...Unit 5: Business Accounting Keneth Andres Veces Batista S335375 5 June 2015 S. Kommers Table of Content P1: Describe the purpose of accounting for an organisation……………….. (page 3) P2: Explain the difference between capital and revenue items of expenditure and income……………………………………………….……………………………….(page 3/4) P3: Prepare a 12-month cash flow forecast to enable an organisation to manage its cash………………………………………………………...………………………..(page 4) P4: Prepare a profit and loss account and balance sheet for a given organisation……………………………………………………...………………..(page 4/5/6) P5: Perform ratio analysis to measure the profitabilty, liquidity and efficiency of a given organisation……………………………………………………….……….(page 6/7/8) P1: Describe the purpose of accounting for an organisation Accounting involves the recording of financial transactions. I’m going to discuss the reasons why accounting is important to a business in this assignment. Record transactions Businesses must keep the records accurate and up to date, this is very important in order for a business to run smoothly and to make profit. The owner or accountant of the business must keep either a PC document or written copy of all the money going in and out of the business. This must be exactly if one number is wrong or forgotten it means that the whole record is wrong. If a business fails to do this, it can forget to pay bills or even worse they can get problems with HM Revenue and Customs. They can get problems...
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...Accounting jobs are available in literally every possible organization one can think of. An accountant’s main task includes the preparation and examination of financial records and every business needs their finances to be managed and monitored. Also, depending on their specific role to the company, they may also provide financial advice, auditing services, and develop, maintain and analyze budgets. They ensure that the overall financial health of the organization, the company or the individual they are regulating is intact. Therefore, it is evident that accountants have an understanding of all aspects of the business and they are able to identify any possible act of fraud or misrepresentation of figures in a business financial balance. Accountants...
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...financial statement. Coca Cola’s return on assets for year 2002 is 12% and 16% in 2003, as illustrated in Figure 1. The ratio increases over a year. The ratio is high and is assumed to be making good use of its assets (Loth, 2014). The net income for year 2002 is $3,050 and $4,347 in 2003. The total assets for 2002 is $24,406 and $27,342 in 2003. The ratio computation is the net income divided by the total assets is the return on assets. Figure 1. Chart showing the return on assets for Coca Cola. From “Coca-Cola Company and Subsidiaries Consolidated Balance Sheets,” by William J. Bruns, Jr., 2004, The Accounting Framework, Financial Statements, and Some Accounting Concepts, p. 10. From “Coca-Cola Company and Subsidiaries Consolidated Statements of Income,” by William J. Bruns, Jr., 2004, The Accounting Framework, Financial Statements, and Some Accounting Concepts, p. 11 The debt on equity for year 2002 is 26% and 31% in 2003, as illustrated in Figure 2. The...
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...Accounting Equation Franklin Weatherspoon ACC/300 OCTOBER 26, 2013 Dr. M Moczynski, CPA, CGFM Accounting Equation In the business world an individual cannot understand a balance sheet, income statement nor transaction recordings within a general ledger, until he or she understands the basic accounting equation: Assets = Liabilities + Owners Equity (Barclay, 2013). Following is a discussion on the relationship of accounting equation and the components of a balance sheet; along with examples showing the affect of each (University of Phoenix, 2013). Relation in Components The accounting formula is the way double-entry bookkeeping is formulated. The accounting formula, which is known as the balance sheet equation, signifies the connection between the assets, liabilities, and owner's equity of a small company (Peeler, 2013). The accounting formula basically expresses a company’s assets, which is obtained either by liabilities or by the company’s capital. The equation has to balance since the company’s entirety, which is known as assets are brought with something like liability or the company’s capital (Peeler, 2013). The effect of one another The company’s equity is affected by capital, functioning as stock. The company has income, which is revenue minus expenses, and gains minus loses, and sometimes extra capital and withdrawals are known as dividends. When the closing of the month approaches, each item will have an effect...
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...Business Analysis TFIN501 Corporate Finance Student ID: 20137163 Name: Yuqi Wang Summary By calculating Net Present Value, Internal rate of return, Accounting rate of return, Profitability Index and payback period in this business analysis, it is demonstrated that weather this project is worth investing money or not. NPV (Table 1) Formula: Note: 1. According to the taxation law, most business expenses can be deductions to reduce the assessable income such as depreciation expense, interest expense, bank fee, rental fee, operation cost, advertising expense and website fee (Business Victoria, 2013). 2. Website expense is considered as a management fee rather than capital fee. Therefore, it is deductible as well (Robin, etc.2012). 3. Discount Rate = WACC – Risk premium rate = 7% - 2% = 5% Result: As NPV=521.73 >0, proposal is accepted. IRR (Table 2) – based on Table 1 Formula: Note: Data is based on table 1. Result: As IRR is compared to the required return and IRR = 7.16% > 7%, proposal is accepted. ARR (Table 3) Formula: 1. Average Net Profit/Average Book Value 2. Average Book Value = (Initial Investment + Salvage Value)/2 Initial Investment | Salvage Value | 2000.00 | 0 | 3000.00 | | 12000.00 | | 17000.00 | 0 | | | Average Book Value | 8500 | Average Net Profit | 1197.35 | ARR | 0.140864706 | Note: 1. As ARR is calculated according to the accounting cash flow, extra depreciation expense...
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...NSSC Accounting Module 3 Hansie Hendricks Excerpt More information Unit 1 Ratios and interpretation As we learnt in our earlier studies, accounting information is used to answer two key questions about a business: • Is it making a profit? • Are its assets sufficient to meet its liabilities? We have also considered the form in which different types of businesses prepare their final accounts. Now we need to examine in more detail how these accounting statements can be used to assess a business’ performance and progress. There are two stages in this process: 1 Analysis This is the detailed examination of various aspects of a business’ performance. To make comparisons (with other businesses or for the same business over a period of time) easier and more meaningful, the results are expressed as percentages or ratios, e.g. the percentage of gross profit to sales, or the working capital ratio. 2 Interpretation Here the results of analysis are used to judge a business’ performance. This is done by making comparisons a with other similar businesses, usually within the same year, e.g. was the gross profit to sales percentage last year better or worse than the average for the trade or industry? b for the same business over a number of years, e.g. has the trend of the gross profit percentage to sales over the last five years been up or down? We will also examine the extent to which analysis and interpretation are useful tools for owners and others in making and assessing business decisions...
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...46 Accounting Standard (AS) 2 (revised 1999) Valuation of Inventories Contents OBJECTIVE SCOPE DEFINITIONS MEASUREMENT OF INVENTORIES Cost of Inventories Costs of Purchase Costs of Conversion Other Costs Exclusions from the Cost of Inventories Cost Formulas Techniques for the Measurement of Cost Net Realisable Value DISCLOSURE Paragraphs 1-2 3-4 5-25 6-13 7 8-10 11-12 13 14-17 18-19 20-25 26-27 The following Accounting Standards Interpretation (ASI) relates to AS 2: ASI 2 - Accounting for Machinery Spares The above Interpretation is published elsewhere in this Compendium. Valuation of Inventories 43 Accounting Standard (AS) 2* (revised 1999) Valuation of Inventories (This Accounting Standard includes paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of its objective and the Preface to the Statements of Accounting Standards1 .) The following is the text of the revised Accounting Standard (AS) 2, ‘Valuation of Inventories’, issued by the Council of the Institute of Chartered Accountants of India. This revised Standard supersedes Accounting Standard (AS) 2, ‘Valuation of Inventories’, issued in June, 1981. The revised standard comes into effect in respect of accounting periods commencing on or after 1.4.1999 and is mandatory in nature.2 Objective A primary issue in accounting for inventories is the...
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...ACCOUNTING STANDARD-2: ACCOUNTING STANDARD -2 VALUATION OF INVENTORIES PURPOSE: PURPOSE Specifies the principals for valuing the inventory. Disclosure of the specific policies adopted by the management for the valuation of inventory. SCOPE: SCOPE This statement should be applied in accounting for inventories other than : Work in progress arising under construction contracts, including directly related service contracts. Work in progress arising in the ordinary course of business of service providers. Shares, debentures and other financial instruments held as stock-in-trade; And. Producers’ inventories of livestock, agricultural and forest products, and mineral oils, ores and gases to that extent that they are measured at net realisable value in accordance with well established practices in those industries. RELEVANT DEFINITIONS: RELEVANT DEFINITIONS Inventories are assets : held for sale in the ordinary course of business. in the process of production for such sale. in the form of materials or supplies to be consumed in the production process or in the rendering of services. Net Realisable Value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated cost necessary to make the sale. VALUATION: VALUATION Inventories should be valued at the lower of Cost and Net Realisable Value . The Practice of writing down inventories below cost to Net Realisable Value is consistent with the view that assets...
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...MISSIE DUNLAP HSM/260 DR. MARY JOHNSON WEEK 1 5/25/2013 1. GGAP- (Generally Accepted Accounting Principles) These are a set of rules, standards ,conventions, and procedures that were established by The Financial Accounting board for reporting financial information. www.investorworld.com 2. Basic accounting formula- Assets = Liabilities + Capital This formula is for double entry bookkeeping systems. This formula must always balance so that the company has the assets and funds it needs to operate. www.accountingtools.com 3. Transaction, T-account- is also a set of financial records that also use double entry bookkeeping. The name T-account comes from the appearance of the records. www.investopedia.com 4. Debit and credit- entries made in account ledgers to show changes in value because of transactions made by the business. www.wikipedia.org 5. Trial balance- A list of general ledger accounts, they contain the name of the nominal ledger account, as well as the value. It will hold either a debit or credit balance value. www.wikipedia.org 6. Journal- a file in a book or on a computer of monetary transactions that are entered the first time they are processed. The list is in chronological sequences by date. www.wikipedia.org 7. Assets and liabilities- assets are things you own such as car, house, or business. Liabilities are things that are owed such as mortgage, car payment, and student loans. These can determine...
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...Introduction: 1 Task: 1 1 (a) Ratio analysis on the basis of AstraZeneca Annual Report and Form 20-F Information 2012: 1 (b) Business structure and financial structure (comparison and relative advantages of the chosen organization) 5 (c) Compare and comment on the finances of business: 7 (d)Recommend potential investor for the investment decision: 8 (e)All possible Sources of finance for 500000 and best source 8 (f) Management of working capital: 10 Task 2: 11 (a)Preparations of a cash flow forecast and comment on budget and cash flow: 11 (b)Recommendation for managing cash flow: 12 Task 3: 12 (a)Assessment of projects by financial techniques: 12 (b) Recommendation from the above calculations and reason behind the choice: 13 Conclusions: 14 Reference: 15 Introduction: Finance is the paramount part of every organization. Whatever the size of the company, financing plays a vital role in the business organization. Ratio analysis is an important tool for the business decision as well as for the interpretation of the financial statements. We have selected AstraZeneca Annual Report & form 20-F information 2012. All the ratio analysis and decision in respect of the business structure as well as financial structure are based on this particular company. Investment appraisal techniques like- NPV, internal rate of return, payback period, accounting rate of return are based on the given data. This report suggests appropriate decision with the analysis on the basis of investment...
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...September 7, 2014 Quality Management and Lean Systems Managerial accounting can provide and prepare economic and financial information for manager and internal users (Weygandt, Kimmel, & Kieso, 2012). This paper will reflect some of the key concepts and topics and how this course has affected my personal, professional, and academic development perceptions, in which have provided a better understanding and confidence in today’s account for a small or large business organization. The course has provided many key concepts and topics to review and some of the concepts to have impact my learning and open my eyes to small and big business accounting practices such as the differences in account of the planning, directing, and controlling. The breakdown of those functions has helped with the understanding of how accounting is directed by the management teams of a small or large organization. The other key concepts and topics discussed throughout the term and I was able to recognize was the use of the cost-volume-profit analysis formulas to show the health of an organization from a small to large budgetary planning to see your spending habit. The statements of cash flow for the showing of where you or your organization is using funds for development of products such as material and manufacturing. The financial statements to review with the stakeholders and other invested in a small or large organization. The formulas of the horizontal to vertical analysis to show of the health of company’s...
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...make them professional for people and organizations. Most time is spent in the ledger and report preparation, it cannot be done without the good knowledge of preparing business records manually, however it is more simple to do it in Excel (Reeve, Warren, & Duchac, 2012). Most people use simple Excel functions such as add, multiply, divide and subtract to do simple financial mathematics; Excel has more advanced formulas and functions that can be used to do more in the preparation of financial accounting records. Advanced functions and formulas in excel are reliable in preparing spreadsheets and data manipulation, one is VLOOKUP it aids in information search about product information by use of a unique product id, HLOOKUP also helps to find product information, it does so vertically. Many people think that proper thinking and planning is not only what makes a business successful, but business accounting records are important. Business accounting records are used in a business to identify cash flow in a business. These Business accounting records are prepared in Excel. There are a few simple steps involved in preparing business accounting records in Excel, first is the preparation of a ledger book, then entering the records in a spreadsheet and ensuring they are well balanced. In preparation of business reports there are a few steps were taken, first preparation of the records in an excel spreadsheet, after spreadsheet are complete a few steps are followed to create a...
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...Evaluation of adequacy of accounting ratios as a means of monitoring the state of business (TASK 8). GROSS PROFIT RATIO (GP RATIO) It is a profitability ratio that shows the relationship between gross profit and total net sales revenue. It is a popular tool to evaluate the operational performance of the business. The ratio is computed by dividing the gross profit figure by net sales. Formula: The following formula/equation is used to compute gross profit ratio: When gross profit ratio is expressed in percentage form, it is known as gross profit margin or gross profit percentage. The formula of gross profit margin or percentage is given below: The basic components of the formula of gross profit ratio (GP ratio) are gross profit and net sales. Gross profit is equal to net sales minus cost of goods sold. Net sales are equal to total gross sales less returns inwards and discount allowed. The information about gross profit and net sales is normally available from income statement of the company. As per Task 7: The GP ratio is 23.58%. It means the company may reduce the selling price of its products by 23.58% without incurring any loss. Significance and interpretation: Gross profit is very important for any business. It should be sufficient to cover all expenses and provide for profit. There is no norm or standard to interpret gross profit ratio (GP ratio). Generally, a higher ratio is considered better. The ratio can be used to test the business condition by comparing...
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...Jones Model & Modified Jones Model Theory and Practice What is Earning Management? Earning management is the process that one firm’s manager presents the finical statement in his favorable way rather the real performance in a certain period. “Earnings management occurs when managers use judgment in financial reporting and in structuring transactions to alter financial reports to either mislead some stakeholders about the underlying economic performance of the company, or to influence contractual outcomes that depend on reported accounting numbers.” (Healy and Wahlen, Accounting Horizon, 1999) Earning management is generally happened within the generally accepted accounting principle (GAAP) choice, under the GAAP, firms have the flexibility to make their accounting choices and required to do estimations on their finical report. The intention of the “flexibility “is to make finical statements can by more accurately present a firm’s operating result in a certain period, companies have to estimate numbers (such as expense) based on their assumptions for the future, but the problem is that GAAP doesn’t have clear boundary to define what is a normal estimation (legal) and what is an extreme estimation (illegal). Therefore as long as the manager has logically explaining of those assumptions, then their estimation is legal. By definition, earning is the sum of operating cash flow and non-cash earning (accruals). Thus, if a manager wants to manipulate a firm’s earning, he...
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...Andre’s Hair Styling 05/15/2016 Draft A cost accounting system (also known as product costing system or costing system) is an outline utilized by businesses to guesstimate the cost of their manufactured goods for lucrativeness evaluation, inventory valuation and cost control. Appraising the precise cost of products is precarious for moneymaking operations. A company needs to recognize which products are lucrative and those that are not, and this can be determined when it has assessed the accurate cost of the product Andre’s Hair Styling Andre has asked you to evaluate his business, Andre’s Hair Styling. Andre has five barbers working for him. (Andre is not one of them.) Each barber is paid $9.90 per hour and works a 40-hour week and a 50-week year, regardless of the number of haircuts. Rent and other fixed expenses are $1,750 per month. Hair shampoo used on all clients is $0.40 per client. Assume that the only service performed is the giving of haircuts (including shampoo), the unit price of which is $12. Andre has asked you to find the following information. 1. Find the contribution margin per haircut. Assume that the barbers' compensation is a fixed cost. Show calculations to support your answer. To find the contribution margin per haircut the formula is: Contribution margin= Selling Price – Unit Variable Costs Selling Price= $12 Unit Variable Costs= $0.40 $12 - 0.40= $11.60 The Contribution Margin per haircut is $11.60 2. Determine the annual break-even...
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