Accounting Practices in JB Hi-Fi

ACCOUNTING FOR DECISION
MAKING

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Purpose of financial accounting statements................................................................................1
Accounting practices of company to produce annual report.......................................................2
Ratio analysis..............................................................................................................................3
Future of JB Hi-Fi.......................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Accounting is the system which records, summarize all business transactions in order to
conduct the operations in smooth manner (Collier, 2015). The main agenda of maintaining these
records is to identify financial position of entity and make necessary modifications in operations
so that performance of the company can be improved. Present report is based on JB Hi-Fi which
is the leading home entertainment retailer of Australia. Firm is growing well in the market and
has gained competitive advantage due to its quality products and services. Current assignment
will analysis financial position and performance of JB Hi-Fi. Furthermore, study will calculate
profitability ratio, solvency, liquidity ratios of the organization.
MAIN BODY
Purpose of financial accounting statements
Financial statements of the organization play significant role in the business unit, by
looking at these report's management can measure its performance and can make necessary
changes in its operations (Francis and et.al, 2015). These are formal records of economic
activities through which authorities can identify actual position of JB Hi-Fi. There are various
financial statements which need to be prepared by all firms. These are such as balance sheet,
income statement, equity statements, cash flow statement etc. As per the international accounting
standards it is compulsory for all firms to maintain these records. Purpose of preparing these
statements are as following:
 The main agenda of these information is to get essential information related to the
operations so that overall position of company can be measured (Millo, Barman and Hall,
2016). By looking on these records stakeholders of JB Hi-Fi can make their decisions.
Stakeholders of JB Hi-Fi are managers, shareholders, investors, banks, suppliers,
customers, employees etc. They all need details related to firm's performance, its
revenues ad marker position. By looking at these statements or annual reports investors
can make their decision of investment on the JB Hi-Fi. If annual records show that
financial position of the company is not good then they invest in other brands (Butler and
Ghosh, 2015). With the help of these financial statements suppliers and creditors can
identify credit worthiness of the business which helps them in making their judgements.
 Income statement defines the profit earning capabilities of the corporation. By preparing
these statements JB Hi-Fi can identify sales volume, type of expenditures occur in the
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business. That helps in measuring net profit earned by the entity after deducting all
spendings. That supports in analysing trends of the business units (Bebbington, Unerman
and O'Dwyer, 2014).
 The main purpose of preparing balance sheet is to make the stakeholders aware with the
financial position of the organization. These information assists in estimating funding,
liquidity and debt position of the entity.
 Cash flow is another financial statement which main aim is to get information about cash
inflow and outflow in the JB Hi-Fi (Betz, 2016).
 On the bases of these statements credit, investment, taxation and union bargaining
decisions can be made effectively that may support in making necessary changes in the
organization so that overall financial performance of the JB Hi-Fi can be improved.
 Financial statements support the organization in identifying its credit worthiness. By this
way lenders can make their credit decision for the organization. Lender use these details
and make decision whether to give them credit or should restrict it.
 Investment decisions can be made by preparing these financial statements effectively. By
looking upon the annual report of JB Hi-Fi investors can make decision whether to invest
in business or not.
 With the help of these records JB Hi-Fi can estimate its liquidity and debt position which
help in conducting the further operations.
Accounting practices of company to produce annual report
JB Hi-Fi follow all the norms of international accounting standards. It makes Updation in
its accounting practices in order to prepare the records in effective manner. For producing the
annual reports JB Hi-Fi follow all provisions. Accounting practices can be defined as the
procedure which is used to create and record all transaction of business unit. JB Hi-Fi is the big
organization conduct audit every year so that it can ensure its transactions. Furthermore, it
examines performance of all departments and accounting staff measure cash inflow and cash
outflow of the organization so that they can prepare accurate annual reports (Oboh and
Ajibolade, 2017). JB Hi-Fi store its sales volume separately, all sales records from
telecommunication, accessories are stored and calculated to find out the total sales of the
company at the end of year. It always uses same method to calculate cost which is occured on
paying overtime salaries to employees. JB Hi-Fi pays amount of invoice to its suppliers in every
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