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Paper F1Paper F1
Accountant in Business (AB)
1. THE BUSINESS ORGANISATION1. THE BUSINESS ORGANISATION
The need for organisationsThe need for organisations
Types of organisationTypes of organisation
Profit seeking organisations Not for profit organisations
Main objective is wealth maximisation which can be expanded into• to continue in existence (survival)• to maintain growth and development• to make a profit
Do not see profit as their main objective• seeking to satisfy particular needs of their members or the sectors of society that they have been set up to benefit• include hospitals, charities, government organisations and mutual organisations
The roles of organisational functions
The roles of organisational functions
Planning LevelsPlanning Levels
2. ORGANISATIONAL STRUCTURE2. ORGANISATIONAL STRUCTURE
Different Structural TypesDifferent Structural Types
Type Rationale
Entrepreneurial Typical in small owner managed companies.
Functional Departments are based on common specialisation. Best suited to companies operating in a stable environment with few products.
Divisional Each product or group of products set up as a separate division.
Geographical Activities are grouped according to location.
Matrix A combination of the functional and divisional. Dual reporting lines
Centralisation/DecentralisationCentralisation/Decentralisation
Centralised structure Decentralised structure
The upper levels of an organisation’s hierarchy retain the authority to make decisions
The authority to take decisions is passed down to units and people at lower levels. Can lead to extra costs in obtaining informationBetter motivation due to increased training and career path
3. ORGANISATIONAL CULTURE3. ORGANISATIONAL CULTURE
Organisational CultureOrganisational Culture
Handy’s cultural TypesHandy’s cultural Types
Schein – 3 levels of cultureSchein – 3 levels of culture
Hofstede - 5 cultural traitsHofstede - 5 cultural traits
2.LEADERSHIP, MANAGEMENT AND SUPERVISION2.LEADERSHIP, MANAGEMENT AND SUPERVISION
Theories of managementTheories of management
Authority, responsibility and power concepts
Authority, responsibility and power concepts
• Authority is a legitimate right to give orders
• Responsibility is an obligation placed on a person to fulfil a task
• Power is an ability to exert influence. Sources can be legitimate, reward, coercive, referent or expert
• Delegation is a process of transferring authority to a subordinate
LeadershipLeadership
5. INDIVIDUAL AND GROUP BEHAVIOUR IN BUSINESS ORGANISATIONS
5. INDIVIDUAL AND GROUP BEHAVIOUR IN BUSINESS ORGANISATIONS
Individual and Group BehaviourIndividual and Group Behaviour
6. TEAM FORMATION, DEVELOPMENT AND MANAGEMENT6. TEAM FORMATION, DEVELOPMENT AND MANAGEMENT
TeamworkTeamwork
• A team is a formal group, it has a leader, a distinctive culture and is geared towards a final result
• The purpose of a team is to solve complex problems
• Teams provide synergy, cooperation and coordination of activities
Team v GroupTeam v Group
Team Theories - BelbinTeam Theories - Belbin
Leader Co-ordinator
Shaper Promotes activity - dominant
Plant Thoughtful and thought provoking
Monitor evaluator Criticises other ideas
Resource-investigator Extrovert, networker
The company worker Administrator, organiser
The team worker Concerned with relationships within the groups
The finisher The progress chaser
The expert As required by the project
Team theories - TuckmanTeam theories - Tuckman
7.MOTIVATION7.MOTIVATION
Overview of MotivationOverview of Motivation
• Motivation is the internal psychological process of initiating, energising, directing and maintaining goal directed behaviour (Buchanon and Huczynski, 1997)
• It is the urge to achieve goals or the drive to excel
• Satisfaction on the other hand is about being content and not seeking new achievements
Content theories of MotivationContent theories of Motivation
• Maslow’s hierarchy of needs – individuals have a hierarchy of personal needs that can be satisfied in a set order of priority in the workplace
• Herzberg two factor theory – hygiene factors deal with non-job related features e.g. working conditions, policies and procedures. Motivators are mostly non financial and will encourage people to work harder
Maslow’s hierarchy of needsMaslow’s hierarchy of needs
Herzberg’s two factor theory of motivation
Herzberg’s two factor theory of motivation
McGregor’s Theory X and YMcGregor’s Theory X and Y
Process TheoriesProcess Theories
• The Vroom expectancy model
• Force = Valence x Expectancy
• Force is the strength of a persons motivation
• Valence is the strength of an individual’s preference for an outcome
• Expectancy is the probability of success
Incentive SchemesIncentive Schemes
• Reward systems should attract and retain staff, encourage desirable behaviour and reflect the nature of the job
• Financial motivators include salary and bonus
• Non financial motivators include feedback, participation and autonomy
8. INFORMATION TECHNOLOGY8. INFORMATION TECHNOLOGY
Information and DataInformation and Data
• Data is a collection of symbols, raw facts and transactions that have been recorded but not yet processed. It could be quantitative or qualitative
• Information is data that has been processed in such a way that it becomes meaningful
• Information is used for decision making at the strategic, tactical and operational levels
Qualities of good informationQualities of good information
ComputerisationComputerisation
• Intranet
• Extranet
• Database
• Spreadsheet
Sources of informationSources of information
• Internal information includes customer records, employee records, inventory and product specifications
• External information includes invoices, letters, statements from 3rd parties etc
• External information can also be obtained through marketing research, legal updates and government data
Types of information systemTypes of information system
9.POLITICAL AND LEGAL FACTORS9.POLITICAL AND LEGAL FACTORS
Political FactorsPolitical Factors
Political environment includes:
• the political system and ideology
• the role of the government in the economy
• the risk of political instability
• foreign trade relationships
Political systems operate on a global, national and local level
Legal FactorsLegal Factors
10. MACROECONOMIC FACTORS10. MACROECONOMIC FACTORS
Economic factorsEconomic factors
• Microeconomics is the study of the economic behaviour of individual consumers, firms and industries
• Macroeconomics considers aggregate behaviour and the study of the sum of individual economic decisions.
Factors affecting the level of business activity
Factors affecting the level of business activity
• consumer and business confidence in the economy
• aggregate demand: AD = C + I + G + X – M
• availability of capital
• use of resources such as technology
• government policy on spending and taxation
• exchange rate movements
Trade CycleTrade Cycle
• A series of fluctuations in the rate of growth of real (inflation adjusted) GDP over its long-run trend
• Recession
• Depression
• Recovery
• Boom
• Government tries to smooth pattern out
Key economic termsKey economic terms
• Economic growth
• Inflation
• Unemployment
• Balance of payments
• Fiscal economic policy
• Monetary policy
11. SOCIAL AND TECHNOLOGICAL FACTORS11. SOCIAL AND TECHNOLOGICAL FACTORS
Social FactorsSocial Factors
• Population (e.g. birth rate and growth)
• Wealth (e.g. high disposable income)
• Education (e.g. skilled staff thrive in knowledge economy)
• Health (e.g. obesity, HIV)
• Cultural trends (social structure, buying patterns, values, attitudes, tastes)
• Affected by government policy
Technological factorsTechnological factors
Impact of technology on:
• organisational structure (e.g. downsizing, outsourcing)
• products (e.g. sophisticated features)
• production processes (e.g. automation)
• society (e.g. ecommerce, home-working)
12.COMPETITIVE FACTORS12.COMPETITIVE FACTORS
Competition – Porter’s generic strategies
Competition – Porter’s generic strategies
• Cost leadership: to become the lowest cost producer and enjoy a superior margin
• Differentiation: demanding a premium for perceived added value of the product
• Focus: Serving a niche market
Being ‘stuck in the middle’ is a recipe for disaster
Porters 5 ForcesPorters 5 Forces
Porter’s Value Chain – primary activities
Porter’s Value Chain – primary activities
Activity Description
Inbound logistics Receiving, storing and handling raw materials
Operations Transformation of raw materials into finished goods
Outbound logistics Storing, distributing and delivering finished goods to customers
Marketing and sales Market research and the 4 P’s
Service All activities occurring after the point of sale e.g. training, repair
Porter’s value chain – Support activities
Porter’s value chain – Support activities
Activity Description
Firm infrastructure How the firm is organised
Technology How the firm uses technology
HRM How people contribute to competitive advantage
Procurement Purchasing, not just limited to materials
13. STAKEHOLDERS13. STAKEHOLDERS
StakeholdersStakeholders
Mendelow’s stakeholder mapping
Mendelow’s stakeholder mapping
14. COMMITTEES IN BUSINESS ORGANISATIONS14. COMMITTEES IN BUSINESS ORGANISATIONS
CommitteesCommittees
A committee is a group of people officially delegated to perform a function and who are given appropriate authority.
Types of committees:
• Ad-hoc
• Standing
• Sub-committee
• Joint
Types of Committees continuedTypes of Committees continued
• Executive
• Steering
• Work safety
• Ethics
• Audit
• Remuneration
15. BUSINESS ETHICS15. BUSINESS ETHICS
Business ethicsBusiness ethics
• Ethics is the analysis of right and wrong and associated responsibility
• Business ethics is the systematic study of moral matters pertaining to business, industry or related activities, institutions or practices and beliefs
• 2 approaches to ethics, either a compliance-based approach or an integrity based approach
Code of professional conductCode of professional conduct
ACCA’s code of ethics:
• Integrity
• Objectivity
• Professional competence and due care
• Confidentiality
• Professional behaviour
16. GOVERNANCE AND SOCIAL RESPONSIBILITY16. GOVERNANCE AND SOCIAL RESPONSIBILITY
Board of DirectorsBoard of Directors
• At least half of the board should comprise independent non-executive directors (NED’s) who do not engage in day to day execution of management decisions
• NED’s contribute to strategy formulation, monitor performance reporting, ensure robust financial controls and determine executives remuneration
Corporate GovernanceCorporate Governance
• The system by which companies are directed and controlled
• UK – Combined Code is principles based, company must ‘comply or explain’
• USA – Sarbanes Oxley is rules based (i.e. law) with personal liability of company officers
Social ResponsibilitySocial Responsibility
• Social responsibility is a duty to all stakeholders of the company to make decisions in such a way that takes into account the interest of the environment and society as a whole
• Benefits include, attracting customers, reducing operational risks and retaining employees
17. LAW AND REGULATION GOVERNING ACCOUNTING17. LAW AND REGULATION GOVERNING ACCOUNTING
Regulations covering accounting function
Regulations covering accounting function
Responsibility to:
• Companies House (for filing of accounts)
• Tax Authorities (e.g. HRMC for VAT, PAYE)
• Financial Services (e.g. stock exchange for listed co’s)
• Office of national statistics (e.g. business statistics)
Bodies governing the accounting function
Bodies governing the accounting function
• International Accounting Standards Committee foundation, parent entity of:
• International Accounting Standards Board (IASB)
• International Financial Reporting Interpretation committee (IFRIC)
• Standards Advisory Council (SAC)
Other bodiesOther bodies
• Accounting Investigation and Discipline Board (AIDB)
• Financial Reporting Review Panel (FRRP)
• Professional Oversight Board for Accountancy (POBA)
• Recognised Supervisory and Qualifying Bodies (e.g. ACCA, ICAEW)
18. THE ACCOUNTING PROFESSION18. THE ACCOUNTING PROFESSION
The role of accounting within the business
The role of accounting within the business
• Not a ‘stand alone’ function
• Interacts with other departments and is one of the central functions of business
• Financial information is a fundamental requirement in decision making
Purpose of accounting functionPurpose of accounting function
• Produces financial information that will be used to make decisions
• May be produced for users outside the company e.g. sales invoices, financial statements
• May be produced for users inside the company e.g. ledgers, cost information
19. ACCOUNTING AND FINANCE FUNCTIONS19. ACCOUNTING AND FINANCE FUNCTIONS
Modern accounting functionModern accounting function
Structure of accounting function:
• Financial Accounting (maintaining books and records, preparing accounts)
• Management Accounting (appraisal, budgeting)
• Treasury (cash management, tax affairs)
• Auditing (reviewing financial reports and internal controls)
Recording of transactionsRecording of transactions
20. FINANCIAL SYSTEMS AND PROCEDURES20. FINANCIAL SYSTEMS AND PROCEDURES
Financial ProceduresFinancial Procedures
Stages in:
• Sales cycle
• Purchasing cycle
• Wages cycle
• Cash system
• Inventory system
The purpose of organisational control
The purpose of organisational control
Purpose Why important
Safeguard company’s assets If assets are stolen or damaged the company will have to spend money to replace them
Efficiency Inefficient business practices are a waste of the company’s money
Prevent fraud Fraud means the loss of valuable resources belonging to the company
Prevent errors Errors can lead to losses in efficiency (time spent correcting) or a loss of assets (e.g. paying for goods that weren’t received)
21. THE RELATIONSHIP OF ACCOUNTING WITH OTHER BUSINESS FUNCTIONS
21. THE RELATIONSHIP OF ACCOUNTING WITH OTHER BUSINESS FUNCTIONS
Coordination between accounting and other business functions
Coordination between accounting and other business functions
MarketingMarketing
• Defined by the Institute of Marketing as ‘the management process that identifies, anticipates and supplies customer needs efficiently and profitably’
• Key emphasis on customer needs
• Marketing research, product development, distribution and promotion all important
Marketing MixMarketing Mix
22. INTERNAL AND EXTERNAL AUDIT22. INTERNAL AND EXTERNAL AUDIT
Internal and External AuditInternal and External Audit
• Internal auditing is an independent activity, established by management, to examine and evaluate organisational risk, management processes and control systems and make recommendations for improvements
• External auditing is an independent examination of the financial statements to see whether they give a true and fair view of the company’s affairs
Internal and External Audit - differences
Internal and External Audit - differences
Internal Audit External Audit
Roles Advises management on the strength of internal controls and protecting the organisation against loss
Provides an opinion to the shareholders on whether the financial statements give a true and fair view
Legal Basis Not a legal requirement, but highly recommended by The Combined Code
Legal requirement for most companies and public bodies
Scope of Work Determined by management
Determined by auditing standards
Approach Evaluates and recommends improvements to controls
Tests items and transactions in the financial statements
Status Company employees Independent accountants
23. INTERNAL FINANCIAL CONTROL23. INTERNAL FINANCIAL CONTROL
Internal ControlsInternal Controls
• Internal Control is a process designed and initiated by management to provide reasonable assurance about the achievement of the entity’s objectives with regards to reliability of financial reporting, effectiveness and efficiency of operations and compliance with laws and regulations. Internal controls are checks on day to day transactions. They are managements responsibility.
Components of Internal ControlComponents of Internal Control
Categories of Internal ControlCategories of Internal Control
Types of ControlTypes of Control
24. FRAUD24. FRAUD
FraudFraud
• Fraud is an intentional act involving the usage of deception to obtain an unjust or illegal advantage. It is a criminal offence
• Prerequisites include: dishonesty, motivation and opportunity
• Fraud could be committed by management, employees or third parties
Examples of fraudExamples of fraud
Implications of fraudImplications of fraud
• Company collapse
• Adverse publicity
• Reduced profits
• Qualified audit report since financial statements do not give a true and fair view
• Distorted performance results make it hard for managers to make business decisions
Responsibility for preventing fraud
Responsibility for preventing fraud
IT systems securityIT systems security
Risks to data:
• Human errors
• Technical malfunction (e.g. systems crash)
• Natural disasters (e.g. fire, flood)
• Sabotage or espionage
• Malicious damage
Principles of data securityPrinciples of data security
• Use individual and complex passwords
• Secure communication channels (e.g. fire walls)
• Back up information on a regular basis
• Have a contingency plan
• Physical security for documents
• Policy on suspicious emails
25. RECRUITMENT AND SELECTION25. RECRUITMENT AND SELECTION
Recruitment and selectionRecruitment and selection
• Recruitment is the process of generating a supply of possible candidates for positions within an organisation
• Selection is choosing from a number of candidates the one most suitable for the specified position
Recruitment processRecruitment process
Importance of R&S Consequences of poor R&S
• New recruit will be technically competent and able to perform the job
• Effective R&S reduces the need for retraining
• Employee will bring in ideas and enhance productivity
•Candidate will get on well with existing team
•Process will comply with legal requirements reducing employee disputes
• High staff turnover
•Wasted advertising budget
•Loss of management time dealing with unsuitable candidates
•Costs and demoralising effects of dismissal
•Increased workload on existing staff if new recruit makes mistakes
• Potential effect on efficiency of operations
Job AnalysisJob Analysis
• The process of collecting all relevant information about the position
• This information is then summarised into:
1.Job description
2.Person specification
3.Job evaluation
Selection ProcessSelection Process
Selection tools include:
• Interviews
• Tests (e.g. aptitude, proficiency)
• Assessment centres
• References from previous employer
Types of InterviewTypes of Interview
• Face to face
• Successive Interviews
• Group interviews
• Panel interviews
Equal opportunities and Diversity
Equal opportunities and Diversity
• Equal opportunities is normally delivered through legislation which is aimed at giving all people an equal chance to be treated fairly in all aspects of employment
• Diversity relates to valuing everyone as an individual and recognising the differences as contributing factors of business success
Equal Opportunities legislationEqual Opportunities legislation
26. REVIEW AND APPRAISAL OF INDIVIDUAL PERFORMANCE26. REVIEW AND APPRAISAL OF INDIVIDUAL PERFORMANCE
AppraisalAppraisal
• Appraisal is a regular and systematic review of performance and assessment of potential with an aim of producing an action programme to develop both work and individual
• Its purpose is to review performance, potential and pay
Objectives of appraisalObjectives of appraisal
From organisational point of view From individual point of view
• Establishes the results staff are expected to deliver•Identifies training and development needs•Encourages communication•Aids personnel planning•Creates a supportive organisational culture
•Determines future promotional activities•Gives recognition for work well done•Serves as a basis for increase in remuneration•Formal opportunity to ask for guidance•Chance to contribute to goal-setting process
Barriers to effective appraisalBarriers to effective appraisal
• Appraisal seen as a confrontation
• Appraisal seen as a judgement
• Appraisal seen as just a chat
• Appraisal seen as bureaucratic ‘form filling’
• Appraisal just an annual event, no substance
• Appraisal just looks at recent events, ignores everything else
Features of an effective appraisal system
Features of an effective appraisal system
27. TRAINING, DEVELOPMENT AND LEARNING27. TRAINING, DEVELOPMENT AND LEARNING
LearningLearning
Kolb’s experiential learning theory
Kolb’s experiential learning theory
Honey and Mumford’s learning styles
Honey and Mumford’s learning styles
Training, development and education
Training, development and education
Stages in training and development
Stages in training and development
Features of a Learning Organisation
Features of a Learning Organisation
• adapts to change
• encourages questions and experimentation
• sees mistakes as part of learning
• supports risk-taking and initiative
• knowledge shared openly and willingly
• people committed to continuous professional development
28. IMPROVING PERSONAL EFFECTIVENESS AT WORK28. IMPROVING PERSONAL EFFECTIVENESS AT WORK
Preparing a personal development plan
Preparing a personal development plan
Effective time management - influences
Effective time management - influences
Barriers to effective time management
Barriers to effective time management
Barriers Ways to overcome barriers
•Frequent interruptions•Unpredictable nature of the job•Having to travel long distances•Bureaucratic procedures•Putting things off
•Be assertive•Distinguish between urgent and important•Multi-task•Focus on effectiveness•Promise yourself a reward on completion
Coaching, counselling and mentoring
Coaching, counselling and mentoring
29. EFFECTIVE COMMUNICATIONS AND INTERPERSONAL SKILLS29. EFFECTIVE COMMUNICATIONS AND INTERPERSONAL SKILLS
Communication processCommunication process
Effective communicationEffective communication
Barriers to effective communication Ways to overcome the barriers
•Different cultures and languages•Noise and distortion•Information overload•Assumptions and prejudice•Conflict between individuals
•Provide training on cultural awareness•Choose the most effective communication channel•Prioritise and focus•Be open minded•Rise above the differences
Communication patternsCommunication patterns
1. Centralised:
• Wheel
• Chain
• Y
2. Decentralised:
• Circle
• All channels