Sustainability Accounting and Accountability

Question: Discuss about the Sustainability Accounting and Accountability. Answer: Introduction A reversing entry is a voluntary journal entry which is recorded at the starting of an accounting period in order to undo the adjusting entries of the previous period (Brown 2014). It can also be said that these reversing entries generally reverse or cancel out the adjusting journal entries that have been recorded at the ending of the preceding accounting time. The objective of recording the overturning entries is clear out the accrual entries and the prepaid entries from the previous year. Therefore, the transactions in the present period can be documented normally. As the accrual basis of accounting and GAAP need the expenses and the revenues to be matched in the periods where they occur (Demski 2013). On the other hand, the accrual journal entries are documented at the end of every accounting period. However, it has been found that some of the accounting managers prefer to implement the reversing adjusting entries at the starting of the next financial year and some do not prefer. Therefore, depending upon the advantages and disadvantages of not reversing adjusting entries at the starting of the next financial year, the accounting manager of an organization communicates and thus, the success of the leadership depends upon the decision-making and communicating skills of the leader. Communication and Leadership Communication is defined as a two-way process that helps in mutual understanding and also helps the participants to exchange any information, feelings, ideas and news between them. The process of communication also helps to develop and share meaning between two or more personnel. Therefore, it can also be said that the methodology of communication is not only an exchange of ideas, news or information; rather it is a process of encoding and decoding. Thus, it is also better known for connecting people. In case of operating and regulating any organization, communication plays the most important role as this key function of management helps to communicate between the various levels of management, employees and departments. From this, it can be said that the success of a leader is directly related with his or her ability of communicating with the various levels of management and the employees of an organization. The fundamentals of a strong and an effective leader are discipline, strate gic alignment, accountability, empowering his or her employees and managing her or his own values towards the operation and regulation of the business. On the other hand, the principle functions of an effective leader include planning, leading, organizing, controlling, communicating and staffing. Therefore, it can be said that the process of an effective communication and an efficient leader are directly related to each other (Knapp, Vangelisti and Caughlin 2014). In other words, it can be said that for being an efficient leader, the particular person should be an effective communicator. The reason behind this is that this skill of communication helps all the employees of an organization to connect with each other and also with the management. Thus, it can be said that a better process of communication can bring a success to the leadership of a leader. Therefore, for avoiding any dilemma in the process of implementation of not reversing adjusting entries at the beginning of the nex t financial year, a proper process of communication is an essential factor. It has been found that some of the leaders implement the reversing adjusting entries at the beginning of the next financial year and some do not. According to Broadbent (2013), both the processes have its own advantages and disadvantages. Therefore, in this report, the advantages of not reversing adjusting entries at the beginning of the next financial year and the disadvantages of preparing reversing entries have been discussed. In addition to this, the disadvantages of not reversing adjusting entries at the beginning of the next financial year and the advantages of preparing reversing entries have also been analyzed. On the basis of the advantages and disadvantages of reversing adjusting entries, a conclusion has been drawn that might help the leaders of an organization to run the firm successfully and profitably. Advantages of not reversing adjusting entries There are various advantages of not reversing the adjusting entries at the starting of the next financial year. These include firstly, an entry which needs the reversing strategy involves an amount entered into the accounting system for allocating the expenses that span two accounting periods (Edwards 2013). Therefore, it can be said that to implement a reversing entry is more complex as if the amount is not entered into the accounting system for allocating the expenditure in two accounting periods, then error might occur in the accounting system of an organization. Thus, it can be said that in order to avoid any error throughout the financial year, implementation of not reversing adjusting entries is more advantageous. The reason behind this is that the not reversing adjusting entries will help a firm to show a stable and balanced assets and liabilities throughout the year (Weil, Schipper and Francis 2013). On the other hand, it can also be said that the not reversing adjusting ent ries might also help the accountant to understand the actual expenses or income of the firm on time. The implementation of reversing adjusting entries might help an accountant to understand the total expenses or the income of the firm at the beginning of the year. However, this also has a negative effect on the operation and regulation of firm. The reason behind this is that if an accountant applies reversing adjusting entries and starts spending as per the plan of future income in the particular year, then the total expenses of an entity will increase at the beginning of the year only (Weygandt, Kimmel and Kieso 2015). However, if the entity does not receive the pre-planned amount at later part of the year due to various negotiations, then the proportion of expenses will relatively increase all of a sudden and the entity will get into trouble. Therefore, in order to avoid any such circumstances, an accountant of a firm should implement the not reversing adjusting entries. The accou ntants generally develop entries for the expense items that have not been received. On the other hand, in case of reversing adjusting entries, the accountants have to work more or it can be said that he have to work double as with any changes in the later period, the accountant have to change or adjust the entries made in the beginning of the next year. Thus, making of reversing entries needs a system of tracking them in order to get ensure about completing the entries successfully (Christensen et al. 2015). On the contrary, it can be said that implementation of not reversing adjusting entries is more advantageous for an entity or an accountant as in this system an accountant have to adjust only once or have to make single entry. Thus, it is simpler or easier of an accountant to use not reversing adjusting entries as it helps to avoid double work. From the below example, it can be better understood. Mr. Z pays his staffs $ 500 for two weeks. Therefore, he might debt the wages expenditure amount for $ 250, credit cash for $ 500 and debt wages payable for $ 250. Disadvantages of preparing reversing entries There are some disadvantages of preparing reversing entries. These might include an error can take place which might understate or overstate the account. It has also been found that the reversing entries double the work for an accountant. In addition to these, the preparation of a reversing entry might also increase the probability of making errors (Drury 2013). The primary limitation of using the reversing entries or preparing the reversing entries is that if the accountant of an organization overlooks or fails to do so, then the expenses or the revenues can be end up being overstated on the basis of the transaction. The objective of journal entries is to modify the data of accounting within the financial schemes. As rightly stated by Flamholtz (2012), the double entry system of accounting is mainly used in the present days accounting that ensures the accountant about the influence of the entries on a minimum of two accounts. In case of double entry system, two accounts are general ly affected because one account receives a credit on one hand and another account receives an analogous debit on the other hand (Rusak 2016). The reversing entries change back the regular entries which have already been recorded. This particular practice is considered as an optional; however it makes the accounting process smoother. The reversing of an entry from the previous accounting year keeps the expenses and revenues away from being overly stated. For instance, if a rental car expense is recognized from the previous month as a part of closing of that month, then if the bill of the rental car comes in the next month and its get paid, then this car rental bill could be billed as an expenditure in that month only. Nevertheless, to forget about the reversing of the entries might lead to an inaccuracy in the total expenditure. In addition to this, reversing entries provides benefit due to its simplicity, but as everyone can use this technique without proper accounting training, the valuation of the particular system has been decreased (Bebbington, Unerman and O'Dwyer 2014). Disadvantages of not reversing adjusting entries It can be said that there are various disadvantages of not reversing adjusting entries within an organization at the starting of the next financial year. These include an accountant might forget about any expenses that might occur at the middle of the financial year and this might put an entity into trouble (Clementi and Palazzo 2013). Therefore, if the accountant forgets about any adjusting entries in later period it might affect the assets and liabilities of the entity at a certain period of time. In addition to this, if an accountant of an entity does not implement the not reversing adjusting entries, then the entity might fail to maintain a stable and balanced assets and liabilities (Kaplan and Atkinson 2015). The other disadvantage of implementing not reversing adjusting entriesis that it is much complex and can lead to confusion. This process is also considered as inefficient and does not get any second scope or chance to make any corrections. Advantages of preparing reversing entries The journal entries are generally used in order to change the accounting information in the financial systems. Opined to Deegan (2013), the double entry system is the most modern accounting system that is used nowadays. The entries as per the double entry accounting system always influence a minimum of two accounts, as one of the accounts is added and one more account is mainly credited. As such, a reversing entry inverts a previously recorded regular entry. It can be said that using reversing entries is an optional factor but many of the accountants use this system for various advantages. These include accuracy, simplicity, efficiency and correction (Warren, Reeve and Duchac 2013). It has been found that when an accountant uses or implements a reverse entry and reverse an entry which was made in the previous accounting year, the particular accountant can prevent any duplication of the expenses or revenues that improves the accuracy. On the other hand, the reversing entries are cons idered as a simple process that might be performed by any staff without much knowledge regarding accounting. The account that was originally debited is now credited and vice versa (Xie et al. 2013). In this process, without changing anything or without any research, the conducted calculations can be used in the next step just by reversing the entries. Therefore, it is considered as a simple process and any complexities can be avoided here. In addition to these, the reversing adjusting entries are considered as more efficient as certain reversing entries can be set up in advance and can make it in an efficient and organized process. Moreover, the reversing adjusting entries can be done faster than not reversing adjusting entries (Needles, Powers and Crosson 2013). Additionally, this particular system helps an accountant to avoid in making any mistakes in calculating and also during entering the journal entries in a system. It can be better understood from the following example: In the month of December, Mr. Z accrued an amount of $ 250 to be paid wages for half of his staffs pay period that was in the month of December; however it was not aid until January. Conclusion Therefore, it can be concluded that the leaders should implement either of the two options on the basis of the situation. It has been found from the detailed analysis that the not reversing adjusting entrieshave comparatively more advantages and fewer disadvantages if it is implemented at the starting of the next financial year. On the other hand, it has been noted that preparing reversing entries has more disadvantages and fewer advantages. Thus, in order to avoid any complexity and confusion and also to keep the process simple, an efficient leader should implement the not reversing adjusting entries at the beginning of the next financial year and disadvantages of preparing reversing entries. References Bebbington, J., Unerman, J. and O'Dwyer, B., 2014.Sustainability accounting and accountability. Routledge. Broadbent, D.E., 2013.Perception and communication. Elsevier. Brown, R., 2014.A history of accounting and accountants. Routledge. Christensen, H.B., Lee, E., Walker, M. and Zeng, C., 2015. 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