Friday, December 6, 2019
The Process Of Communicating Financial Data and FactsÃ¢â¬ Free Samples
Question: Discuss about the Process Of Communicating Financial Data. Answer: Introduction The process of communicating financial data and facts of a business to its users like shareholders and managers is known as accountancy. The users uses accounting information to take better decisions regarding the overall performance of a business. Accounting is a very dynamic profession as it can constantly change itself as per the needs and requirements of the users. Each and every type of business uses accounting information in order to conduct their operations effectively and efficiently (Clarke, 2012). The three forms of business ownership are sole proprietorship, partnership and company. All these uses accounting function in their business. Accounting is basically a task of collecting, identifying recording, summarising and communicating the results of business transactions to the users (Carey, Knowles Towers-Clark, 2017). The chosen business sample is: Name: CIMB Group Holdings Berhad Location: Malaysia. Business activities: It provides various types of banking services such as retail banking, commercial and private banking. Along with this, it is also engaged in wealth and asset management services, insurance and many more. This report contains a description and evaluation of the type and shape of the chosen business ownership. It also explains the role of accounting in that particular business type. Forms of business In general, organizations are classified into various types according to their core business activities. The categories defined are as per the main functions performed by the business organization. These are: Retailing/ Trading/ Merchandising This type of business mainly deals with purchasing the goods and selling them to the consumers in market. The people involved in such business are known as merchandisers, who buy different types of goods at a price (cost) and sold the same to the consumers at higher prices (selling price). Supermarkets, wholesalers, grocery stores are some examples (Dunne, Lusch Carver, 2013). Manufacturing The organizations who follows a process of converting raw materials into saleable finished goods are involved in a business form named as manufacturing. These firms purchase some products as raw materials and hire workers for assembling them and converting them into finished products. The finished good is then sold at a price higher than the total cost of manufacturing. An oil refinery, car manufacturing are some examples of manufacturing firms (Obi, 2013). Services There are many firms which are engaged in providing services to the customers rather than dealing with different products. The income earned by this business is in the form of fees or commission. Such as lawyers charges fees for rendering their legal and consultation services to the customers (Mudie Pirrie, 2012). Talking about Malaysia, CIMB Group Holdings Berhad, is one of the leading universal bank of Malaysia, operating in ASEAN (Association of Southeast Asian Nations). It also considered as the largest investment bank in Asia and one of the largest Islamic banks in world (CIMB. 2018a). The form of business, bank is engaged in, is services. It provides various services like retail banking, investment banking and Islamic banking, private and commercial banking. Along with these services, it also deals with wealth management, asset management, securities services, financing, insurance, sales and trading, transaction banking and many other services. The company provides banking solutions to its clients along with the market-leading and Islamic financial advice. The group operates under numerous units named as CIMB Bank, CIMB Investment Bank, CIMB Niaga, CIMB Thai and CIMB Securities International (CIMB. 2018a). The vision of the banking group is to be the leading company in ASEAN and its miss ion is to provide the banking services universally in ASEAN and key markets, as an integrated and institutionalised company having a high performance. The main markets in which the group operates are Malaysia, Indonesia, Thailand, Singapore and Cambodia. It has more than 1000 branches with approximately 40000 employees, serving over 13 million customers (CIMB. 2018a). In Malaysia it provides many services. One of them includes personal banking in which, individuals are provided with the facility of credit cards and loan. CIMB also offers various investment portfolios, making it easy for its clients to manage their wealth and assets. Some of them are unit trusts, structured investments, dual currency investments, retail bond and Gold investment account (CIMB. 2018b). Different type of insurance services are also provided such as life insurance, property insurance, car and personal insurance. Another one is priority banking services which is known as CIMB Preferred. It recognize the customers for who they are and offers them various facilities such as personalized services, financial solutions that meet their requirements, financial advice regarding the movements in the market and lifestyle privileges which include invites for special events and many more (CIMB. 2018c). Apart from the above services, CIMB started its private banking services in Malaysia in year 2002 and after that its business expanded in other countries also including Thailand, Indonesia and recently in Singapore. At private banking, the company provides best solutions for managing clients wealth effectively and seamlessly. With the help of a private banker and their team, the group assists its clients in achieving their long term investment goals by protecting and enhancing their wealth. The bank offers all-inclusive investment strategy and wide range of solutions to its customers which help them in meeting their need. These solutions include proper portfolio management and investment advices (CIMB. 2018d). The services or products provided by CIMB also helps its consumers in planning for their retirement. Other services like internet banking, mobile and regional banking and a facility of quick remittance is also provided by the group. Types of business ownership It is the one factor which affects the accounting process and procedure of an organization. Reason being, different ownership of business have different financial reporting formats. The information and data contained in financial statements are somewhat different. Therefore, it is very necessary to understand the different characteristics of three types of business ownership. Following are the types: Sole proprietorship It is also known as sole trader and as the name suggest, the ownership of this business belongs to any one individual. The owners and business are considered as a separate entity for the purpose of accounting but for legal purposes both are considered as single entity. In this form of organization the owner has full control over the business. Income or profit generated is solely belongs to the owner. (Pride, Hughes Kapoor, 2014). Partnership A firm owned by two or more people is called a partnership firm and the people are known as partners. Further, there is an agreement between the partners known as partnership deed, which contains the information about how the profits and losses are to be distributed, how much interest is to be charged on the capital and many more. For legal purposes, both partners and their firm are considered as one entity. (Clough, Sears, Sears, Segner Rounds, 2015). Company or Corporation The organization which is owned by many people is called a company or corporation. The group of people who owned it are known as shareholders, who has some percent of shareholdings in the company. In legal and accounting aspects, a company is treated as a separate entity from its owners and is considered as an artificial person who runs a business in its own name. Further, shareholders can transfer their shares to another person easily and it is expected to continue the business for long time. (Boone Kurtz, 2013). CIMB Banking Group has an ownership structure same as of a company or a corporation. It is a company owned by a group of people who are designated to different posts as per their expertise. The corporate governance structure of the bank includes Directors, Board committees and shareholders. The professional code of conduct and information about accountability and auditing is also included in its corporate governance (CIMB. 2018e). The directors of the banking group looks after the affairs of business and focuses on developing a right strategy, in order to generate value for shareholders. It is the responsibility of the directors to bring the interests of all the stakeholders into a line and sets the activities of the business in a way, where ethics and values are followed. A time to time review of board size and composition is done. The board members lay more emphasis on enhancing the skills and expertise of the members, so as to meet the challenges of the market in which the bank op erates. CIMB board identifies the importance of independent directors to the banking group, in order to ensure the objectivity and impartiality in the business. Dato' Zainal Abidin Putih is the chairman of the group and Dato' Sri Nazir Razak is a deputy chairman (CIMB. 2018f). Some of the governance responsibilities of the board are delegated to the board committees, which operates and helps the board in fulfilling its duties and responsibilities. Though the board has given some authority to these committees to look upon some operation matters but the final decision still lies in the hand of board members. There are many committees formed, some of them are audit and board risk committee, group nomination, remuneration and compensation review committee and many more (CIMB. 2018g). Shareholders and the investors are the people who holds some percentage of the shares of the group. They got timely updates about the changes happening in the company and the strategy followed by the business. CIMB ensures a two-way communication with its shareholders, done according to the principles, mediums, policies and procedures set for broadcasting the information. This help the bank to increase its credibility and raise the level of investors confidence. CIMB has many shar eholders among which the one who holds majority of shares is Khazanzh Nasional Bhd (CIMB. 2018h). Advantages and disadvantages of business ownerships Type of ownership Advantages Disadvantages Proprietorship It is very easy to form. Legal requirements are less. Owner has full control over the business. Limited capital. Limited expertise. Difficult to expand the business. Partnership Few or little legal requirements. More capital can be generated. Partners additional skills can be used in strengthening the business. The firm may get dissolve, if one partner dies or goes bankrupt. Instability in the management may arise due the conflicts between the partners. Company or Corporation. It is easy to expand a company and also the business has limited liabilities. More capital because of more owners. The company has unlimited life and is not dependent on the life of its owners. It do requires lots of legal formalities before its incorporation. The set up cost of the company is generally high. Obliged to comply with the government rules and regulations. Role of accounting function Accounting play a very important role in the success of any business, whether it is sole proprietorship, partnership or a company. It has the elements of science and art and is a professional knowledge, which every individual should possess and should have idea about the basic accounting concepts (O'Regan, 2015). In the world of business, accounting is treated as a language of trade as it displays all the information related to business transactions. Along with this, it also creates control and accountability in the organization. The accounting information is used as a tool for decisions making by its internal and external users. It allows the organizations to represent all its information in a standard format. All the relevant reports and documents used for representing the financial information about the business are included in an accounting system. There are various types of accounting function pursued by every type of businesses, such as managerial accounting, financial accounti ng and tax accounting. In any organization, the main purpose of accounting function is to keep the record of ongoing business transactions and to timely review all the monetary information like capital expenses, operating overheads, salaries, investments and many more. Generally, a company has financial and managerial accounting function in its business. These functions are carried out in order to make the management more efficient and to provide shareholders and investors with a snapshot of the financial performance of the company (Bull, 2014). The accounting system followed by banks is somewhat similar to the accounting functions followed in any other businesses. However, the procedure or working of bank accountant is slightly different from the other accountants. They need to prepare journal entries, ledger and the statement showing the cash position of the company. Moreover, they need to ensure that there should be sufficient cash in the bank for making daily transactions. The f inancial statements prepared by the bank accountant are income statement, balance sheet, and cash book, pass book, cash flow statement along with the statement of changes in equity and retained earnings. In addition to this, the accountant needs to make sure that the accounting practices are carried out as per the standards and are complied with government rules and external auditors (Information Resources Management Association. 2014). The accounting function in CIMB is mainly concerned with the planning and control of finance in order to ensure equitability, accountability and proprietary. To enhance this function, CIMB has made an Audit committee which looks after the financial reporting, risk management and internal control system. CIMB bank prepares its financial reports as per the standards approved by the Malaysian Accounting Standards Board (MASB), followed by Companies Act 1965, Islamic Financial Services Act 2013 and Financial Services Act 2013. These reports shows the true and fair view of banks financial position and also helps users of financial information to take appropriate decisions (CIMB. 2018i).As the bank provides several financial services to its clients, so it become necessary for it to maintain all the records of its services and also to calculate cost of rendering them. Cost accounting techniques are been followed to measure the cost of services. It helps in establishing the budgets and the c ost of procedures, operation and various departments. The cost account provide financial and non-financial information related to the cost incurred by the company. CIMB also practices management accounting which is concerned with the information that is useful for the managers in taking correct business decisions, which will result in better internal control and efficient and effective execution of the strategies made. Apart from this, the accountant in CIMB performs financial accounting function which deals with the preparation of financial reports, provided to the external users. It records and evaluate the daily transactions and prepare the report on the basis of Malaysian Accounting Standards. These reports are then submitted to the investors, shareholders, government and other users. On a whole, it can be said that, the accounting function plays a vital role in the success of CIMB and it is very necessary for the bank to pursue the same in the long run (CIMB. 2018i). Conclusion From the above report it can be concluded that, it is very necessary for each and every organization, whether company, partnership or sole trader, to have an accounting function in its business. This function is very important for the success of an organization as it harmonizes all the business transactions and present a true position of the entity. Accounting plays an important role in the success of Malaysian bank CIMB. The bank has practiced different type of accounting functions, which makes its working more effective and efficient. So on a whole it can be said that, every form of business ownership must apply accounting function, in order to operate smoothly and to survive in the competitive market. References Boone, L. E., Kurtz, D. L. (2013).Essentials of Contemporary Business, Binder Ready Version. (1st ed.). USA: John Wiley Sons. Bull, R. J. (2014).Accounting in business. (5th ed.). UK: Butterworth-Heinemann. Carey, M., Knowles, C., Towers-Clark, J. 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