Developing total organizational competence and efficiency of the employees is essential for leading a business in the direction of success. This necessitates guiding and training the employees in such a way as to build their efficiencies in all the aspects of business while stressing on maintaining ethical standards effectively at all times. Understanding and upholding business ethics is essential for overall business activities. So it goes with Financial accounting as well. Below are mentioned in brief some benefits of maintaining accounting ethics in business.
There is no doubt about that maintaining ethical standards leads to improved survival and sustainable business with higher chances of growth and development. One the hand it is a good way for improving effectiveness of a business as a whole, it’s also one of the best practices to lead a business towards greater efficiencies.
Ethics is synonymous with morality, honesty and integrity. Ethics means the basic concepts and fundamental principles of right human conduct, which involves differentiating between good and bad, right and wrong, so that an accounting professional follows what is principally right for him to do.
Since the accounting professionals involve in various functions of accounting, such as, recording of all business events that are of financial character, classifying and summarizing them and present them in the form of profit and loss statement, balance sheet and cash flow statement, the way these activities are performed is very important and it has a lot do with maintaining accounting ethics of accountants. If accounting ethics are maintained appropriately, the right picture of a business may be known. It would thus lead further to consider as to how a business, performance, process, and procedures may be enhanced in order to grow and develop more.
One of the most important benefits of being ethical is that accountants remain impartial and loyal to the business organization while performing the related activities sincerely and in all honesty. Since the accounting information drawn from the financial statements is of great value and significance to be relied upon and upon which the success or failure of a business immensely depends, accountants are well aware about it and understand this importance and do not lead themselves to manipulate any kind of information.
Neither they direct their mind to hide any information, rather, on the basis of ethical standards, they would remain fair and impartial. So, the information pertaining to various accounts: such as, cash, receivables, inventory, prepaid expense, long term receivables, accounts payable or long term liabilities including others, is presented accurately creating the sense that the information is true and fair.
Similarly, the activities pertinent to the components of income statements, such as, revenues and expense are to be carried out efficiently. The income statement is considered as similar to a moving picture of a business entity’s operations during a particular time – unlike the balance sheet that reveals the financial position of an organization at any given moment in time. Accountants who have good knowledge of ethics and who are honest and straight-forward are not at all motivated to play with the figures with the intention that the profits look better, but they provide accurate information without changing the figures showing less expenses or greater profits..
Accounting ethics are applied to each and every transaction and activity of the process of accounting, so that the complete, accurate and reliable information can be presented to the desired users of financial statements in a business organization.
Working capital is defined as being the capital of a business which is used in its day-to-day operations. It is the net of current assets minus current liabilities.
Emergency Fund is a money set aside from your own salary or income to cover unexpected expenses. Many financial planners would even tell you that the very first thing to save is to allot it for your emergency fund..
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