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In this accounting assignment would gone to examine about different factors of accounting. This assignment would explore about accounting g concept utility in financial accounting. Therefore, the auditors and directors of company involvement in public company to make decision about business plan. Additionally, using of annual report will help to make understanding about organization financial condition. Cash budget and breakeven point importunacy and evaluation would be described to present different accounting tools. Another part would be use to present about importunate of consolidated financial reports use to evaluate financial position. Moreover, different type of cost and double entry system would be using to presenting accounting reports for analyzing different insights.
Executive summary
This project has explained about different accounting tools and interpreted of organization. Those accounting tools importance in presenting analyzing has delivered in this project. Additionally, breakeven point, cash budget and financial statement of regarding organization has explain about financial strength has weakness. Furthermore, this aspect of financial statement also represent about financial insights of those organizations. Another, part of this project has explained about importance of double entry system. Different type of financial accounting that has explained financial condition to stakeholders. Additionally, important of financial statement toward stakeholders has derived about utilization of financial reports. Moreover, management accounting prospect in corporate industries has been derive to make report about importunate of accounting for corporate success.
Accounting to concept is being used as a method that has been used for presenting financial factors of organizations. Accounting concepts have been implemented by financial managers that have been focused over the “Revenue recognition” concept that has concentrated over the “profit and loss statement”. Through P&L statement organization has representing total revenue in a financial year that also explains about growth in revenue volume compared with previous years revenue. Revenue is the total cash flow of an organization. Moreover, this concept of accounting has established a P & L statement that has been used for evaluation of profit.
Additionally, “historical cost” concept is being used in acquisition time that has produce present value of assets. Meanwhile, the cost accounting process is being considered as evaluation of assets. The concept of accounting using depreciation method helps in presenting the current value of an asset of an organization (Jasim and Raewf, 2020). Moreover, “Matching principle” in accounting follows a double entry system has been used to make the match end of accounting. Additionally, expenses are being posted in ledger books and those are expenses also being posted in P&L statements to match the profit of organizations.
A public limited company characteristic as considered as a legal entity that has been considered as an individual person in the legal system. Separate legal entity system has been used for legal documentation that has considered visual persons in the legal system (Demirkan et al. 2020). Another characteristic of a public limited company is that it is too easy to transfer the whole company by selling off equity. Therefore, the making limited risk of directors by distributing equity to different persons. Another, paid up capital is that amendment has been passed according to Companies Act. Moreover, limited companies have rights to put “limited” words after company names that have helped to represent a trustable organization toward stakeholders. Moreover, at least members are required to form a private company and the maximum number has no limit. Income statement of the organization has a presentation about profitability. Moreover, a cash flow statement is being presenting about the cash balance of an organization. Through balance sheet characteristics is presenting about assets and liabilities of an organization.
Additionally, the balance sheet has been presenting assets and liabilities. Assets are being divided in current and non-current segments that also present the financial sustainability aspect of long term goals. Current assets of the company holding details reading inventory, provided loans and bills recoverable to others. Additionally, non-current assets contain details regarding building, properties, and motor vehicles that are tangible.
Directors and auditors are involved with an organization where they have some responsibilities. Directors are playing an important role for business development where acquiring new frames and expansion strategies both have been finished by them (Bonsón and Bednárová, 2019). On other hand, auditors are maintaining the accounting process of an organization. Additionally, auditors have recorded every financial transaction for maintaining accuracy and transparency in the organization. Additionally, auditors are being involved with presenting benefits and risk regarding acquisition. Financial reports also explain changes regarding financial growth or deficit in the present financial year. Additionally, the balance sheet has been presenting assets and liabilities. Assets are being divided in current and non-current segments that also present the financial sustainability aspect of long term goals. Current assets of the company holding details reading inventory, provided loans and bills recoverable to others. Additionally, non-current assets contain details regarding building, properties, and motor vehicles that are tangible.
In financial reports of a public limited company it has contained revenue, expenses and profitability. Through these elements stakeholders or potential investors evaluate the growth rate of the company (Bebbington and Unerman, 2020). Through analyzing ratios that helps to present different growth and deficiency in recent years. Moreover, in P&L statement also contained bad debts of the company, also considered as loss. These details about bad debts show relation with debtors that has present potentiality of growth in revenue generation.
Additionally, the balance sheet has been presenting assets and liabilities. Assets are being divided in current and non-current segments that also present the financial sustainability aspect of long term goals. Current assets of the company holding details reading inventory, provided loans and bills recoverable to others. Additionally, non-current assets contain details regarding building, properties, and motor vehicles that are tangible.
Legislation is a guideline, which is being followed by auditors and managers. This legislation rules bind organizations to follow specific rules to filing tax and recording financial activities (Putra, 2019). Through legislation prices proper accounting process b\need to be followed by auditors otherwise it could affect the reputation of this organization. Accounting in organization provides professional activity that has made proper entries of financial activities. Moreover, legislation also provides ethical guidelines to present transparency in organizations. Additionally, impact of legislation over accounting is verified after accounting entries that have eliminated wrong and rectify records to provide appropriate reports to stakeholders. Including ethical standards in accounting accuracy of recording different records would be effective to present sufficient data in accounting reports.
According to “International Accounting Standards 1” is presenting a guideline of financial statements that has an impact on positivity over limited companies. Moreover, limited companies filing reports following this IAS 1 guideline helps stakeholders to evaluate position and chances of growth in future (Kwilinski, 2019). Moreover, consolidated financial statements also gather information of every business activity that has been by a specific group of companies. Moreover, this consolidated statement process has presented total profit and loss toward stakeholders that help to understand specific results through the overall process of b business. The collection of consolidated results of a a group helps to present the details of total “assets and liabilities” of an organization. Through the ISA inventories related information is being considered about inventory level of a companion that has use as current assets of a company. Through IAS auditors and funds managers follow these rules and regulations where manipulation regarding rules and norms are not even included in this standard protocol (Doering, 2019). Moreover, in following IAS have influence financial reports of organizations that have presented different financial data. According to IAS depreciation are being deducted from tangible fixed assets that has reduced valuation of assets. Through this depreciation charge auditors could manipulate profitability of an organization to save tax. According to IAS depreciation has been deducted from revenue or gross profit where extreme percentage of depreciation would present less “profit before tax” that manipulate tax payable amounts.
Date |
particulars |
L.F |
Debit |
Credit |
January 01 |
bank account |
20000 |
||
To capital account |
20000 |
|||
Narration |
Being Started business with |
|||
January 02 |
Purchase account |
155 |
||
To K Smith |
75 |
|||
To M Zainab |
22 |
|||
To T Doggart |
58 |
|||
Narration |
Being Bought goods on credit |
|||
January 05 |
cash account |
187 |
||
to sales |
187 |
|||
Narration |
Being Cash sales |
|||
January 06 |
Wages |
254 |
||
To cash account |
254 |
|||
Narration |
Being Paid wages in cash |
|||
January 07 |
H Maclean |
35 |
||
L Rory |
42 |
|||
J Gardener |
72 |
|||
To credit sale account |
149 |
|||
Narration |
Being Sold goods on credit |
|||
January 09 |
Purchase account |
259 |
||
To Cash account |
259 |
|||
Narration |
Being bought good for cash |
|||
January 10 |
Purchase account |
155 |
||
To M Zainab |
57 |
|||
To T Doggart |
98 |
|||
Narration |
Being Bought goods on credit |
|||
January 12 |
Wages |
314 |
||
To cash account |
314 |
|||
Narration |
Being Paid wages in cash |
|||
January 13 |
L Rory account |
32 |
||
J Gardener account |
23 |
|||
To credit sale account |
55 |
|||
Narration |
Being Sold goods on credit |
|||
January 15 |
Shop fixture account |
2550 |
||
To store Ltd. Account |
2550 |
|||
Narration |
Being Bought shop fixtures on credit from Store |
|||
January 17 |
M Zainab account |
67 |
||
To bank account |
67 |
|||
Narration |
Being Paid M Zainab by cheque |
|||
January 18 |
T Doggart |
20 |
||
To return out ward account |
20 |
|||
Narration |
Being returned goods to T Doggart |
|||
January 21 |
bank account |
550 |
||
To store Ltd. Account |
550 |
|||
Narration |
Being Paid Store Ltd a cheque |
|||
January 27 |
K Smith |
12 |
||
To return out ward account |
12 |
|||
Narration |
Being returned goods to K Smith |
|||
January 30 |
Cash account |
6000 |
||
To Kettle and Co Ltd account |
6000 |
|||
Narration |
Being Kettle and Co Ltd lent by cash |
|||
January 31 |
motor van account |
4000 |
||
To bank account |
4000 |
|||
Narration |
Being Bought a motor van paying by cheque |
Table 1: Journal entries month of January
(Source: created by learner)
Date |
particulars |
Amount |
bank account |
Date |
particulars |
Amount |
January 01 |
To capital account |
20000 |
motor van account |
4000 |
||
20000 |
By balance C/D |
16000 |
||||
4000 |
||||||
Date |
particulars |
Amount |
wages account |
Date |
particulars |
Amount |
To cash account |
254 |
|||||
By balance C/D |
254 |
|||||
Date |
particulars |
Amount |
M Zainab account |
Date |
particulars |
Amount |
By purchase account |
22 |
|||||
To balance C/d |
22 |
|||||
Date |
particulars |
Amount |
Purchase account |
Date |
particulars |
Amount |
January 02 |
To K Smith |
75 |
||||
To M Zainab |
22 |
|||||
To T Doggart |
58 |
|||||
By balance C/D |
155 |
|||||
155 |
155 |
|||||
Date |
particulars |
Amount |
cash account |
Date |
particulars |
Amount |
to sales |
187 |
By wages |
254 |
|||
To Kettle and Co Ltd account |
6000 |
By balance C/D |
5933 |
|||
6187 |
6187 |
|||||
Date |
particulars |
Amount |
H Maclean account |
Date |
particulars |
Amount |
To credit sale account |
35 |
|||||
By balance C/D |
35 |
|||||
35 |
35 |
|||||
Date |
particulars |
Amount |
L Rory account |
Date |
particulars |
Amount |
To credit sale account |
42 |
By balance C/D |
42 |
|||
42 |
42 |
|||||
Date |
particulars |
Amount |
J Gardener account |
Date |
particulars |
Amount |
To credit sale account |
72 |
By balance C/D |
72 |
|||
72 |
72 |
|||||
Date |
particulars |
Amount |
Motor van account |
Date |
particulars |
Amount |
To bank account |
4000 |
By balance C/D |
4000 |
|||
4000 |
4000 |
|||||
Date |
particulars |
Amount |
Kettle and Co Ltd account |
Date |
particulars |
Amount |
By cash account |
6000 |
|||||
To balance C/D |
6000 |
|||||
6000 |
6000 |
|||||
Date |
particulars |
Amount |
sales account |
Date |
particulars |
Amount |
By cash account |
497 |
|||||
By H Maclean |
35 |
|||||
BYL Rory |
42 |
|||||
to balance C/d |
646 |
By J Gardener |
72 |
|||
646 |
646 |
|||||
Date |
particulars |
Amount |
K Smith account |
Date |
particulars |
Amount |
By purchase account |
58 |
|||||
to balance C/d |
58 |
|||||
58 |
58 |
|||||
Date |
particulars |
Amount |
T Doggart account |
Date |
particulars |
Amount |
By purchase account |
75 |
|||||
to balance C/d |
75 |
|||||
75 |
75 |
|||||
Date |
particulars |
Amount |
Capital account |
Date |
particulars |
Amount |
January 01 |
bank account |
20000 |
||||
to balance C/d |
20000 |
|||||
20000 |
20000 |
Table 2: Ledger accounts month of January
(Source: created by learner)
Financial statements of Alpha Stores |
|||||
Date |
particulars |
Amount |
Date |
particulars |
Amount |
Purchases |
68975 |
Sales |
248783 |
||
Sales Returns |
1206 |
Inventory |
2000 |
||
Purchase Returns |
780 |
||||
Gross profit |
181382 |
||||
251563 |
251563 |
||||
Carriage Inwards |
220 |
By Gross profit |
181382 |
||
Discounts Allowed |
2474 |
Discounts Received |
3135 |
||
Wages |
111220 |
||||
Insurance |
7500 |
||||
General Expenses |
39590 |
||||
Heat and Light |
3880 |
||||
Bad Debts |
965 |
||||
Net profit |
18668 |
||||
184517 |
184517 |
Table 3: Financial statements of Alpha Stores
(Source: created by learner)
ABC Production Ltd |
|||
Particulars |
Amount |
Per unit |
|
Sales revenue |
900000 |
45 |
|
Direct wages |
200000 |
10 |
|
Direct materials |
300000 |
15 |
|
Variable overheads |
120000 |
6 |
|
Fixed costs |
205000 |
10.25 |
|
Profit of ABC Production Ltd |
75000 |
3.75 |
|
Contribution (sales - variable cost) |
780000 |
39 |
|
ABC Production Ltd next year |
|||
Particulars |
Amount |
Per unit |
|
Sales revenue |
990000 |
49.5 |
|
Direct wages |
206000 |
10.3 |
|
Direct materials |
285000 |
14.25 |
|
Variable overheads |
111000 |
5.55 |
|
Fixed costs |
212500 |
10.625 |
|
Profit of ABC Production Ltd |
175500 |
8.775 |
|
Contribution (sales - variable cost) |
879000 |
43.95 |
|
Breakeven point (contribution / fixed cost) |
4.136470588 |
4.136471 |
Table 4: Breakeven point
(Source: created by learner)
Three month Cash Budget of Active Sport Gym |
||||||
February |
March |
April |
||||
Credit Sales (£) |
3600 |
3825 |
3900 |
|||
Cash Sales (£) |
1200 |
1275 |
1300 |
|||
Customer pays |
22400 |
22400 |
24640 |
|||
Total receipts (A) |
27200 |
27500 |
29840 |
|||
Less |
||||||
Purchase |
550 |
550 |
616 |
|||
Expanses |
||||||
Wages |
11000 |
11000 |
11000 |
|||
Light and Heat |
550 |
594 |
594 |
|||
Maintenance |
13875 |
|||||
General expenses |
7500 |
|||||
Total expenses (B) |
12100 |
12144 |
33585 |
|||
Cash balance |
15100 |
15356 |
-3745 |
|||
Carry forward balance |
15100 |
15356 |
||||
Reaming balance in cash |
15100 |
30456 |
11611 |
Table 5: Cash budget of Active Sport Gym
(Source: created by learner)
Consolidated financial reports contain about summarizes of all business of an organization that present fair and true value of financial activities. Moreover, consolidated financial reports are being used to present about total revenue of the company that has evaluate performance. Through consolidated P&L statement management present overall loss and profit. Due to consolidated P&L statement management presents all expenditure of all business that has been subtracted from the total revenue to present total net earnings (Karabarbounis and Neiman, 2019). Additionally, this consolidated statement has made sustainable reports where any segment of business faced loss in the current financial year that has been covered up by t\other business earnings. Also consolidated statements present segment wise revenue, expenditure and profit that have evaluated higher profitability business and low profitability business of the limited company. Therefore, the consolidated balance sheet has a president about total assets of the company that has been presented by segment wise growth in assets from every business where stakeholder could understand about assets gained business. This use of consolidated balance sheets also presents liabilities related information that produce higher liability oriented business where management could focus more for development.
There are different types of costs that arise in an organization where direct cost is the essential cost for continued production. Direct costs are labor and materials both are considered as production costs (Rosenthal, 2018). Moreover, indirect costs are rent, administrative expenses, and depreciation. More indirect costs are considered in organization as primary indirect costs. Additionally, variable cost is being considered as those costs depend on the unit of products produced like sales commission, raw martial reloaded cost and labor cost. During production of products those are not fixed for organizations; those are averages over production quantity. Additionally one more a cost is oriented with organizations this is controllable cost, which means wastage reading cost. Wastage is the primary issue of all production related organization wastage could be controlled by implementing specific strategy.
Pricing model is a act of financial activity that sets the price of products to gain marginal benefits from sales. There are four types of pricing models being used for establishing pricing of products. “Cost plus” pricing model is used by markup cost that considers a percentage that is being added after total cost has been made by the organization. As an example of 10 percent markup cost is being used to set pricing of products where product total cost is 100 then selling price would be (100+10) = 110.
Another pricing model is “Target Return Pricing'' is based on the target of return from investment. Moreover, this pricing model is being considered as management makes a target over return on investment that has set the price of products. For an example of this pricing model total investment is around 100000 where management has decided to return about 130000. This has to be the total selling price of all units of production that has been divided by total quantity of products. Through each product the sale price has been established by selling price.
Therefore another pricing model is “value based pricing” that depends over products demand according to customer's demand. Due to products being used in reasonable basis demand where management has decided product price according to consumers demand.
Moreover, “psychological pricing” is another pricing model to make the price of products. This segment of pricing method has been presenting the influence consumers have to make demand in the market (Andiola et al. 2020). This process of method is being implemented to provide about actual methods of pricing where products selling price is being set by demand of consumers. Management influence through strategy has created demand in the market that has raised demand for products.
The double entry system is being considered about double entry of every financial activity that has been posted in financial reports. This double entry system has been implemented as a double effect over financial statements (Tiwari and Khan, 2020). This process of double entry has presented important over ledger accounts that have produced both side effects over every ledger statement. Due to this process of accounting system that has presented every detail of planning of projects of making stability in the entry system.
Break-even point is the factors where an organization has started earning more than investment. Moreover, this process of analyzing has set a target for sales volume to get more revenue to get profit. For example, the initial investment of an organization is then break-even point would be more than 100000. Change in cost and revenue would change the break-even point of the organization.
Financial statements are useful to stakeholders that have presented the importance of evaluation of an organization. This process of P&L statement has been projecting expenditure and profitability. Moreover, all expenditure of an organization has been projecting about employee’s future in this organization that has presented about employees importance in organization (Hörisch et al. 2020). Moreover, investors are another stakeholder of an organization that helps investors to make decisions over investment. Investment in organizations is being used as stakeholder’s understandability about organization current condition. Suppliers and creditors are reliable to organization due to these stakeholders playing an important role in decision making.
Managerial accounting process has included overall posting of all cash receipts and payment related entries that has been conducted about presentation of a financial statement (Karale, 2020). Managerial accounting follows specific rules and guidelines about organization understanding financial data. Managerial accounting has involved the asset quality of an organization that has present growth of assets in the current financial year. Controlling business operating method that analyzing financial statements has reduced cost to make more profit through whole operations.
Moreover this process of managerial accounting presents insights in detail about financial aspects that have evaluated the progress of a company. The corporate success depends on profit generation where the accounting system has evaluated and proposed some recommendations for future growth. Additionally, this process of accounting has separate each department for calculating growth or deficit that also present those points that need to focus for corporate success (Maheshwari et al. 2021). Additionally, the success of corporations depends on making use of the accounting system. Through strategic accounting process management maintains transparency in the accounting system that attracts investors to participate in corporations through investing large funds. Decision making and planning both are relevant activities for business growth that depend over managerial accounting.
Andiola, L.M., Masters, E. and Norman, C., 2020. Integrating technology and data analytic skills into the accounting curriculum: Accounting department leaders’ experiences and insights. Journal of Accounting Education, 50, p.100655.
Bebbington, J. and Unerman, J., 2020. Advancing research into accounting and the UN sustainable development goals. Accounting, Auditing & Accountability Journal.
Bonsón, E. and Bednárová, M., 2019. Blockchain and its implications for accounting and auditing. Meditari Accountancy Research.
Demirkan, S., Demirkan, I. and McKee, A., 2020. Blockchain technology in the future of business cyber security and accounting. Journal of Management Analytics, 7(2), pp.189-208.
Doering, O.C., 2019. Accounting for energy in farm machinery and buildings. In Handbook of energy utilization in agriculture (pp. 9-14). CRC Press.
Hörisch, J., Schaltegger, S. and Freeman, R.E., 2020. Integrating stakeholder theory and sustainability accounting: A conceptual synthesis. Journal of Cleaner Production, 275, p.124097.
Jasim, Y.A. and Raewf, M.B., 2020. Information technology's impact on the accounting system. Cihan University-Erbil Journal of Humanities and Social Sciences, 4(1), pp.50-57.
Karabarbounis, L. and Neiman, B., 2019. Accounting for factorless income. NBER Macroeconomics Annual, 33(1), pp.167-228.
Karale, U., 2020. Financial Statements; How to Find out Financial Statements of a Listed Company?; Marginal Costing: Features, Advantages and Disadvantages; Break Even Point (BEP): Graphical Representation; How Marginal Costing Helps to Take Business Decisions?; All About Budget and Budgetary Control.
Kwilinski, A., 2019. Implementation of blockchain technology in accounting sphere. Academy of Accounting and Financial Studies Journal, 23, pp.1-6.
Maheshwari, S.N., Maheshwari, S.K. and Maheshwari, M.S.K., 2021. Principles of Management Accounting. Sultan Chand & Sons.
Putra, Y.M., 2019. Analysis of factors affecting the interests of SMEs using accounting applications. Journal of Economics and Business, 2(3), pp.818-826.
Rosenthal, C., 2018. Accounting for slavery. In Accounting for Slavery. Harvard University Press.
Schmitz, J. and Leoni, G., 2019. Accounting and auditing at the time of blockchain technology: a research agenda. Australian Accounting Review, 29(2), pp.331-342.
Tiwari, K. and Khan, M.S., 2020. Sustainability accounting and reporting in the industry 4.0. Journal of cleaner production, 258, p.120783.
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