Aims and Purpose of Financial and Management Accounting to Business

This report discusses the aims and purpose of financial and management accounting in a business, as well as the various users of accounting information and their requirements. It also explores the role of the international accounting board and the standard advisory council.

Accounting

Contents
INTRODUCTION.......................................................................................................................................3
TASK 1.......................................................................................................................................................3
Aims and Purpose of financial and management accounting to business................................................3
Various users of accounting information and what information they require..........................................4
Role of international accounting board and the standard advisory council..............................................5
TASK 2.......................................................................................................................................................6
Problem 1................................................................................................................................................6
Problem 2..............................................................................................................................................12
CONCLUSION.........................................................................................................................................14
REFERENCES..........................................................................................................................................15

INTRODUCTION
Accounting could be characterized as the practice of documenting all business activities
in correct records in order to assess specific expenditure and profits. Financial planning is the
method of controlling and sustaining the company output by implementing various comments.
These are declaration of exchange, accounting of P&L, balance sheet and cash flow. This could
be decided with both the aid of all of them whether the business is doing well, or not (Davison,
2015). Each of these may also be used to assess competitiveness, liquidity etc. If a company
cannot stimulate then this will lead to the loss of confidence from shareholders and other
participants. This report based on the department store. In this report discuss about the aims and
purpose of management and financial accounting and identify various users of particular
accounting information. Along with analysis the requirement of these information and role of
international accounting standards boards and the standard advisory council. Additionally, in this
report analysis two problems of different organisation of Jack Uzi and woody train.
TASK 1
Aims and Purpose of financial and management accounting to business
Financial accounting: It relates to reporting for money transfers by categorizing,
reviewing, illustrating and reporting financial activities such as acquisitions, revenues, accounts
receivable and accruals and eventually planning financial accounts including income statement,
balance sheet and cash flow. Financial accounting's key goal is to present true and equitable
description of the firm's personal finances. Firstly firm will start with a double-entry method and
debit & credit, and then slowly recognize newspaper and account, trial account, and four
financial statements, to know its essence.
Purpose: Financial Accounting is intended to provide the details necessary for sound
economic judgment-making. The main purpose of financial accounting is to produce financial
statements and provide information to external parties such as shareholders, lenders and tax
office with details regarding the current results of a business.

Management accounting: It is the method of defining, calculating, collecting,
evaluating, planning, interpreting, and transmitting financial information that administration uses
to prepare, analyze, and monitor an entity and to ensure the proper use and transparency of its
funds. Accounting management also involves writing financial statements for un-management
entities including stakeholders, lenders, enforcement officers and immigration authorities
(Merkl-Davies and Brennan, 2017).
Purpose: Accounting for management is essential to maintain the vitality of a company.
The overall purpose of this method of reporting is to help all facets of commercial activities in
choice-making procedures. Management accounting plays a variety of important objectives in
achieving that aim.
Use in business: Financial accounting is often used to record transactions in a company's
financial statements. Government businesses are expected to disclose the performance to the
government whereas private firms disclose to their holders. Financial information is generated in
each scenario and the effects are analyzed. That is the financial statement cycle.
Managerial accounting should be used for short- and long-term actions that concern a
business's safety. Management accounting allows executives make financial choices, aimed at
increasing the operating performance of the business, thereby helping to make lengthy-term
investment choices. Along with it also use by business for planning and control, record keeping
and decision making procedure (Burks, 2015).
Various users of accounting information and what information they require
The accounting information are utilized by the different users to make decision in regard
of business investments. External users are the shareholders, administrators, executives, business
staff, suppliers, stakeholders, administration, export markets, regulatory authorities, global
normalization departments, reporters and inner consumers. Internal users are that individual who
runs, manages and operates the daily activities of the inside area of an organization.
1. Owners and Stockholders.
2. Directors,

3. Managers,
4. Officers.
5. Internal Departments.
6. Employees
7. Internal Auditor.
Management accounting defines tracks, assesses, and discusses the financial details that
administration uses to schedule, monitor, and assess the inner user activities of a organization.
External users are all those people who have a curiosity in an agency's account details and are
not member of the administrative phase of the organization. External consumers have a formal or
informal involvement in information pertaining to finance. Financial accounting is the
mechanism for preparing the company's financial statement that can be used by inner as well as
outside stakeholders. Those reports are essential to financial details external users (Boiral,
2016).. Examples of external users of accounting information are;
 Creditors: Creditors or investors have used the financial documents to figure out the purchaser's
creditworthiness the debtor's mortgage, the amount of the claimant's current assets, verification
of revenue, economical situation, etc. until making loans to the business entity.
 Investors: Investors are the suppliers of a business' money. An investor sees the financial
statements before spending to find out the prospects of the company in the future. For a
shareholder, financial data is essential for trying to make sure the expenditure is safe.
 Government: To governmental federal agencies, financial statements is important because it
helps government to track the environment and the sector.
 Trading partners: Company requires to do trade, that is the reality. Partner investment companies
look at government details and plan to deal with the specific economy.

 Regulatory agencies: Maintaining an economic model of a state updated with massive changes is
critical. It is a work for policymakers and business managers alike. The accounting report offers
details essential for the advancement of the economy and society to make improvements to the
current legislation at a the right time (Heflin, Hsu, and Jin, 2015).
 International standardization agencies
 Journalists
Creditors and Investors are the most regular example of external users among many other
external users.
Role of international accounting board and the standard advisory council
International accounting board: The IASB once was called the International
Accounting Standards Committee (IASC) before April 2001, and it had been solely responsible
and authoritative to trouble international accounting standards. The IASB amended several of the
standards, however, began to issue its own standards, that have been understood as International
Financial Reporting Standards (IFRS). The fundamental jurisdiction, tracking board is
accountable for overseeing the IFRS Foundation trustees, engaging from the trustee nomination
procedure and approving appointments of new trustees. The IASB comprises 16 members who
are made for a period of three to four decades. The IASB has complete responsibility for all
technical matters, including organizing and issuing IFRSs; prep, and issuance, of vulnerability
drafts; creating procedures such as reviewing comments received on records which were released
for comment; and also devoting foundations for decisions. Each participant of the IASB has just
one vote and also the approval often associates is required for vulnerability drafts to become
issued because conversation or since the last standard.
Standard advisory council: The IFRS Advisory Council offers a platform for the IASB
to engage a wide variety of stakeholders impacted through the activity of the IASB with either
the goal of: updating the Committee on policy decisions and goals in the operation of the
Committee reminding the Board of the perspectives of organizations on significant benchmark-
setting initiatives offering further guidance to the Business or the Treasurers. The IFRS
Consultative Committee usually operates twice a year (number of meetings decreased by the

2015 examination of the Framework from three meetings to two). The IFRS consultative board
was referred to as the Standards Advisory Council.
The Advisory Council is your appropriate judicial system into the International
Accounting Standards Board (Board) and also the Trustees of this IFRS Foundation. It is made
up of wide selection of agents, including organizations’ and individuals having an interest in
international economic coverage (Lowe, 2019). The attention of this Advisory Council would be
to give tactical support and information into this IFRS Foundation; also it matches in London at
least 2 times per year for a period of time of 2 weeks. The Standards Advisory Council (SAC)
could be your part- time frame which guides the Trustees and also the IASB in their work and
priorities. The Trustees of the IASC Foundation want to make a Chairman of this SAC, Who'd
devote a Minimum of One week a month into the SAC's job
TASK 2
Problem 1
Journal Entry
Date Particular Debit Credit
A Cash a/c 2000
Office supplies a/c 75
To accounts payable 75
To Jack's capital a/c 2000
(Being accounts payable to Bing
office supply)
B Computer Equipment a/c 500
To Lease a/c 500
(Being payment in advance for
lease for november)

C Cash a/c 4847
To sales a/c 4847
(Being sold out stuffed animal)
D Cash a/c 4486
To sales a/c 4486
(Being sold out educational toys)
E Cash a/c 4702
To sales a/c 4702
(Being sold out video games)
F Cash a/c 1827
To sales a/c 1827
(Being sold out pretend play toys)
G
Purchase a/c 416
To Bing's office supply a/c 416
(Being purchase office supplies
on credit)
H Drawings a/c 1600
To cash a/c 1600
(Being withdrawal cash by
owner)
I Bing office supply a/c 416
To cash a/c 390
To Discount received 26
(Being payment of office
supplies)

J Wages a/c 2500
To cash a/c 2500
(Being payment for wages in
cash)
K Cash a/c 74
To cleaning service a/c 74
(Being payment for services in
cash)
L Purchase a/c 4044
To Bank a/c 4044
(Being purchased stuffed animal)
M Purchase a/c 3547
To Bank a/c 3547
(Being purchased educational
toys)
N Purchase a/c 4169
To Bank a/c 4169
(Being purchased video games)
O Purchase a/c 1382
To Bank a/c 1382
(Being purchased pretend plays)
Ledger accounts

Cash a/c

Date Particular Amount Date Particular Amount
To accounts
payable a/c 2000
By Bing office
supply 390
To sales a/c 4847 By Wages a/c 2500
To sales a/c 4486 By Drawings a/c 1600
To sales a/c 4702 By balance c/d 13446
To sales a/c 1827
To Clearing
service a/c 74
Total 17936 Total 17936
Purchase a/c
Date Particular Amount Date Particular Amount
To Bing's office
supply a/c 416 By balanced c/d 13558
To Bank a/c 4044
To Bank a/c 3547
To Bank a/c 4169
To Bank a/c 1382
Total 13558 Total 13558
Sales a/c
Date Particular Amount Date Particular Amount
To balance c/d 11015 By Cash a/c 4486
By cash a/c 4702
By cash a/c 1827

Total 11015 Total 11015
Bing office
supply
Date Particular Amount Date Particular Amount
To cash a/c 390 By purchase a/c 416
To discount
received a/c 26
Total 416 Total 416
Discount received
a/c
Date Particular Amount Date Particular Amount
To balance c/d 26
By Bing office
supply a/c 26
Total 26 Total 26
Cleaning service
a/c
Date Particular Amount Date Particular Amount
To balance c/d 74 By cash a/c 74
Total 74 Total 74
Office supplies
a/c
Date Particular Amount Date Particular Amount
To accounts
payable a/c 75 By balance c/d 75
75 75

Jack's capital a/c
Date Particular Amount Date Particular Amount
To balance c/d 2000 By cash a/c 2000
Total 2000 Total 2000
Drawings a/c
Date Particular Amount Date Particular Amount
To cash a/c 1600 By balance c/d 1600
Total 1600 Total 1600
Wages a/c
Date Particular Amount Date Particular Amount
To cash a/c 2500 By balance c/d 2500
Total 2500 Total 2500
Computer
equipment a/c
Date Particular Amount Date Particular Amount
To lease a/c 500 By balance c/d 500
Total 500 Total 500
Lease a/c
Date Particular Amount Date Particular Amount
To balance c/d 500
By computer
equipment a/c 500
Total 500 Total 500

Bank a/c
Date Particular Amount Date Particular Amount
To balance c/d 13142 By Purchase a/c 4044
By Purchase a/c 3547
By Purchase a/c 4169
By Purchase a/c 1382
13142 13142
Accounts payable
a/c
Date Particular Amount Date Particular Amount
By balance c/d 75
To office supplies
a/c 75
Total 75 total 75
Trial Balance
Particular Debit Credit
Jack's capital a/c 2000
Cash a/c 13446
Purchase a/c 13558
Sales a/c 11015
Cleaning service a/c 74
Drawings a/c 1600
Discount received a/c 26
Office supplies a/c 75
Wages a/c 2500
Accounts payable a/c 75
Computer equipment a/c 500

Bank a/c 13142
Lease a/c 500
Suspense a/c 4847
31679 31679
Profit and loss account
Particular Amount Particular
Amoun
t
To purchase 13558 By sales 11015
To wages a/c 2500 By gross loss 5043
Total 16058 Total 16058
To gross loss 5043 By cleaning service a/c 74
To office supplies a/c 75
By discount received
a/c 26
To Lease a/c 500 By net loss 5518
Total 5618 Total 5618
Balance sheet
Liabilities Amount Assets
Amoun
t
Jack's capital a/c 2000 Computer equipment a/c 500
Net loss 5518 Cash a/c 304
Drawings 1600 Other assets 8314
Total 9118 9118
Cash flow statement

Cash flow from operation
Addition to cash
Increase in accounts payable 75
Cash flow from investment
Computer equipment 500
Cash flow from finance Nil
Cash flow for financial on the
October, 31 575
Problem 2
Using the usual ratio categories: There are mention different types of ration that includes some
ratio such as:
Liquidity ratio: Liquidity ratios are an essential category of monetary indicators was
using to assess the willingness of a borrower to repay existing debt liabilities while requiring
outside capital. This ratio calculates the willingness of a business to meet liabilities and their
usable capacity by measuring metrics like current ratio, rapid ratio and cash flow proportion. In
this ratio consist of current ratio, acid test ratio (Nitzl, 2016).
 Current ratio: The current ratio is a monetary ratio that indicates the percentage of the
tangible assets of a corporation to its current liabilities. It is also known as a liquidity
ratio, and greater than a lower current total. The flexibility of a firm, nevertheless,
depends on turning the total assets into cash in time for payment of its responsibilities.
 Acid test ratio: An acid-test ratio, also recognized as a fast ratio, is a monetary indicator
of a company's decision to compensate off its existing obligations – this is also, every
debts that would have to be settled during one period, including online payments and
accrued balances. The acid check shows that a company can instantly pay off its debt
using money or interest expense. It is one indicator of the quick-term financial stability of
an organization.

Profitability ratio: A profitability ratio is a profit metric and is a way to calculate the
efficiency of a business. Profit margins are basically the desire to make a gain, and a benefit is
what is leaving over by the money received when you've removed all the tax-related fees and
costs. The equations are about to know can be used to evaluate the quality of a organization and
to equate its output with other businesses equally located.
 Profit margin: Profit margin is one of the efficiency measures that is widely used to gage
the extent by which a corporation or enterprise is making a profit. It reflects what share of
revenue is income. In short, the ratio shows how many cents of income the organization
has produced per each dollar of sales (Nielsen, Mitchell and Nørreklit, 2015).
 Return on owner’s equity: The return on capital ratio or ROE is a valuation ratio which
evaluates a company's corporate capacity to produce profits from either the business's
investors' holdings. In certain terms, the return on capital ratio indicates how often
income each money produces from the capital of the existing shareholders.
Solvency ratio: The solvency ratio is a primary indicator was using to calculate the
willingness of an organization to satisfy its liabilities, and is also used by potential borrowers.
The solvency ratio demonstrates that the cash flow of an organization is adequate to satisfy its
quick- and lengthy-term commitments. The smaller the solvency ratio of a corporation, the
higher the risk of defaulting on its debt payments.
 Debt equity ratio: The debt-equity ratio is a calculation of the comparative investment in
the capital worked by the investors and stakeholders or investors in the company.
Actually said, the percentage of the enterprise's gross lengthy-term debt and equity
resources is considered the asset-equity percentage (Baboukardos and Rimmel, 2016).
Calculate the following ratio
Debt equity ratio: To calculate this ratio requires total debt as well as equities. For this apply this
formula:
= Total liabilities / Equity
= 13200 / 9260

= 1.42
Profit margin:
= Net profit / revenues * 100
= 3260 / 37763 * 100
= 8.63%
Return on owner’s equity:
= Net income / Shareholders equity
= 3260 / 9260
= 0.35
Describe the financial performance of Woody Train
As per the income statement of Woody train is has been analyzed that company have
good performance and have total sales 37763 and the gross profit of the business is 19387 so the
company have total income 13997. From the income less all the expenses and get the amount
4075 and less the amount of tax and get net income 3260.
There are analysis balance sheet of the company and assess that company have total
assets have 13200 and liabilities is 13200. The company has shareholders equity is 9260 which is
presenting good performance of an organisation.
CONCLUSION
As per the above report it has been analyzed that management accounting as well as
financial accounting both are essential for the business that presents actual performance of
business. For this analysis different users who are using these information in effective manner.
Along with understand the requirement of both types of accounting. There are applying different
formulas to calculate the different activities of business.

REFERENCES
Books and Journal
Davison, J., 2015. Visualising accounting: an interdisciplinary review and synthesis. Accounting
and Business Research. 45(2). pp.121-165.
Merkl-Davies, D. M. and Brennan, N. M., 2017. A theoretical framework of external accounting
communication. Accounting, Auditing & Accountability Journal.
Burks, J .J., 2015. Accounting errors in nonprofit organizations. Accounting Horizons. 29(2),
pp.341-361.
Heflin, F., Hsu, C. and Jin, Q., 2015. Accounting conservatism and street earnings. Review of
Accounting Studies, 20(2), pp.674-709.
Boiral, O., 2016. Accounting for the unaccountable: Biodiversity reporting and impression
management. Journal of business ethics. 135(4). pp.751-768.
Lowe, E. A., 2019. On the idea of a management control system: integrating accounting and
management control. Management Control Theory, p.63.
Nitzl, C., 2016. The use of partial least squares structural equation modelling (PLS-SEM) in
management accounting research: Directions for future theory development. Journal of
Accounting Literature. 37. pp.19-35.
Nielsen, L. B., Mitchell, F. and Nørreklit, H., 2015, March. Management accounting and
decision making: Two case studies of outsourcing. In Accounting Forum (Vol. 39, No. 1,
pp. 66-82). Taylor & Francis.
Heflin, F., Hsu, C. and Jin, Q., 2015. Accounting conservatism and street earnings. Review of
Accounting Studies. 20(2). pp.674-709.
Baboukardos, D. and Rimmel, G., 2016. Value relevance of accounting information under an
integrated reporting approach: A research note. Journal of Accounting and Public
Policy. 35(4). pp.437-452.