Unit 5 Accounting Principles

Unit 5 Accounting
Principles

Table of Contents
INTRODUCTION ...............................................................................................................................................3
PART 1.................................................................................................................................................................3
1.Examine the purpose and scope of accounting in complex operating environments....................................3
2. Critical evaluation of the accounting function in informing decision making and meeting stakeholder and
societal needs and expectations.......................................................................................................................4
3. The main branches of accounting and job skill-sets and competencies:......................................................5
4. Basic accounting concepts:..........................................................................................................................6
5. Threats to business enterprises are a topic of regulation, compliance, and ethics.......................................7
A. Construct a schedule of expected cash collections for the quarter.............................................................8
B. Construct a schedule of anticipated cash disbursements for merchandise inventory purchases for the
quarter..............................................................................................................................................................8
C. Construct a cash budget for July, August, September and Q1 (first quarter). Show in the financing
section any borrowing that will be required in any month..............................................................................9
D. Pros and Cons of budgetary control, budgets and budgeting......................................................................9
E. Construct a Flexible Budget......................................................................................................................11
PART 2...............................................................................................................................................................12
Prepare income statement and balance sheet.................................................................................................12
1. Compute the liquidity, profitability and investment ratios........................................................................13
2. Recommendation on the liquidity position of the company with the help of ratios and also consider
whether the firm is able to take bank overdraft or not ..................................................................................14
3. Analyse overall performance of the company and provide recommendations on the basis of analysis ....14
CONCLUSION ..................................................................................................................................................15
REFERENCES...................................................................................................................................................16

INTRODUCTION
Accounting principles refers to the rules and regulations which can be followed by the companies or
organisations while analysing financial information. These principle make it simple to analyse financial
information by using various methodology and terms (Appelbaum and Nehmer, 2020). This report includes
purpose of accounting and its function which take part in smooth running of business operations. Further, it
explain the main branches, concepts and ethics of accounting. Financial statements are constructed with the
help of given data which includes Cash collection for the quarter, cash disbursements for quarter and also
provide explantation of budget and budgetary control. Another part of report include financial statements like
balance-sheet, income statement and ratios. Financial ratios are helpful to provide recommendation on the
liquidity position of the company. A conclusion and recommendation is constructed to analyse the overall
financial position of the company.
PART 1
1.Examine the purpose and scope of accounting in complex operating environments
Accounting contains a process of recording, reporting and analysing the financial information related
to the business called accounting. The process of accounting functions are as follows-
Recording- This step is initial step for the accounting function. In this step all the financial
transactions related to the business operations like sales, purchase, payment, receipts, incomes, losses, gains,
and many more transaction are written down in a proper manner.
Reporting- In this step all the monetary transactions of business are recorded in summarising manner.
In the reporting the financial position of the business in the particular accounting year can be explained by the
help of graphs, charts and diagrams. The information included in the report should be prepared in a systematic
way so that it can understandable for both insider and outsider (Bakhash, 2019).
Analysing- The next step after reporting is analysing. In this step the organisation analyse the
performance of the business in a particular accounting year and make the decisions for the future according
the financial position of the business.
The purposes and scope of accounting function are given below
To Keep the records- The very first purpose of accounting is to keep the records for the business so
that they can analyse the performance of the business in a particular accounting year. Due to this the
organisations can improve their performance and increase the sales and profitably.
To Facilitate decision making- After analysing accounting records the management of the
organisation can make the decisions related to the business. So that they can expand their business operations
in future and improve the efficiency of the business organisation.

To Provide information to the investors- The next important purpose of accounting is that
it helps in providing the financial information to the investors so that they can invest their money
at the right place .
To Meets legal requirements- Accounting function provide all the financial data of the
business which helps them to find out the tax liability of the business. Due to this the
organisations can pay their tax on time and meet all the legal requirements. If the organisation
did not pay the taxes then it will consider as a legal offence and the owner of the organisation
can get into a prison of that activity. So that why this purpose is consider as a main purpose for
the organisation (Barabash and et.al., 2020).
2. Critical evaluation of the accounting function in informing decision making and meeting
stakeholder and societal needs and expectations
Accounting is very important of the organisation by the help of this function the
organisation can evaluate the financial position, goodwill and opportunities to earn the profit in
future for the firm. This function is not only good for the organisation it is also beneficial for the
society, investors and the competitors. The analysis and evaluation of the financial position of
the company can be done by the help of the financial statements of the business. The financial
statements include profit and loss account, balance sheet, cash flow, and notes to account. The
critical evaluation of the accounting helps in informing decision making and meeting stakeholder
and societal needs and expectations. The two types of accounting functions are given given
below.
Financial reporting- This function of accounting is mainly determined on providing the
information to the outside users like government and other authorities. But this financial
reporting function can also be used for internal organisation by help of making strategies for
increasing the sales and profitability of the organisations. This financial report contains the
information related to the operations of organisation like P&L statement, balance-sheet, cash
flow statement, accounts payable, notes to account and accounts receivable. These financial
reports helps the investors to evaluate the financial positions of the business so that they can
decide whether they have to invest in the business or not. It helps them to invest their money so
that they can earn some profit (Brink and et.al., 2020).
Management Reporting- This reporting function of accounting is more useful for the
organisation as compare to financial reporting. The management reporting function helps the