1. ACCOUNTING ENVIRONMENT
W.G.N.K.ILANGASEKARA
0054

2. INTRODUCTION
“Accounting environment is the surrounding or the factors which effect the accounting in an organization.”
Accounting environment mainly divided in to two types.
1. Internal Environment :- Internal environment can be controlled by the managers of the business
2. External Environment :- External environment is the environment which beyond the control of the individuals of the business

3. ECONOMIC & POLITICAL ENVIRONMENT
SOCIAL & CULTURAL ENVIRONMENT
LEGAL ENVIRONMENT
EXTERNAL
MANAGER
INTERNAL ENVIROMENT
SHARE HOLDER
EMPLOYES
ENTERPRISE NATURE & CULTURE
NATURAL ENVIRONMENT
TECHNICAL & PROFESSIONAL ENVIRONMENT
TECHNOLOGICAL ENVIRONMENT

4. 1. Internal Accounting Environment

5. Parties effect in Internal Accounting Environment
Internal accounting environment is the environment that can be controlled by the managers of the business.
Parties effect in Internal Accounting Environment
1. Managers
2. Employees
3. Share Holders
4. Enterprise nature and Culture

6. 2. External Accounting Environment

7. 2. External Environment
External environment is the environment which beyond the control of the individuals of the business.
Parties in External Environment
Legal Environment
Economic and Political Environment
Social and Cultural Environment
Technical and Professional Environment
Technological Environment
Natural Environment

8. LEGAL ENVIRONMENT

9. 1. LEGAL ENVIRONMENT
“Every organization should comply with legal requirement directly relevant to that particular entity and the general requirement of the country.”
Some of the legal requirement directly applicable for the entities are as follows.
Business ordinance
Partnership ordinance 1890
Company Act No 07 of 2007
Consumer protection Act
Inland Revenue Act No 10 of 2006
VAT Act No 14 of 2002
Nation Building Tax No 09 of 2009

10. POLITICAL ENVIRONMENT
2. ECONOMIC AND
POLITICAL ENVIRONMENT

11. 2. ECONOMIC AND POLITICAL ENVIRONMENT
“Economic and political environment have a direct impact on accounting process. Changes occur in economic and political environment effect to the business as well as to the accounting process.”
For example
Effects of changes in Foreign Exchange
Effects of tax policies of the government
Effects of the changes in interest rates
Privatization of corporations
Effects of international economic depression
Effects of changes in powerful leaders of the country

12. 3. SOCIAL
AND
CULTURAL ENVIRONMENT

13. 3. SOCIAL AND CULTURAL ENVIRONMENT
Social and cultural values of the country will affect the organization. Some believes, behavior, attitudes directly or indirectly affect the organizations operations.
For example
Changes in population structure, social and cultural values
Some occasions, regional festivals effect the business.
example :
-Sinhala Hindu new year festival will increase the demand for new cloths. Food and crackers.
-In vesak season vesak card, oil lamp, oil demand will increase

14. 4. TECHNICAL AND PROFESSIONAL ENVIRONMENT

15. 4. TECHNICAL AND PROFESIONAL ENVIRONMENT
In today accounting stands as a profession. In Sri Lanka professional environment of accounting is governed by the Institute of The Chartered Accountants in Sri Lanka(ICASL). Financial statements of the organizations of Sri Lanka has to be prepared according to the accounting standards recommended by the ICASL.

16. 5. TECHNOLOGICAL ENVIRONMENT

17. 5. TECHNOLOGICAL ENVIRONMENT
In today technological changes take place in the world rapidly. Therefore the development in technology have given a major impact to the business.
For example
Using of Computerized accounting system:- Preparation of financial statement has become more convenience than manual process.

18. 6. NATURAL ENVIRONMENT

19. 6. NATURAL ENVIRONMENT
Changes in natural environment may definitely effect for the business. It includes natural resources, weather, climatic conditions, port facilities, topographical factors such as soil, sea, rivers, rainfall etc. Every business unit must look for these factors before doing something.