Understand Essay of Social Accounting in Accounting

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What is Social Accounting? Any business accountant of an enterprise or any organization can describe the conditions of that organization. Social accounting is that kind of movement by which everyone can analyze the same thing as like a business accountant. The main aim of social accounting is to produce data, indices and other information to help everyone about an organization. Social Accounting can also be termed as Corporate Social Reporting, Non- Financial reporting or sustainability accounting. It is a way by which a business seeks to place a value on the impact on society of its operations. So, what discusses is – Understand Essay of Social Accounting in Accounting.

The Concept of Social Accounting is to explain the Meaning, Definition, Scope, Qualities, Features, and Benefits.

The concept of ‘Social Accounting’ has gained importance as a result of high-level industrialization which has brought prosperity as well as many problems in society. It has necessitated the corporate sector, with huge amounts of funds at their disposal, to invest substantial amounts in social activities so as to nullify the adverse effects of industrialization.

Social accounting is also known in various names. These are social and environmental accounting, corporate social reporting, corporate social responsibility reporting, non-financial reporting or sustainability accounting. This is actually a procedure of communicating in which the social and environmental belongings of organizations (NGO, Charities, maybe Government agencies etc.) are included. This is a way by which an organization can express the level to which it meets its societal or ethical goals.

Meaning of Social Accounting:

Social accounting is distinct from evaluation in that it is an internally generated process whereby the organization itself shapes the social accounting process according to its stated objectives. In particular, it aims to involve all stakeholders in the process. It measures social and environmental performance in order to achieve improvement as well as to report accurately on what has been done.

There are some key factors in social accounting by which everyone can understand the difference between social accounting and conventional accounting. The main focus of social accounting is mainly on issues which can develop a correlation in between society and organization. In maximum aspects, social accounting is not focusing on financial data but sometimes it needs financial data for making a report. The purpose of social accounting is to be liable to a large number of stakeholders.

With the help of these reasons social accounting may be described as,

“Social accounting is the voluntary process concerned with assessing and communicating organizational activities and impacts on social, ethical, and environmental issues relevant to stakeholders”. – Crane and Matten Material on Social Accounting.

With the help of social accounting, it is clearly understood that organizations or companies manipulate their outer environment during their performance and should consequently account for these belongings as part of their standard accounting practices.

The intelligence of the accounting is nearly closed to the economic concept of externality. It offers a substitute explanation of important economic bodies. It has a perspective to disclose the apprehension between the following economic profit and chase of environmental and social objectives.

Definition of Social Accounting:

The following definition below is:

“The social impacts of organization underlie some real social issues – such as obesity, ill- health and community regeneration. The profound effects organizations have on society are becoming increasingly obvious. From the point of view of stakeholders, social accounting is, therefore, a critical part of delivering accountability and transparency. From the organization’s point of view, social accounting can help to identify and manage social risk”

“Social Accounting is the application of double entry bookkeeping to social economic analysis.” —Kohler.

“The measurement and reporting, internal and external, of information concerning the impact of an entity and its activities on society.” —Ralph Estes.

“Social accounting as the means by which the effects of social programmes are attempted to be expressed in some type of quantitative terms. —Leonard Spacer.

“Social Accounting is the expansion of the existing boundaries of the accounting beyond the normal economic consequences” —Salivary.

The Scope of Social Accounting:

Social Accounting allows a co-operative or social enterprise to build on its existing monitoring, documentation and reporting systems to develop a process whereby it can account fully for its social, environmental and economic impacts, report on its performance and draw up an action plan to improve on that performance.

Through the social accounting process, an organization can understand its impact on the surrounding community and on its beneficiaries and build accountability by engaging with its key stakeholders. In this way, it can prove its value and improve its performance.

Basically, social accounting involves clarifying what a co-operative or social enterprise does, what it is trying to achieve and who it is working with. Then, on the basis of this, it collects quantitative and qualitative information and data which relates to its overall objectives and underlying values.

This usually lasts one year and runs concurrently with the financial year. At the end of the social accounting year, the organization brings all the information together in the form of social accounts that are independently audited and after revisions the social accounts form a Social Report.

Qualities of Social Accounting:

If the social accounting is good then all the views and accounts of all main stakeholders will be reflected. In good social accounting, the communication is mainly two-way communications with the main stakeholders. Good social accounting compares different period’s data with other organizations and makes relation with external standards.

In good social accounting, all the various areas of organizations are shown. In good social accounting changes is also happened due to changing of stakeholders expectations. Actually good social accounting has a tendency to make over the good aspects of stakeholders. A good social accounting always makes correlations in between system and procedures to control and estimate the effective institutionalization carefully.

With the help of good social accounting, all stakeholders can get a brief description of all the accounts and reports. They can get all these reports on the basis of their needs. In all characteristics of good social accounting one of the most important characteristics of social accounting is to support continuous improvement. That means good social accounting always encourages an organization to develop and increase its improvement continuously and it also helps an organization to enlarge its area of assessment.

Features of Social Accounting:

The following feature below is:

  • An expression of a company’s social responsibilities.
  • Related to the use of social resources.
  • Emphasize the relationship between the firm and society.
  • Determines the desirability of the firm in society.
  • Application of accounting on social sciences, and.
  • Emphasizes social costs as well as social benefits.

The technology of an economic system imposes a structure on its society which not only determines its economic activities but also influences its social relationship and well being. Therefore a measure limited to economic consequences is inadequate as an appraisal of the cause and effect relationships of the total system, it neglects the social effects.

Social Accounting, also known as Social Responsibility Accounting, Socio-Economic Accounting, Social Reporting, and Social Audit, aims to measure and inform the general public about the social welfare activities undertaken by the enterprise and their effects on the society.

As per F.F. Perry’s Dictionary of banking, social accounting is the reporting of the cost incurred in employing with anti-pollution, safety and health and other societal beneficial requirements and, more generally the impact of the business entity on the endeavor to project

society its amenities and the environment.

Need or Benefits of Social Accounting:

The important benefits of social accounting are as follows:

  • A firm fulfills its social obligations and informs its members, the government and the general public to enables everybody to form the correct opinion.
  • It counters the adverse publicity or criticism leveled by hostile media and voluntary social organizations.
  • It assists management in formulating appropriate policies and programmes.
  • Through social accounting, the firm proves that it is not socially unethical in view of moral cultures and environmental degradation.
  • It acts as evidence of social commitment.
  • It improves employee motivation.
  • Social accounting is necessary from the viewpoint of public interest groups, social organizations investors and government.
  • It improves the image of the firm.
  • Through social accounting, the management gets feedback on its policies aimed at the welfare of the society.
  • It helps in marketing through greater customer support, and.
  • It improves the confidence of shareholders of the firm.

“In modern times, accounting efforts have been extended to the assessment of the state of society and of the social programmes not for the satisfaction of any individual or group but for the application of evaluative procedures in the allocation of resources towards the better social well being as a whole.”

Social accounting is concerned with the study and analysis of the accounting practice of those activities of an organization. The concept of socialistic pattern of society, civil rights movements, environmental protection, and ecological conservation groups, increasing awareness of society towards corporate social contribution, etc. Have contributed towards the growing importance of Social accounting.

Global Standards of Social Accounting:

There are main three standards which are established or prepared for making the social and environmental report.

These are:

  • 1) Global Reporting Initiative (GRI).
  • 2) SA8000, and.
  • 3) AA1000S.

Global reporting initiative is actually famous as GRI. It was started in the year 1997. It was tying up with the United Nations Environment Programme (UNEP) to work on social accounting for various organizations. The main aim of GRI was to prepare the report about all the steps which are related to economic, social and environmental sides of an organization. In one word the main motto of GRI was to make a sustainable report of organizations. GRI reaches success in the making of sustainable reports.

SA8000 is a social accountability standard. It was also established in the year 1997. It covers a number of key labor rights. Working time; strained work; unfairness etc are some examples of key labor rights. With the help of these key labor rights SA8000 could make a report and all the examination, making facilities can be authorized as SA8000 compliant. SA8000 was developed through consultation with a large number of stakeholders including workers, employers, NGOs, and unions. In the year 2006, it had authorized approximately 900 facilities in 50 countries.

In the year 2002, there were other standard AA1000S established. This was the first attempt to give a logical and healthy source for assuring a public report. It was making reports with the help of the principles of accountability and stakeholder engagement. The standard was specially intended to be reliable with the GRI sustainable reports.

Reasons for taking over Social Accounting by Organizations.

The principle of social accounting for accountability is intended to sustain the search of society’s aim. These objectives can be defined in the term of social and environmental desirability and sustainability. The society is seen profit in various ways with the help of the implementations of the social and environmental approach to accounting.

Such as, it honors stakeholders’ rights of information, it balances corporate power with corporate responsibility; it increases transparency of corporate activity; it identifies social and environmental costs of economic successes. To sustain and make easy the success of an organization’s own idea, social accounting is considered mostly for the standard of management control.

Because this is concerned with self-reporting in a systematic way which is considerable. But all the individual reports are frequently referred and those are known as societal audits. After implementing this kind of social accounting the organizations also benefited in various aspects. It increases information for making a decision, it is the more exact product, it is enhancing illustration supervision as well as public relations.

It is identifying social responsibilities, and also it is identifying market development opportunities. For these given reasons everyone can understand. That after taking over the social accounting the corporate world or the organizations can reach a profitable condition. So anyone can suggest to a corporation to take over an improved social accounting.

Understand Essay of Social Accounting in Accounting. Image credit from #Pixabay.
Nageshwar Das

Nageshwar Das, BBA graduation with Finance and Marketing specialization, and CEO, Web Developer, & Admin in www.ilearnlot.com.