Financial Accounting Of World Vision

Introduction

Financial accounting is basically a specialized branch of accounting which works for keeping a track over financial transaction of a company. With the use of standardized guidelines, recording and summarizing of financial transaction is done, and then presentation of financial reports such as income statement and balance sheet is done (Deegan, 2013). Moreover, financial accounting plays an essential role in keeping a track over all the financial transaction occurs in an organization. This helps the organization in identifying the revenues and expenses and how much profit or loss company is experiencing. Further, this report mainly focuses upon the role of financial accounting in World Vision Company. Furthermore, this report describes the trends and issues in financial accounting and also it describes the solutions for standard accounting problems which arise in the modern accounting environment. Moreover, the report analyses these trends and issues in a critical way (Choi and Meek, 2011).

Critical analysis of trends and issues in financial accounting

As it is known that financial accounting in a firm is used for recording, summarizing and maintaining financial transaction carried out in a company throughout the year (Weil, Schipper and Francis, 2013). By using this technique a firm can find out the expenses it has done and how much income it has gained. By presenting an income statement and balance sheet an organization could come to know about its financial position. However, with change in time, new trends in this accounting got added and the way of handling this accounting has changed completely. Thus, latest trends have been added to this accounting according to the modern accounting environment, whereas, this change has also brought issues along with it. Thus, this section defines the analysis of trends and issues in financial accounting:

Trends

There are multiple trends came into accounting which has changed its face completely and has changed the way of doing business. In the very beginning, accounting was done manually. Then accounting was done half on computers and half manually. Later, the trend came of doing accounting work entirely using computers and then internet got introduced which gave new way to accounting as well. In a similar manner, latest trend have been introduced in the market which must be adopted by the companies in order to carry out the financial work in a more effective manner (Horngren and et.al., 2012). However, it must be analyzed that whether the latest trend is effective for the company or not. For that aspect, critical analyses of the latest trends have been done as follows:

1. Cloud Accounting: As it is known that cloud computing has become the basic necessity of the company for carrying out any operations ranging from data storage to connectivity and even for reducing business costs. Similarly, accounting is also a part of company’s operation and thus, it is also lined up for getting into cloud. Therefore, a new trend has been added in accounting is cloud accounting (Beatty and Liao, 2014). This is increasingly used for working and enabling easy access to world-class infrastructure without spending huge amount on it. However, heavy cost is involved in providing training to the executives. As it required high end professionals who can carry out this accounting work in an efficient manner. Moreover, this is the biggest trend which is going around and every company has to follow this trend in order to stay ahead in the market. Moreover, this is user-friendly software which can be cited as reason for its surging popularity.
2. Automation: Automation in accounting is a trend which can save a great amount of time to businesses when it comes to accounting. This trend is slowly eliminating the need of manual data entry and helps in saving a large amount of time in production. The major role of automation is to reduce the burden of manual bookkeeping and utilize that time in dealing with real time accosting issues (Weygandt and et.al., 2010). However, such kind of trends cut offs the job which is not appropriate. Moreover, automation would require a person who would be observing it all the time and this would add extra cost to the company.
3. Social Media Strategy: These days social media is widely used for creating a presence of the business online. It is also used to reach a large number of people around the world. Similarly, social media strategy is also used for accounting and is gaining popularity this year and business owners are becoming active on social media. This trend in accounting is very beneficial for accounting firms and also for clients who can gather information themselves using social media (Schroeder, Clark and Cathey, 2011). There are certain benefits of using social media strategy are that no costing is imposed, one can communicate with millions of people, business exposure, etc. Whereas, this type of trend can lead to the increase in website traffic. Along with that, there are high chances of leaking confidential information due to open interactions. Moreover, fraud can also happen if the accounting firm registered on social media could be fake.
4. Outsourcing: Latest trend have been introduced in accounting filed and that is outsourcing of finance and accounting services. This helps the company in focusing on its primary business rather than opening a finance department. This help the firm in cutting down the cost and it also reduces the risk of fraud (Deegan, 2012). However, by adopting this feature, company has to provide all the information to outsourced firm which would be bit difficult as there are high chances of skipping any transaction which may lead to faulty results. Moreover, there are high chances that confidential information may get revealed in front of a competitor which is a major threat to the firm.

Issues

In every operations of a firm, some or the other issue get arise and these issue continue to come while introducing change. Similarly, while bringing change in accounting operations and coping up with latest trends, issues also come along. Therefore, company has to keep a track over these issues every time in order to avoid them (4 Key Accounting Issues, 2017). However, there are certain issues which are avoidable and some issues are unavoidable which create hindrance while carrying out this activity in an efficient manner. Some of the latest and emerging issues have been described as follows:

1. Continuous demand for skilled professionals: As the accounting is collaborating with computers and internet, the demand for skilled professional has increased on a high pace. The reason is that only skilled professionals can easily understand the functioning of carrying out accounting using computers and cloud. Furthermore, regulatory compliance also require skilled professionals therefore, its demand is increasing. However, the supply of such professional is less because of continuous demand in the market (Williams, 2014). This creates a big issue for the firm. Moreover, these professionals demand high salary and if not given they will move to another company because of high in demand which is again an emerging issue in the market. A survey has found that 78 percent of the company has already taken steps for the compensation of the loss of these employees which includes enhancement of recruitment and retention programs.
2. International Accounting Differences between Countries: This is a biggest issue which is faced by the companies working globally. As it is known that this is an era of globalization and every company is targeting for becoming globalized. However, due to this issue, company faces major problems (May, 2013). The reason is that, accounting is done differently in different countries and due to which company has to face difficulty in managing accounting of all countries together. Accounting practice is influenced with national culture, legal system, taxation system, providers of capital and many other influences. Due to this reason, it is becoming difficult for the firm to carry out its accounting activities in an appropriate manner.
3. Harmonization of Accounting Standards: Harmonization of national and international accounting standard has begun to implement. This news brings joy to the companies and at the same time it is becoming an issue for the firms as well. The reason is that company has to bring a huge change in its accounting procedure which becomes highly difficult for the firm. Moreover, there is a pressure for harmonization of divergent accounting practices from the users of financial statements and also from regulators (Hoskin, Fizzell and Cherry, 2014). Moreover, financial analysts have enough potentiality for destroying the international flow of capital. Further, he investors are also pressurizing for harmonization because they desire that financial information must not only be intelligible but comparable also. Thus, this is again a big issue which is faced by the company in the present year.
4. Dependency on Internet: Presently, accounting is entirely dependent upon the internet. Without it, accounting functions are not carried out. This is a major issue faced by the company in present. It is true that internet has made the life of an accountant easier but too much dependency is also creating problem for them. Due to certain technical reasons, many a times, internet does not work and due to which accounting functions cannot be carried out (Sharma and Panigrahi, 2013). Because of this, company has to face many difficulties in their day-to-day lives. Moreover, sometimes, a huge loss could be faced by the firm as daily task does not get fulfilled due to server loss which may get delayed and results in loss to the company. Thus, cloud accounting could be regarded as the biggest issue in today’s era.
5. Risk of fraud: When accounting is done using internet and cloud computing, there are high chances of involvement of risk. The reason is that fraud could happen at any time. There are large numbers of hackers available in the world and they can easily hack the data available on the cloud. This may lead to the leakage of confidential information like income statement and balance sheet of the company (Deegan, 2013). However, leakage of such information may result in a biggest problem for the company. Along with that, competitors might come to know about the financial status of the firm which is threating for the company. Furthermore, fraud happens often if accounting is done using internet because internet is not at all secured.
6. Change in Policy and Regulations: Accounting policies and regulation gets updated every time which create problems for the company to implement them. As it requires proper change management which add extra cost to the company and it is also a time consuming process (Horngren and et.al., 2012). Furthermore, the employees resist for change and in shorter span of time policies and regulations get change which create problem in carrying out the accounting activities in a smoother way.

These are some of the issues in accounting which is emerging this year and are faced by the accountant while carrying out functions of accounting.

Solving standard accounting problems arising in the modern accounting environment

There are several accounting issues arising in the modern standard accounting and they are creating problem for the accountant in carrying out the accounting function in an appropriate manner (Beatty and Liao, 2014). These issues have been listed above and to get rid of those issues, some of the solutions have been described below. By following them, company or accountant can avoid such issues which hinder them in carrying out the functioning of accounting. Some of the solutions have been described as follows:

1. For the first issue which is continuous demand for skilled professionals in accounting field a solution can be suggested. For that, a firm can provide training to other employees who are working in finance department regarding the latest trends of accounting. This will help the company is creating a backup in case a professional leaves the organization due to thigh demand in market (Schroeder, Clark and Cathey, 2011). Hiring other professional for the same post will take some time and during that time, a gap can be filled by temporarily hiring other person on that post. By this, company will not face any issue in carrying out its accounting activities and it will not stop my any means.
2. Second issue arising in modern market is the difference in international accounting standard across countries. This can be avoided by the company by understanding all the international rules and policies of accounting. By this, firm would have complete knowledge of accounting standards of other countries as well and they can provide training to the accountant as well (Sharma and Panigrahi, 2013). This will help the firm in keeping a track over accounts of its branch in other countries as well. This will aid the firm in understanding about the revenue and expenses in a better manner.
3. Third issue is the harmonization of accounting standard and this is getting implemented in every firm at high pace. Therefore, it is necessary for the company to understand this procedure and bring changes in their accounting work in order to stay align with the world (Weygandt and et.al., 2010). Moreover, this will help the company in maintaining the same accounting standard around the globe and due to this difference in accounting standard can also be avoided. Further, to avoid the pressure of investors and other financial analysts, it is better to adopt the harmonization soon because it is beneficial for World Vision in a long run.
4. The fourth issue talks about high dependency on internet. To avoid this issue, company should also maintain manual accounting side by side and for that they can hire intern to carry out manual accounting firm (Weil, Schipper and Francis, 2013). This will not incur high cost as well. By maintaining manual accounting will help the accountant in carry out accounting functions even when internet server is down.
5. This is the most concerned issue because fraud is likely to happen if the company is carrying out its working online. To avoid such risk, company can install firewall on their cloud so that no one can excess unwantedly (May, 2013). Along with that, password should be made using eye retina or face reading so that no one can open except the authorized person. Along with that, company should avoid uploading income statement and balance sheet on cloud instead they should keep a record in books.
6. A firm should remain updated regarding the changing policy and bring into the notice of accountant so that they does not resist regarding the change.

Conclusion

From the above report, it has been concluded that accounting is the major function which is to be carried out in every organization for keeping a track over its revenue and expenses and to calculate its profit/loss. Therefore, it is important for the firm to stay updated regarding the latest trends and issues emerging in the modern environment. Further, it is also concluded that numerous trends have been emerged and which impacts the most to the organization. Moreover, there are certain issues emerging in accounting world which have been solved by giving appropriate suggestions to the World Vision Company.

References

Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia.

Choi, F.D. and Meek, G.K., 2011. International accounting. Pearson Higher Ed.

Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to concepts, methods and uses. Cengage Learning.

Horngren, C., Harrison, W., Oliver, S., Best, P., Fraser, D. and Tan, R., 2012. Financial accounting. Pearson Higher Education AU.

Beatty, A. and Liao, S., 2014. Financial accounting in the banking industry: A review of the empirical literature. Journal of Accounting and Economics, 58(2), pp.339-383.

Weygandt, J.J., Kimmel, P.D., KIESO, D. and Elias, R.Z., 2010. Accounting principles. Issues in Accounting Education, 25(1), pp.179-180.

Schroeder, R.G., Clark, M.W. and Cathey, J.M., 2011. Financial accounting theory and analysis: text and cases. John Wiley and Sons.

Deegan, C., 2012. Australian financial accounting. McGraw-Hill Education Australia.

Williams, J., 2014. Financial accounting. McGraw-Hill Higher Education.

May, G.O., 2013. Financial accounting. Read Books Ltd.

Hoskin, R.E., Fizzell, M.R. and Cherry, D.C., 2014. Financial Accounting: a user perspective. Wiley Global Education.

Sharma, A. and Panigrahi, P.K., 2013. A review of financial accounting fraud detection based on data mining techniques. arXiv preprint arXiv:1309.3944.

Online

4 Key Accounting Issues. 2017. [Online]. Available Through <https://www.accountingweb.com/aa/standards/4-key-accounting-issues-to-watch-in-2017>. [Accessed on 15^th September, 2017].