The assignment describes about the ethical, social, and environmental accounting and reporting concepts. This assignment will be defining the term and explain the concepts that are ethical, social, and environmental accounting. This assignment briefing about the Benefits and the applications of Ethical, Social and Environmental Accounting and Reporting in a company and also describing the Drawbacks and the limitations of Ethical, Social and Environmental Accounting and Reporting of a company with also explaining above points with example all, or some using a company.
Social accounting and reporting relates to the collation and communication of data that are financial, quantitative or qualitative about a company's communications with society. This collation may be undertaken by the company to which the social accounting relates or it may be the work of a body external to and frequently freely from the organisation. The communication of the social accounting may be limited to internal management, utilize in the type of social bookkeeping and information systems or the social report may be for external use as a available in the social accounting (Gray, n.d). The backbones of social accounting for every company are the broad range of stakeholders. Company are influenced by stakeholders and also, in turn, stakeholders influence the organisation. Also are the shareholders and other financial participants, employees, local communities, suppliers, customers, government and environment. The company social accounting has a various stakeholders that the company must deal with and their interests that have to be balance.
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Environmental accounting is a subset of the social accounting. Environmental accounting is defined as the plan at accomplishing sustainable growth, maintaining a relationship with the society, and pursuing efficient and effective environmental preservation activities. These environmental accounting procedures allow a business to discover the cost of environmental preservation activities during the normal course of company, discovering profit gained from such activities, and offer the best possible means of quantitative measurement in monetary value or physical units and support the communication of its results(Boyd, 1988).
Ethical accounting -"We do not act rightly because we have virtue or excellence, but we rather have those we have because we have acted rightly." Aristotle. Ethics is a term that refers to a code or moral system that gives criterion used for evaluating right or wrong. An ethical dilemma is a condition in which a person or group of person is faced with a judgment that tests this code. EthicsÂ deals with the ability to differentiate right or wrong. Accountants that are working in the business world are always faced with so many ethical dilemmas, some of which are complex and complicated to resolve the problem.
Social accounting has some essential elements that the company has to report at corporate level and this help to understand the business in it broadest ways as including company's economic impact without taking concern for the type of organisation or the nature of ownership. The company has also to ensure that all the key stakeholder needs are heard and a social accounting will be done on stakeholder biased. There will a verification of this social accounting that will be checked and verified by an independent auditor or panel. The company has to ensure that the social accounting that a company do has to get to the stakeholders, shareholders and other financial participants, employees, local communities, suppliers, customers, government and environment in the interest of accountability, transparency and to communicate with stakeholders about the issues that the company faces. The financial statement is prepared for the investor assuming that the other peoples need will be satisfied by that. But what about the employees, the public, they might need other information like employee will need information about their safety but that will be not concerned with public. Social accounting is defined that the giving the information to the all interested persons, for those to that are small group. But the information also needs to be within category like lower level employee needs safety information, whereas higher level employees need organizational information more. The social accounting is giving a need to manage with intra-group and inter-group both (scribd, 2013-02-28).
Environmental accounting has two key phrases that are sustainability and pollution. The concept of sustainability is assuming that the resources are always scarce and that cannot be easily substituted. So the organisation will attempt to use minimum resources and that have to be substituted by the renewable resources. The government also have shown the investor to look for information about the environmental accounting of the company before the investor invests in that company. Also if moving to the renewable resources that will need money. Pollution is growing by days and causing global warming. Pollution is omitted by the company. This has to check by the organisation. There is a need that the company has to disclose environmental issue which may vary according to the industry, like most emitting pollution company such as oil, chemical, motor vehicle, etc have to give more information and on a voluntary basis. There is a need for accounting policies notes to include environmental protection measure. Environmental accounting is an area where people feel the most and this area is emotional. Different professional bodies have done this like ACCA, ICAEW, etc. setting different scheme, setting guidance for environmental accounting.
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Business ethics is done three levels. The macro level is applied to the organization in national and international level. The organisational level is the ethical guidelines that are specified in the company. This guide is followed for a long duration or short duration. The individual ethics is the personal ethics of the individual in the company they are influenced by following factor- family, parents, peer group, social group, culture, religion and professional factors. There are two approaches to the ethical code of a business. One is positive approach. This approach has ethical code that is fixed and rigid standard. This approach is done by having all the employee of the company. Another one is normative approach. This approach is developed by following theoretical, pragmatic, or religious approach. Theoretical approaches take many theoretical studies on ethics like who adopt more community centre, one based upon right, wrong, or duty. The religious approach is used when ethics are to prepared from religious foundation like Hindu, or Buddhist, or etc. the pragmatic approach is applied when ethical problems arises, there will be ethics that will be set by the committee.
The advantages of social accounting are that it provides an outgoing record of the organisation or enterprise that has developed over a period of time and feedback will be given by the people of organisation. Through this you will come to know where things are going well and where not and this will help you to improve things in the weak areas. By this you will able to accomplish your aims and targets. This will also make easy to maintain records and also provides information for applying and reporting for grants and funding (Cameron, 2010).
The advantages of environmental accounting are that it helps companies to make production and pricing decisions on the basis of costs and more cost is involved in the depletion of resources as compared to those which are mentioned in the statements. People are more conscious now about the effects on the natural resources because of their own use and this awareness has made them to take decisions about the resources which the use like keep the drinking water clean, decrease the rate of pollution, recycle of wastage, use of CNG in vehicles so that they emit less CO2.
The advantages of ethical accounting are that it provides companies a competitive edge. Through this customers learn to trust these brands even in hard times. A company called JOHNSON & JOHNSON spent around $100 million on its best selling product and followed the ethical values for boosting the customer's buoyancy for the product. And as a result because of ethics renowned by ethical companies the society is always in benefit and they never face any problem.
The limitations of the social accounting are the cost of social accounting is high. Â When in the initial stage of the Implementation the it require a high workforce. Planning and troubleshooting tactics have to be prepared, which will invest lots of time and cost to the company. The company main motive is to maximize profits and shareholders' wealth of the organization but the social accounting will make this accounting very difficult to implement. The process of implementation process will lead to extra hour work and extra workload at the same rate that the company pays to the employee which will de-motivate the employee. As an outcome appears, the company will have high labor turnover and also employee may leave the company and there will be more cost of recurring on recruitment and training. Companies that omit large amount of pollution and also producing their product by killing animal displays bad image to the customer and can face loses (www.ehow.com,Â 28 February 2013].). Â
The limitation of the environmental accounting is that there is no standard accounting method of doing environmental accounting. Two different companies or countries cannot compare if the environmental accounting methods are different. Â Â The inputs for the environmental accounting are not easily available because the benefits and the cost that are related to the environment are very difficult to find. Lots of govt. organization do not manage use of energy and the material used or waste management and some relevant issue. So many businesses undervalue the cost of environmental performance. The environmental mostly consider the cost internally of the company and exclude cost to society. Â Environmental accounting is a long process. It may take lots of time, money, and the conclusion drawn out of this will not be easy. The Environmental accounting should be amalgamating with the financial accounting that is not easy. It cannot work separately with financial accounting. Companies that omit large amount of pollution and also producing their product by killing animal displays bad image to the customer and can face loses. Â It is again very difficult to implement and that again can lose the employee motivation, high labor turnover and also employee may leave the company and there will be more cost of recurring on recruitment and training. The environmental accounting must be evaluated with other points of accounting. It is because that the cost and the benefits that are relevant to the environmental depends upon financial, management, cost, tax, national accounting, etc. the user of the information that is given by the environmental accounting need goodÂ knowledge so not all user can know(Chauhan,Â 2005).
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The limitation of the ethical accounting is that the ethical accounting reduces the company chance to earn maximum profits. This also waste time as the company may invest some of the amount in an inefficient way.
Hereby I conclude my essay by saying that it is essential for each and every organization or company to construct ethical, environmental and social accounts. And how important it is to perform the social responsibilities by the organizations in their run without overcoming them. As well as people have to recognize their responsibility in conserving the environment by making optimum utilization of the resources and reducing wastage, along with many organizations who are saving the environment and are doing social accounting. As by doing a bit you can make a better future.
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