Category: Accounting Content

What is the Importance of Conceptual Framework and Accounting Standards with Essay? An accounting framework is a coherent system of inter-related objectives and fundamentals that should lead to consistent standards that prescribe the nature, function, and limits of financial accounting and financial statements.

The main reason for developing a conceptual framework is that gives a framework for setting accounting standards; a basis for resolving accounting disputes, and fundamental principles; which do not have to exist repeated in accounting standards. Furthermore, a Conceptual Framework can exist categorized in terms of the distinctive; function of management accounting within the management process in organizations. Moreover, how the utility of the outcomes of the management accounting process can exist tested. Conceptual Framework is a criterion that can exist used to assess the value of the processes; and, work technologies used in management accounting and capabilities necessarily associated with the effectiveness of the management accounting function overall.

Conceptual Framework plays an important role in accounting. It is because a Conceptual Framework helps a better understanding of accounting information; for example, general-purpose financial reports and, in turn, their confidence in IFIs. Furthermore, the Conceptual Framework promotes harmonization by giving a basis for selecting; the most appropriate accounting treatment permitted by financial accounting standards. It also assists in dealing with events, transactions, conditions or circumstances does not deal with any financial accounting standard developed by AAOIFI. This framework helps users of financial reports in understanding the information enclosed in financial statements prepared in conformity with financial accounting standards.

Conceptual Framework is also direct to the development of future financial accounting standards and regulator of subjective judgment made by management; while preparing financial statements and another financial report. Moreover, it helps national standard-setting bodies in increasing national accounting standards. In addition, it gives who exists interested in the work of AAOIFI information about its approach to formulating the financial accounting standard. “In my view, the conceptual framework is absolutely an important document for the Board as well as constituents. I believe the primary use of the framework is to make sure that the FASB does not randomly issue standards. The framework provides a necessary common conceptual underpinning that helps the Board resolve issues,” by Jeannot Blanchet.

A conceptual framework is essential for investors. This is because it provides the risk capital to the investor and the adviser is concerned with the risk inherent from their investment. The information exists needed to help them to determine whether they should sell, buy or hold the shares. The information which enables assessment of the ability of the enterprise to pay dividends exists interested in the shareholders. Employees and their representative groups exist also interested in the stability and profitability of their employees; and, the information that enables them to assess the ability of the company to give retirement benefits, employment opportunities, and remuneration.

In addition, it enables lenders to make sure that their loans and interest will exist paid when due. Next, the information of the amount of money borrowed out by the suppliers and other trade creditors is important for them; because it may determine whether the money will exist paid when due. Trade creditors have an interest towards an enterprise over a short term than lenders unless; they are needy on the continuation of the enterprise as a major customer. Moreover, customers stand also interested in the information about the continuance of an enterprise, especially during the long-term involvement of the enterprise. Finally, the allocation of resources and the activities of the enterprise is important to the government and its agencies. The information enables them to determine taxation policies, as the basis for national income, determine taxation policies, and similar statistics.

Ways of modern-day bookkeeping and the double-entry system evolved and the importance of it.

The recording of financial transactions undertaken by an individual or an organization stands defined as Bookkeeping. The organization could be an enterprise, a charitable organization, or even a local sports club. The necessary support for such accounting function is provided by bookkeeping as the preparation of cost reports, financial statements, and tax returns. Making entries to specific accounts with the debit and credit system and keeping track of a business’s financial transactions exists involved.

Bookkeeping has evolved through the years from clay tablets to paper ledgers, and now computerized systems. Even, for now, bookkeeping fundamentals have not existed changed through the ages. And chances are the future societies will not be able to exist without a formal system of financial recording keeping. In short, some of the same problems that plagued ancient bookkeepers still exist even with modern advancement.

The process of bookkeeping exists always considered to be of vital importance to categorize and record financial data. Each transaction or activity must exist posted to the proper general ledger account. The general ledger exists used to prepare Profit & Loss statements; which tell you if you are making or losing money in a certain accounting period. Also, The general ledger produces the Balance Sheet which shows the company’s assets, liabilities, and equity. The general ledger also produces cash flow statements; which exist analyzed by management and used as a gauge in making important decisions.

These three financial reports exist supposed to show the true financial condition of the company. Extremely important decisions stand made by management from these financial statements and they must be accurate. The bookkeeping process allows all data to stand transferred to complicated financial statements for informational purposes. The integrity and accuracy of bookkeeping procedures affect the outcome of the financial statements. Bookkeeping is the crucial reporting that major decisions exist later made from. It must exist done correctly.

At least two changes in the balance sheet stand caused by every business transaction. Therefore, the books of account must record the two changes. Otherwise, completion of the books of accounts would not exist done and therefore the accuracy of the result will be low. For example, we buy equipment for RM 15,000. This transaction involves two changes, equipment increases by RM 15, 000 and cash reduction by an equal amount. While this transaction record is in accounting, recording both changes is a must.

“A debit change” & “a credit change” is the term of these two changes in accounting language. Consequently, we know that every transaction involves two entries, which are debit entry and credit entry. There will be a relevant credit entry of the same amount for each debit. In turn, for the credit entry, there will be a corresponding debit entry of the same amount. Thus, the double-entry system is in which both the changes which occur under a transaction record together; one change debit when another change credit with an equal amount.

A double-entry system could help an account to double-check while doing the accounting; a mistake would discover if the two totals are not equal. After that, an accountant could double-check and make corrections to the figure to balance.

A double-entry system of books would keep by an accountant for his or her accounts. The accountants have their records and the bank has its own. When the two are unable to achieve the agreement then a missing charge will happen which refers to a mistake, a service charge, a bad check, or a case of identity theft. If the accountant realizes a charge that he or she is unable to account for then he or she can easily track it down because they have to have a one-to-one correspondence between the two sets of records.

Advantages and disadvantages of regulating accounting information through accounting standards.

The advantage of regulating accounting information through accounting standards is protecting investors. Accounting standards will increase the confidence of investors to invest in the business. It is because investors exist interested to realize that their money will finally earn and go back to them. In addition, investors’ interests exist ensured as the documents they review are correct and authentic. Thus, it is very important accounting information for investors.

Next, understandability is an advantage of regulating accounting information through accounting standards. FASB published the accounting standards to represent the required processes for businesses to succeed. When creating financial statements, users expect companies to follow the published accounting standards. In addition, interpreting the results reported when these users depend on the assumptions outlined in the accounting standards. The same assumptions exist used by the users to interpret the financial statements of different companies. Once the users realize these assumptions, they use this knowledge when learning any financial statement.

Besides that, guidance is another advantage of regulating accounting information through accounting standards. Using accounting standards concerns that accountants are provided by the guidance. The accountant may refer to the published accounting standard to determine how to record the event when financial reporting issues arise. . These issues include new accounting transactions deriving from technology, such as Internet sales, or new operations incorporated by the corporation, similarly changes in pension plans. When creating accounting standards, the FASB incorporates the needs of financial statement users likewise company feedback. This process allows the accountant to believe that the guidance contributes to the accounting standard passed the rigidity process of establishing that it matches everyone’s needs.

Lastly, the advantage of regulating accounting information through accounting standards is flexible. Flexibility stands as one of the main principles-based accounting methods. As the financial world becomes more complicated, it becomes progressively problem to create standardized regulations for the whole economy. Principles-based accounting provides companies to arrange their financial statements as they see best to guard accurate disclosure of their current position. The harsh format of rules-based accounting made disclosure more work and at times less informative. For example, the company would not have the proficiency to list industry-specific data in the manner it thought best.

The disadvantage of regulating accounting information through accounting standards is the cost to comply. Using the accounting standard considers the costs for the company to comply with the standard. The company needs to change its procedures, which requires a large financial investment that includes employee labor costs, system upgrades, and employee training. For example, the company needs to have someone to monitor people are correctly applying the standards and have to train people to adopt the standard. In these circumstances, it requires time and money. Thus, the cost of the company will increase.

In addition, we can see that the accounting standards involve trial balance, income statement, and balance sheet. The accountants compel to follow each step continuously to prepare the financial statement. This will make the restriction for the accountants. The accountants cannot do financial reports in their ways.

Lastly, following the accounting standards to prepare the financial report, it requires a lot of steps to prepare. For example, record all amounts into a journal then record them to the ledger. After that, we get the balance from the ledger and record it to the trial balance. The trial balance stood prepared then we can proceed to our income statement and balance sheet. All the procedures may take a long time to prepare it. If the company has many branches, the accountants will take a few months to prepare the financial report.

The merit and shortcomings of the historical cost accounting concept.

The historical cost is the cost at the date of acquisition and when they exist incurred. The historical cost accounting concept requires the amount of all financial items recorded based upon original cost, even the items have increased in value due to inflation. It is the most common and widely used basis of financial reporting. While current value or fair value accounting concept is the concept that financial items record at the realistic value at which they could exist sold or settled as of the current date.

There are several merits or advantages of the historical cost accounting concept. Firstly, it is easy to use and simple to apply as it does not require referring to market values. Therefore, users do not need to do market research to get the current price or market value of the financial items as the historical cost does not subject to any future changes. They can just record the original cost of the financial items in financial reports. Thus, the financial reports can certainly be prepared more speedily and easily than using other bases of measurement; which are current replacement cost, current market value, and net realizable value, so it can contribute to cost savings and time savings.

Secondly, the Historical cost accounting concept is easy to understand. In consequence of the simplicity of historical cost, users can easily understand and interpret financial reports well even though they do not have any financial background. Thirdly, the Historical cost accounting concept is objective, verifiable, and reliable. Since the historical cost is recorded based upon the original amount paid, hence the original cost of the assets can be confirmed through an original invoice or receipt.

Moreover, the historical cost accounting concept also enables biz to keep track of their assets. Because the financial items are recorded in financial reporting based on the original cost of the items, therefore the users can compare the current cost and the original cost of the assets.

However, the historical cost accounting concept also has shortcomings or disadvantages. Firstly, the historical cost accounting concept is fixed, which means it is recorded based on the original cost in the invoice or receipt. Thus, it does not take inflation or changing prices into account. During the inflation period, the price of the assets is different from changing a lot, it reflects the large difference between the original price and current price, so it does not seem sensible to record the value of assets by using the historical cost accounting concept when facing changing price.

Secondly, the historical cost accounting concept does not show the true value of a company’s assets. It recorded all the assets at the price at the date they are acquired. It is unrealistic fixed assets values, which mean the balance sheet value of the financial assets are differ from the true value.

Thirdly, the historical cost accounting concept is lead to the insufficient provision of depreciation. Depreciation is a mechanism of making funds for fixed assets replacement. Depreciation is charged on the original cost of the fixed assets in the historical cost accounting concept, it is not charged at the price at which the same assets are acquired. Therefore, the provision of depreciation which is charged on the original cost will not be sufficient for the replacement of the assets.

Other than that, the disadvantages of the historical cost accounting concept are unrealistic profit. Under the historical cost accounting concept, financial reporting, such as Income statements does not show the true profit of the company as the revenues of the company are recorded on current price while the expenses are recorded at historical cost. So, it will lead to an overstatement of profit during the inflation period.

What is the Financial Information to Stakeholders? Definition, Importance, and Objectives Essay; It is knowledge concerning money transactions a few person or business; samples of money info are payment histories, Credit Card numbers, credit ratings by third parties, money statements, etc.

Here is the article to explain, Financial Information Definition, Importance, and Objectives Essay!

Financial information exists employed by investment corporations, creditors, lenders, associate degreed management to gauge an entity; whereas mistreatment money info the safety of the data ought to exist ensured as a result of misuse of it may happen by third parties. The finances help analyze a company’s money position and provide an image of the performance of a business.

Definition of Financial information;

Financial information contains in annual reports that the companies exist published periodically. That period stands identified as reporting period. The company obligates to provide financial information to their various stakeholders during the past reporting period. The annual report is a report the company reports their comprehensive transactions and events to publish and provide for required parties.

There are a few reasons to publish annual reports by companies generally as follows. Because companies have legal obligation between companies and the government act implemented for companies exists known as company act 2007 No 7. The company act’s sections 150, 151, 152, and 153 have mentioned the obligation to prepare financial statements, content, and form of financial statements, obligation to prepare group financial statements, and content and form of group financial statements accordingly.

Stakeholders of the company require financial information for the following reasons.

• To know how well the company is doing.
• To find the company has earned more money than they spent.
• Also, To get an idea about the strategic and tactical plans of the management.
• To provide information to make decisions who make decisions about the organization.
• Avoid dissimulations and corruptions of the organization.

Through the audit process, organizations will be able to identify weaknesses of their control of procedures and corruptions that occurred due to them. To obtain and fulfill the financial requirements from monitory markets via financial types of equipment such as shares, debentures, bank loans, etc.

Importance of Financial Information to Stakeholders;

However, financial information exists required by stakeholders of the organization. Stakeholders of the organization can divide into two. The bellow chart represents the stakeholders of the organization according to the environment they belong to. They are two types;

1. External stakeholders; Suppliers and Trade creditors, Government, Consumers, Public, and media.
2. Internal Stakeholders; Directors & Managers, Shareholders, and Employees.

The above chart shows the deviation of stakeholders of the organization and they require financial information due to various purposes.

Directors and Managers;

To make decisions about the organization at different times and different levels. Directors and managers of the organization are taking different types of decisions as follows.

• About new investment and project appreciation decisions.
• About continued and discontinued operations.
• Dividend decisions.
• Diversified business decision.
• Winding up decision.
• To establish overall objectives and periodical targets.
• To avoid dissimulations and corruption.
• Also, To establish squired systems and strengthen control of procedures.
• To increase the productivity level of the organization.

Shareholders;

• To determine whether their investment will sale, Holt or bought more shares of the organization.
• To decide the fairness of the return for their investments.
• Also, To determine the going concern of the organization.
• To obtain wide knowledge about organizational activities.
• To compare their investments and their benefits with other competitive organizations and industries.

Employees;

• To know about the stability and profitability of the employer.
• To know about remuneration, retirement benefits, and employment opportunities are in an organization
• Also, To ensure job security with the current employer.
• To ensure the fairness of the salaries and wages they obtain from the organization according to their earnings.
• To have a clear view about other operations of the organization.

Suppliers;

• To ensure their payments of supplies will receive on due.
• To ensure the stability of their customers.
• Also, To know about other products and their suppliers of the organization.
• To compare their transaction with existing and other companies
• To find other competitive suppliers and their contribution to the organization.
• They find opportunities to supply more.

Government;

• To collect accurate taxes and amounts from organizations on due dates.
• To provide government benefaction to improve their business.
• Also, To obtain financial and non-financial assistance for government development projects.
• To ensure the organizations reasonably oversee their employees.
• To ensure the organizations’ compliance with government rules, regulations, and acts established by the government.

Consumers;

• To know the cost structure of the products that the organization is producing.
• To ensure the stability of the organization.
• Also, To know about the organization’s profitability, because profitability is a shed light to know about products impossible growth, improvements, best customer service, and low price strategic implications.
• To know about CSR programs conducted by the organization.

Public;

• To be conscious about the organization’s substantial contribution to society.
• To know about the opportunities to link with the organization.
• Also, To know about CSR contribution towards the country.
• To conscious their activities which can affect to the interest of the nature and the country.

Purpose or Objectives of Financial Information;

The following Financial Information Purpose or Objectives below are;

• Financial Information is very costly data. It shows the monetary capability of individuals. So an Institution engaged in issuing loans would like to have information regarding the monthly income of persons so that they can pay the monthly installments of the loan issued. So it is used to judge the liquidity position of an individual or business.
• Big Credit rating agencies like Moody’s, S&P, etc. rely on the Financial data of companies to produce ratings. Companies engage in monetary transactions with several counterparties. So all the transactions are essential data points and need to be analyzed thoroughly to understand whether the credit quality of a company is good or bad.
• For Individuals, Credit Quality is decided by the Credit Score. So to assign credit scores, rating agencies need to study the credit history of the individuals. How much loan has an individual taken throughout their life? How fast did he repay? Was there any default in payment? So all these are financial data that are required to make an informed decision regarding the credit score of an Individual.
• Creditors take the help of the financial data of companies before giving credit. They usually have separate Teams who are engaged in studying this Information to understand whether to give credit to any particular organization or not.

Other Purpose;

• Investors, before investing in stocks of the company, extract Information by reading several Financial Statements to predict the Credit and liquidity quality of a company. This research helps investors to understand whether they should buy or short the stock.
• Information like bank transactions, Credit card usage, and several other monetary transactions are being thoroughly scrutinized by the Country’s Intelligence to track and hunt terrorist activities.
• Private equity Investors study this Information on Start-Up companies thoroughly before investing in them. They buy this information from several third-party sources, and at times they request this information directly from the Start-Ups.
• External Auditors depend highly on Financial Information obtained from several sources to review whether the company’s Financial Statements are reflecting correct information.

What is the Management Control? Meaning, Definition, Purpose, and Strategies Essay; Controlling is one of the four main functions of management. Managers need to ensure all planning, organizing, and leading run as smoothly as desired. If managers can ensure that each plan made and every task given to the employees are carried out perfectly, and the results expected are what had existed planned, control stands not required.

Here is the article to explain, Management Control Meaning, Definition, Purpose, and Strategies Essay!

Unfortunately, managers are not able to ensure these conditions will run smoothly without the occurrence of any problems since most planning exists done by humans, and humans know to be diverse in terms of abilities, motivation, and others. In a rapidly changing business environment, not only the expected results must exist controlled; but planning must also exist monitored and controlled.

Definition of Control;

Management control is a systematic effort to fix or establish the standard of performance; through planning objectives, designing information feedback systems, comparing true performance with the fixed standard, determining whether; there are any disadvantages or weaknesses, and taking suitable actions to ensure all resources; within the organization can exist used most effectively and efficiently the objective of the organization.

Control is the process of ensuring that organizational activities are running according to plan. This process can exist carried out by comparing the true performance with the standard; that has stood established and taking corrective actions to rectify any distortion that does not comply with the standard.

The main purpose of control in management is to prepare managers to face future or existing problems before they turn critical. In general, an organization with a good control mechanism will have the advantage of competing strength compared to organizations without a good control system. The following are several examples of the importance of control for organizations:

Quality Assurance;

The smooth running of a particular process can monitor and problems can avoid by having control. Control can stimulate the organization to monitor and increase the quality of products and services offered. Through the activities related to the control process, members of the organization will always exist driven to act according to the plans that have stood established.

Preparation to Face Changes;

Change cannot exist avoided. Change in environmental factors such as markets, competitors, technology, and legislation makes the control process important for managers in responding to opportunities and threats. Control helps the organization to suit its products to the needs and wants of consumers in the market.

Steps in the Control Process;

A control process has three basic needs: fixing of standards to exist used in measuring the level of growth; monitoring decisions and comparing it to the standards, that is, the comparison of the organisation’s true performance with the planned performance; and finally, taking corrective actions in rectifying any disadvantages and weaknesses that occurred in achieving the performance that has already existed set.

Establishing Standards;

Standard is the base for comparison to measure the level of performance of a company to find out whether the company is compliant. Also, Standard is the point of reference in making comparisons to another value. Standard can exist defined as what requires out of a particular job or an individual. In management control, standards exist usually derived from the objectives. Standards should be easy to exist measured and interpreted. A specific objective that can exist measured makes it more suitable to exist used as a standard. If this standard is not clearly and specifically stated; it may exist interpreted differently and will then raise various difficulties that can affect the goals of the organization.

In general, there are three types of standards: physical standard such as the number of products and services, number of customers and quality of products and services; a financial standard which exists stated in the form of money; and this includes labor cost, sales cost, material cost, sales revenue, profit margin, and others; and lastly, time standard which includes the performance rate of a particular task or the period required to complete a particular task.

Measuring Performance and Making Comparisons;

Performance measurement is a type of control. Actual results need to exist monitored to ensure that the output produced is according to the specific standard. The main purpose of performance monitoring is to gather data and detect deviation and problem areas. Measurement has no meaning if it exists not compared to the standard. The next step is performing the comparison of standards. Comparison of the standard is a process where comparison stands made between the true performances with the standard set. This step is important because it allows any deviation or distortion to exist detected and corrective actions can exist taken to achieve the goals that have existed set.

Corrective Actions;

It is often found that managers establish standards and monitor decisions but do not take suitable actions. The first and second steps in control will be meaningless if corrective actions are not taken. Before taking any steps in correcting, a detailed analysis must be carried out to find out the factors that caused the particular deviation.

This corrective action may involve a change in one or more operation activities of the organization; such as modification, repairing of machines, preparation of certain courses, and others, or it might also involve a change in the fixed standard. Corrective action is a process of identifying the distorted performance, analyzing the distortion, and developing and implementing programs to rectify it.

THE MANAGEMENT CONTROL PROCESS;

The running of a management control process is a continuous act. This process cannot exist done only once to gain the achievement expected. This exists considered a dynamic process. This dynamic process begins with looking at the true performance and measuring the achievement level of that particular performance. Managers will then compare the performance achieved with the performance that has stood fixed. If there happens to be any difference, it must exist analyzed to identify the cause of the differences and this follows by the correcting act.

This process must exist done repeatedly and must exist given full attention by the manager to achieve the performance goals set.

Basic Methods of Control;

According to Williams (2000), a control process consists of three basic methods; which exist identified as future control, concurrent control, and feedback control.

Future Control;

This type of control exists also known as prevention control. This involves the use of information, including information from the latest results, is to forecast; what will happen in the future so that preventive measures can exist taken. It stands implemented to prevent the occurrence of deviation between what had happened with what exists expected to happen. Prevention exists carried out through detailed analysis of the input before it exists accepted into the process of organizational transformation.

Input stands ensured to comply with the quality standards established so that the results obtained are as expected. One example of the use of this control is when a manager ensures that the sample of raw material; that is going to exist used complies with the standard established by the organization or is based on certain specifications to avoid damage to the product in the future.

Concurrent Control;

Concurrent control exists carried out during the process of transformation. When this control exists carried out, restoration actions, corrective actions, or modifications exist done after distortion exists detected. For a production-oriented organization, this controlling action is taken; while input is being processed while for service-oriented organizations, it is taken while service is being provided. Through this method of control, organizations will monitor; their operations and simultaneously take the necessary corrective actions before the transformation process is completed. This will help to reduce mistakes in the outputs being produced. Examples of this method of control are mid-term examinations, control of accounts, control of inventories, and others.

Feedback Control;

Feedback control involves gathering information related to the weaknesses of controlling measures after an incident takes place. This type of control exists implemented after the transformation process has existed completed to find out whether the whole activity ran properly with results as expected. This control is also able to determine whether the plan that is going to exist carried out has continuity with the previous program.

It is also able to evaluate the effectiveness and efficiency of the involved parties in performing the activities of the organization. An example of this method of control is the use of low-quality raw materials that resulted in the production of low-quality products. The act of changing the raw materials used is one of the examples of feedback control.

Types of Control;

According to Williams (2000), five forms of control can exist used by managers in implementing the process of control — bureaucratic, objective, normative, conservative, and self. Illustrates these five forms of control.

Bureaucratic Control;

This method uses hierarchy authority to influence employees. Rewards exist given to employees who obey and punishment exists meted out to employees; who do not obey the policies, regulations, and procedures of the organization.

Objective Control;

This method uses the measurement of observation towards the behavior of employees or output produced to evaluate work performance. Managers are more focused on the observation or measurement of the behavior of employees or outputs rather than the policies or rules. Objective control consists of two forms of control, behavior control, and output control.

Behavior control;

Behavior control is the rule of behavior and actions that controls the behavior of employees in their tasks.

Output control;

Output control in the form of control that controls the output of employees by granting rewards and incentives. Important features in the implementation of output control are reliability, fairness, and accuracy, convincing employees and managers to achieve the expected results; while rewards and incentives depend on the performance standard that has stood established.

Normative Control;

Normative control is a method that arranges the behavior of employees and results through norms and beliefs shared among all the members of the organization. There are two main substances in this type of control; which are, sensitivity towards the selection of employees based on their attitude and norms, and obtaining inspiration based on experience and observation of employees.

Conservative Control;

This is a method that uses the norms and behavior discussed, formed, and agreed upon by the workgroup. This form of control plays a role in an autonomous workgroup. An autonomous workgroup is a workgroup that operates without the presence of a manager and is fully responsible for the control of the process, task group, output, and behavior. Autonomous work groups gradually grow through two stages of conservative control. First, members work and learn from each other, supervising the work of each member and developing norms and beliefs that guide and control them. Secondly, the appearance and acceptance of objectives as a guide and control of behavior.

Self Control;

It is a system where managers and employees control their behavior by establishing their own goals; monitoring their progress and their achievements of goals, and rewarding themselves when goals have stood achieved.

FACTORS THAT NEED TO BE CONTROLLED;

Determining the matters to exist controlled is as important as making decisions on whether to control or in what method should control exist done. Several perspectives need to exist controlled by a manager for the organization to be able to achieve the goals expected.

Financial Perspective;

One of the important areas that need to exist controlled is finance. There are times when the financial performance does not reach the expected standard. If this condition remains undetected and relevant actions exist not taken, the existence of the company might be in jeopardy. The financial perspective is generally related to activities such as sales, purchases, and others. Financial statements are important sources of financial information for an organization. A balance sheet shows how strong the financial position, assets, liabilities, and the position of the equity holder for a certain financial period is.

A profit-loss statement or income statement shows the summary of the operational activities; and the relationship between expenditure and revenue for a particular financial year. There is a new approach in the financial perspective known as economic value added. Economic value added is the total profit of a company that exceeds the capital cost in a particular year. In this perspective, a manager must impose control so that the total profit of a company always exceeds the capital cost for the company to continuously gain economic value added.

Human Resource Perspective;

The control of human resources is vital for organizations. If an organization is unable to control its human resources properly such as losing an expert workforce; hence, it will jeopardize the performance and achievement of the company.

Organizations need to have planning that can motivate the employees. For example, organizations need to be concerned regarding the problems faced by the employees by creating harmonious discussions between the management and the employees union.

Quality Perspective;

Internal operations of organizations exist usually measured through quality. Operations control is very important for every organization, especially for manufacturing firms. This is because the efficiency and effectiveness of operations control will determine the level of production and organizational performance as fixed by the standard.

The quality value of products and services produced based on the standard will be able to strengthen the perception of the customers towards the quality of goods that they had purchased. For example, the control of product quality can reduce waste and product defects and this will further save cost. Inventory control is also effective in reducing the costs of investments related to inventory

Consumer Perspective;

To measure the performance of customers, an organization needs to impose control on customers; who leave the organization and not based on the survey of customer satisfaction. In this perspective, the manager will evaluate by measuring the percentage rate of customers who left the organization. By controlling customers from leaving the organization, a company will be able to increase profits. For example, the cost of obtaining a new customer is five times more compared to the cost of retaining an existing customer.

Overview;

The main purpose of management control is to prepare managers to face existing or future problems before it becomes critical. Management control has three basic needs: establishing standards; monitoring decision and comparing it to the standard, and making corrections on any distortion that occurred between the true decision and the standard.

Control is a dynamic process because it is a continuous process. The control process consists of three basic methods; future control which stands also known as prevention control; concurrent or present control; and feedback control.

Five forms of control can exist used by managers in implementing the control process: bureaucratic, objective, normative, conservative, and self. To ensure that the organization can achieve its goals, several important perspectives must exist controlled — finance, human resource, quality, and customers.