Introduction to Accounting

PART 1

A. Identifying and describing relevant stakeholders as per conceptual framework

In accordance with International Accounting Standard Board (IASB), main stakeholders of Morrison’s include shareholders, management team, employees, financial institution, suppliers, customers and government authority (IASB, 2018). On the basis of accounting rules and regulations company needs to prepare as well as publish financial accounts & report at the end of financial year.

B. Explaining how financial statements meet the information need of stakeholders

Financial report which is published by Morrison’s at the end of accounting year fulfils information need of concerned stakeholders to a great extent in the following manner:

Internal stakeholder

• Management: For making effectual operational and financing management team of Morrison’s undertake as well as evaluate financial statements. Moreover, annual report clearly furnishes information about profitability, liquidity and solvency aspects. Hence, considering such information management team would become able to take suitable and strategic decisions for the near future.
• Employees: With the motive to assess future growth in both monetary and non-monetary terms personnel make evaluation of final accounts. Moreover, profitability statement clearly presents the growth take place in income level of the firm and thereby assists in making estimation about salary, incentives and other benefits.
  
  

External stakeholders

• Shareholders: Investors make evaluation of annual report to ascertain financial position and performance of firm (Users of financial statements, 2018). Hence, financial statements help investors in taking decision whether they should hold the investment or sell it now.
• Financial institution: Financial statements mainly balance sheet helps lending institution in identifying that Morrison’s is able to payback loaned funds along with the relative interest charges or not.
• Suppliers: Using final accounts and reports suppliers can decide whether they should extend credit to a company or not.
• Customers: Now, customers prefer to purchase products or services from the retailer which carries out operations in a sustainable manner. Hence, by reviewing annual report customers can assess that company is performing activities in an eco-friendly manner or not.
• Government: Profitability statement and balance sheet is evaluated by the government authorities to assess whether business unit has paid appropriate tax amount or not.
  
  

Hence, the above depicted aspects clearly show that financial statements satisfy informational need of the stakeholders to a great extent.

PART 2

A. Describing advantages and disadvantages of marginal & absorption costing method

Absorption costing system: This is also known as full costing method which considers both fixed and variable production expenses as product cost. As per GAAP and IFRS such costing technique is highly recommended to the business units.

Marginal costing system: In this costing system, only variable or direct expenses are charged to the unit cost produced.Under marginal costing method, fixed cost is recognized as a periodical cost, whereas variable expense considered as product expense.

B. Identifying costing system which is adopted by each type of business

CONCLUSION

By summing up this report, it has been concluded that annual report presented by Morrison each year provides high level of assistance to the stakeholders in taking appropriate decisions. Besides this, it can be inferred that absorption costing system is highly suitable over marginal because it considers both fixed as well as variable expenses while determining production cost.