). As such, a nonprofit organization will be evaluated based on its efforts to address social issues in an accountable manner.
The influence of the organization is also defined in the shareholder theory, where the argument establishes the need for maximizing profits for the shareholders (How et al. 2019). The shareholders require to benefit more from the organization than any other entity. These are vital factors that highlight the place of Accountability in accounting, especially in nonprofit organizations. The performance of any organization is defined within the boundaries of social justice and the common good. Nonprofits are entities defined by their focus on solving societal issues, and as such, every action should focus on addressing these goals. The institutional theory emphasizes the basis of such activities through viable accounting policies that influence the decision made in such organizations (Katsikas et al. 2017). All of these theories are focused on defining the place of Accountability in the accounting processes.
The relationship between accounting and Accountability should be viewed in terms of the reporting aspects of accounting. The data that is collected in the accounting process should remain a reflection of the influence that an organization has both on itself as well as the society. Issues such as social accounting are al reliant on balance sheet, statements of affairs and income statements which will also highlight the impact of the organization on the shareholders. The shareholder’s theory promotes the maximum benefits accrued to shareholders, and the idea of legitimacy is also based on the influence that an organization bears. It is, therefore, imperative that accounting and Accountability form the basis of all operations in the nonprofit organizations primarily in the space of reporting and decision-making processes.