U10473 Contemporary Issues in Accounting Assignment Sample

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1. Introduction

Financial Accounting plays a vital role in business because it keeps systematically recording itemized, summarized, and reporting own financial transactions. It promotes transparency, supports decision making and enables businesses to follow the regulation. Reporting of the finances of organizations on the “London Stock Exchange (LSE)” is important because it helps investors, creditors, and other stakeholders to understand how good (or bad) a company’s finances are performing. The main items of the financial reporting of a company are its financial statements. Income Statements are a business’s “Statement of Profit or Loss” that shows revenue it earned and expenses it paid during a certain period, so that stakeholders can determine a company’s current profitability. A snapshot of a organizations assets, liabilities, as well as shareholders’ equity on a date is known as the “Statement of Financial Position (Balance Sheet)”, and this shows a organizations financial stability. The “Cash Flow Statement”, however, works with “cash inflows and cash outflows” and is used for observing the company's liquidity as well as its operational efficiency.

Contemporary accounting refers to modern accounting practices that incorporate technological advancements, regulatory changes, sustainability reporting, and ethical considerations to enhance financial transparency, decision-making, and corporate governance in a dynamic business environment. Financial statements of these companies consist of consolidated financial statements along with management discussions, corporate governance reports, strategic insights, and the annual report. It is a key tool for decision-making for investors, lenders, employees, and regulators, as well as other stakeholders, as it allows assessing the financial standing and future outlook of a company. Annual reports are used by investors to check its profitability and risk, by lenders to see solvency before they grant credit to it, and by the regulatory authorities to ensure that the company is complying with the standards of financial reporting.

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2. Key Financial Statements and Their Importance

Financial Statements give important information about how well the county or firm is performing, if it has sufficient amounts of cash for paying its debts and operating, and what tradeoffs were made between sources and applications of cash. There are simply no other tools that stakeholders can use other than a balance sheet to evaluate the financial health and make appropriate, not just financial, but also material decisions of an organization (Elmghaamez and Olarewaju, 2022). “There are three major financial statements of an annual report like the Statement of Profit or Loss (otherwise referred to as Income Statement), the Statement of Financial Position (aka Balance Sheet,) and Cash Flow Statement (Fridson and Alvarez, 2022)”.

2.1 Statement of Profit or Loss (Income Statement)

The “Statement of Profit or Loss”, the “Income Statement quantifies” a company’s income and it can be yearly or quarterly (Eilifsen et al., 2021). It is about comparing the “company’s revenue” against its expenses to present company’s capacity to generate profit.

Key Components:

• The total income from business operations.
• Costs of the business for running such as operational, administrative, and interest expenses.
• It is profit earned before the deductions of interest and taxes.
• Net Income – One final profit that has been removed of everything that codes down to expenses, taxes, and Interest (Sebrina et al., 2023).

How Stakeholders Use It:

• Profitability and potential returns are assessed by investors based on the trends of revenue growth and net income.
• Lenders rely on the profits the company makes to see that how it would be able to pay back the debts.
• It is used by managers for strategic planning to identify areas to reduce costs and the improvement of utilisation.

2.2 Statement of Financial Position (Balance Sheet)

The “balance sheet” provides the financial statement of the company with the particular date of the company positions. “What it owns are assets, what it owes are liabilities, and the remaining interest of the shareholders is equity (Otaka, 2024)”.

Key Components:

• Current (free of charge) and noncurrent (not free of charge) assets
• Obligations – the company owes, involved loans, short-term and long-term debts accounts payable.
• Residual interest of assets minus liabilities, the owners’ value.

How Stakeholders Use It:

• Although they don’t have the nurses' capabilities, they can invest based on the strength of their assets and debt.
• Before providing credit, creditors analyze solvency and risk exposure.
• Accounting standards are assured by regulators for financial transparency and compliance.

2.3 Cash Flow Statement

“The Cash Flow Statement reports the flow of cash for a certain time during operating, investing, and financing activities (Al Zobi and Al-Dhaimesh, 2021)”. “This is good for helping stakeholders understand a company’s liquidity and can fulfill financial obligations (Blessing and Sakouvogui, 2023)”.

Key Components:

• “The cash flows from core business operations, consisting of sales revenue and operating expenses Operating Activities (Feinberg and Zanardi, 2022).”
• “The cash flows related to asset purchases, investments, as well as divestitures are known as investing activities (Lee, 2021).”
• Cash flow of “Financing Activities” – flows due to borrowing, repayment of debt, and payment of dividends.

How Stakeholders Use It:

• Liquidity and negative cash flow generation are evaluated by investors and can be gauged, too.
• Cash flow patterns make sure managers monitor these trends.
• Financial stability is reviewed by employees to secure a job within the company and to ascertain how likely they are to be able or earn a maximum salary.

3. Other Published Financial Information

The primary “financial statements”, organizations listed on the “London Stock Exchange” include other reports in their annual reports. These sections make the company transparent and help different stakeholders to get a complete idea about the company’s financial strength, company governance, as well as ethical commitments of the company.

Corporate Governance Reports

Corporate governance reports outline the internal rules of a company including which individuals are on the board, the practices used to nominate new directors, along with that how board nominates the organizations leaders. These reports are important because they confirm adherence to corporate governance codes, moral standards, and risk management standards. These reports give investors an insight into board structure, executive compensation, and internal controls, among other things, ensuring responsible management (de Villiers and Dimes, 2021). Corporate governance disclosures by regulators, like the “Financial Conduct Authority (FCA) in the UK”, are made to conform to legal and ethical norms.

Report of Directors

The Director’s Report conveys information about the company’s production, exposes future strategies, as well as mentions dangers. This is particularly useful to customers of both shareholders and potential investors, because it contains information on what policies they adopted on the dividend, business outlook, and market conditions. In addition to these major financial trends, the board discusses major corporate risks and strategic decisions taken during this period of the company (Khatib, 2025). Investors can better appreciate the long-term sustainability and potential returns, as represented in the Director’s Report.

Notes to Financial Statements

The Notes to “Financial Statements” give more thorough explanations of accounting policies and other information used in accounting and figure in the financial statements. Transparency is increased by revealing the asset valuation methods, depreciation policies, and contingent liabilities (Fridson and Alvarez, 2022). They are also helpful to auditors, financial analysts and investors who need a deeper level of understanding of a organizations financial strength as well as compliance with “International Financial Reporting Standards (IFRS)”.

Sustainability & CSR Reports

“Sustainability and Corporate Social Responsibility (CSR)” reports present a organizations impact in environmental, social, and ethical issues. Especially interesting to socially responsible investors and customers are these reports, which consider a company’s sustainability efforts before making investment and buying decisions (Christensen et al., 2021). These topics are about lowering the company’s carbon footprint, employee welfare programs, and community engagement that showcases the company’s strength towards long run social and environmental health.

Contemporary Issues in Accounting

• Sustainability & ESG Reporting – Companies now focus on “environmental, social, and governance (ESG) factors”. Transparent sustainability relay is essential to meet investor and regulatory expectations (Oreshkova, 2023).
• Technology Integration – Automation, AI, and blockchain impact financial reporting. Digital transformation enhances accuracy but raises cybersecurity risks.
• Regulatory Changes & Compliance – New accounting standards like IFRS updates and tax regulations require businesses to adapt their financial reporting practices.
• Ethical Accounting Practices – Companies face challenges like earnings management, fraud, and fair value reporting, demanding stronger corporate governance.
• Impact of Globalization – Multinational firms deal with currency fluctuations, different accounting standards, and taxation policies.

Financial Accounting vs. Management Accounting

Table 1: The comparison table of Financial Accounting and Management Accounting

U10473 Contemporary Issues in Accounting Assignment Sample

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4. Stakeholders and Their Use of Annual Reports

Final Reports are most important source of “financial and operational information” to all shareholders who are interested in a company to be able to make the relevant decision(s) as to how to deal with such an enterprise. It can be said that the key stakeholders include investors, lenders, employees, government authorities, customers, and suppliers. Each group works on a different section of the report, with the needs fitting for its specific analyst.

4.1 Investors

“Annual reports that help in assessing a company’s financial performance patterns and growth potential are relied upon by investors when making investment decisions (Breijer and Orij, 2022)”. They analyze the company’s key financial statements to check profitability, liquidity and the sustainability of its long-term.

• Revenue trends and profit margin of investors could be analysed with the help of “Statement of Profit or Loss”.
• The “Balance Sheet” gives the details about a organizations financial strength, debt levels and composition of assets.
• “Cash Flow Statement” has the most crucial declaration for liquidity along with cash generating capacity.
• Corporate governance reports and sustainability disclosures are utilized by shareholders to make sure that the company does not practice unethically and should be in line with the long-term investment goals.

4.2 Lenders & Creditors

Banks and financial institutions, along with other lenders, assess the annual reports to see if the company can repay loans and stay financially stable (Hassan et al., 2021).

• The “solvency and liquidity” ratios computed on the “Balance Sheet” from which the risk level of the company is determined are calculated within the Balance Sheet.
• The “Cash Flow Statement” gives insight into the level of cash generated and how much debt can be paid.
• “The Profitability ratios, such as return on assets and return on equity, help the lender assess financial strength”.

4.3 Employees & Trade Unions

The Financial reports are applied by employees as well as trade unions to find out if the company is stable in the economy and the prospects of its growth. General profitability of the company or its finances determines the job security, salary increment, and benefits.

• Profit and Loss Statement is important for employees to know revenue increase and business expansion potential (Kaawaase et al., 2021).
• The Balance Sheet shows financial security and can pay pensions and salaries.
• Reports are used by the employees to get better wages, job stability, and better working conditions through the trade unions.

4.4 Government & Regulators

“All government authorities and regulatory bodies, including the “Financial Reporting Council (FRC)” and “HM Revenue & Customs (HMRC)”, monitor accounting standards compliance and tax obligations as per annual reports (Shkulipa, 2023)”.

• The “Statement of Profit or Loss and Balance Sheet” informs the regulators that companies have not engaged in fraudulent financial reporting and comply with the rules and tax laws.
• The source of information for corporate governance reports is about executive compensation, business ethics, and risk management.
• Regulators evaluate adherence to the standards of “International Financial Reporting Standards (IFRS)” as well as guarantee that financial disclosure exactly portray the company’s operation.

4.5 Customers & Suppliers

Annual reports are employed by customers and suppliers to that see how long a company can expect to remain the same, and usually can continue their relationships with it.

• Trade credit is offered to the company that has a check on its financial health, before this is delivered to the supplier, and that the company does not hold out on payment.
• The second is for customers, especially those entering long-term contracts, to determine whether the company can sustain itself and keep providing products and services (Roszkowska, 2021).
• For customers and partners who make CSR and sustainability reports a part of their criteria, sustainability and CSR reports are necessary.

5. Conclusion

The decision making has a high reliance on financial reports because as key stakeholders or decision makers, they have to review such information contained in the financial reports to see the performance of the firm, stability and potential for the future. “Statement of profit or loss”, “Statement of financial position” as well as the “cash flow statement” are the most important data that investors, creditors as well as managers can use to make judicious decisions. All of these include corporate governance reports, directors’ reports and sustainability disclosures that aim at increasing transparency and accountability. The annual reports have multiple purposes for different stakeholders. Investors look at financial statements to see whether it is profitable and involves risks and for determinants of solvency and repayment capacity (lenders). They serve as the financial reports used to check the job security and to negotiate salaries, by employees and trade unions, while government authorities and regulators make sure that there are financial laws and taxation. The business relationships are established in between the customers and supplier, who evaluate the financial stability of a supplier.

References

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• Blessing, H. and Sakouvogui, G., 2023. Impact of liquidity and solvency ratios on financial performance: a comprehensive analysis. Indonesia Auditing Research Journal, 12(3), pp.102-115.
• Breijer, R. and Orij, R.P., 2022. The comparability of non-financial information: An exploration of the impact of the non-financial reporting directive (NFRD, 2014/95/EU). Accounting in Europe, 19(2), pp.332-361.
• Christensen, H.B., Hail, L. and Leuz, C., 2021. Mandatory CSR and sustainability reporting: Economic analysis and literature review. Review of accounting studies, 26(3), pp.1176-1248.
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