Practise explaining final accounts, stakeholder information and accounting ethics using IB Business Management SL questions and mark schemes.
Sam created a marketing plan to obtain finance for AFA, a fair-trade retail business. A marketing plan can identify objectives, target markets, marketing mix, budgets and implementation. Sam initially had poor understanding of accounting and finance, so applying appropriate accounting principles and ethics is important for reliable records, correct cash-flow/profit information, tax compliance, honest reporting and stakeholder trust. AFA sells fair-trade chocolate, coffee, clothing and stationery through pop-up stalls, retail outlets and an e-commerce business-to-consumer website.
With reference to A F A, explain why applying appropriate principles and ethics of accounting practice is important.
Accounting principles and ethics include:
- integrity - being straightforward, honest and truthful
- objectivity - avoiding bias, conflict of interest
- professionalism - accounts produced to relevant professional standards
- confidentiality
- accounts need to comply with legal obligations and be compliant with standards set by professional bodies.
Context: in the context of AFA the business is run on ethical and fair trade concepts. Failing in any of the accounting principles and ethics could damage the reputation of the business and AFA could lose sales and customers. Investors will also need reassurance in relation to the ethics of the business. Other stakeholders, such as pressure groups concerned with fair trade, may need to be satisfied.
Discussion of ethics in a wider sense is allowed but [6] can only be achieved if there is some reference to accounting principles.
If ethics are general, and no mention of accounting principles/ethics then maximum award is [3].
If accounting principles only with no reference to ethics/accounting ethics then maximum award is [3].
Be aware that context is difficult, so the same context can be used for the various different principles/ethics.
Accept any other relevant explanation.
Marks should be allocated according to the markbands on page 3.
Award a maximum of [3] for a theoretical answer.
Award a maximum of [5] if the explanation is mainly descriptive, but in context.