Accounting Principles, Financial Statements, Budgets and Financial Ratio Analysis

This report discusses the purpose of accounting function, main branches of accounting, accounting systems, and the role of technology. It also discusses issues of ethics, regulations, and compliance. Includes cash budget for given financial year data.

Learner Name ID
Unit Number and Title Unit 5 – Accounting Principles
project Title
Part 1 Accounting Principles. Standards, Financial Statements and
Budgets
Part 2 Financial Ratio Analysis
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Table of Content
Assessment Part 1
1.0 Introduction 2
2.0 An examination of purpose of an accounting function within
an organization 2-4
3.0 A critical evaluation of the accounting function 4-6
4.0 Explanation of main branches of accounting 6-8
5.0 Accounting systems and the role of technology 8-9
6.0 Issues of ethics, regulations and compliance 9-10
7.0 CASH BUDGET 10-11
8.0 Conclusions 11-12
References 12-13
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Part 1
1.0 Introduction
Write an Introduction to Management Accounting and the
principles of Management Accounting
The goal of management accounting is to provide
information to managers so they can manage. Accounting is a type
of device which helps business firm to record or analyses day to
day income and spending transaction for a given (Skouloudis,
Malesios and Dimitrakopoulos., 2019). It is also termed as
bookkeeping. It is a key component of each and every
organization, to make a future decision or to control the operation
activity. The recording is done by the accountant of the company in
the books of accounts. In this following report, the objective of an
accounting activity in enterprises are analyzed and critically
evaluate the function of accounting. The major branches of
bookkeeping such as tax accounting, managerial accounting,
financial accounting, auditing, etc. are also explained. Further
defines the system of accounting and the role of infrastructure as
well as issue of regulation, moral and compliance like nature of
accountant, motoring and controlling. Moreover, the report
attached a cash of the given financial year data in an appropriate
template.
2.0 An examination of purpose of an accounting function within
an organization
The Accounting division ensures that your operational expenses
are all paid on time and keeps up with records of the things and
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administrations that your firm buys. It likewise records generally
impending installments for the organization, including those for finance,
stock, and other business-related costs. In business organization
generally four purposes of accounting are presented which are follows:
 Keeping accurate records of business transaction: An
intensive and coordinated record-keeping framework empowers
the board to rapidly and promptly get any data (McNellis, C.J.,
2018). Be that as it may, there are countless business exchanges
in each organization, and the administration can't recall each and
every one of them. Bookkeeping enters all deals into books of
records so the data can be utilized by the planned clients to settle
on different choices.
 Determination of results: Any business' essential objective is to
make money. All livelihoods and costs should be determined and
introduced in a different explanation called a Manufacturing,
Trading, and Profit and Loss Account to decide whether a
business firm has created a gain or experienced a misfortune. A
business makes "benefit" when its complete costs are not exactly
its total income, and "misfortune" when its total costs are higher
than its income. With the utilization of this data, cost control
techniques can be executed effectively.
 Establishing Business Financial Position: A financial statement
such as balance sheet of the organization endeavor can be ready
to satisfy the objective of showing monetary position. An assertion
of resources and liabilities is known as a monetary record. The
accounting report records both the resources and liabilities that an
association has comparable to its assets.
 Information Distribution to Multiple Users: In addition to the
administration, some of extra clients might be keen on learning the
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subtleties of the endeavor's monetary solidness and productivity.
For example, banks are keen on the security of their advance and
the capacity of the business to pay revenue, while investors are
keen on how much profit declared by the organization or income
per share. Various sorts of clients (inward or outer) who might
require a similar bookkeeping data for navigation likewise need it.
Accounting aids in providing all interested consumers with
pertinent information in this regard (Apriyanti and Yuvitasari.,
2021). The several ways to convey important information to target
consumers include annual reports, cash flow statements, graphs,
and charts.
3.0 A critical evaluation of the accounting function
Accounting is essential obligations incorporate monitoring,
examining, and regulating monetary exercises. Fiscal summaries
for an organization's staff, employees, and financial backers are
made utilizing bookkeeping. Bookkeeping likewise guarantees the
progression of cash into and out of a business.
Advantages of Bookkeeping
 Bookkeeping reflects Financial Position: Accounting
portrays an organization or a gathering of organizations'
monetary standing. Contrasting an organization's new
monetary execution with that of different firms is regularly
useful (Agyekum and Singh. 2018).
 Replaces Memory: Accounting precisely and quickly reports
the entirety of an individual's or alternately organization's
exchanges. One can promptly procure the data from
bookkeeping books assuming they need it later on.
 Useful in differentiating: Since many firms utilize a similar
bookkeeping framework, contrasting one organization's
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presentation with that of different organizations is basic.
Furthermore, one might balance their exhibition with that of
the past year.
 Manager assistance: A balance sheet and income and
statement provided by an accountant to their managers or
top management with the crucial information they need to
make decisions.
 Helpful in computing the amount of tax: The department
of the accounts of a business's make profit and loss account
for given period that helps them to analyze a tax money.
Disadvantages of Bookkeeping
 Describes Accounting Information in Terms of Money: In
books of accounts, non-financial transactions cannot be given
effect. The accountant can only calculate transactions that are part
of the financial constitution. Financial transactions do, in fact, take
the form of exchanges of money.
 Estimates provide the basis of accounting information Several
accounting facts are based on assumptions (Zhang., 2021).
Therefore, it is possible for estimations to be inaccurate.
 Accounts data may be biased: Bookkeeping data could be one-
sided because of bookkeepers' very own impact over the
element's bookkeeping information. The bookkeeper can browse
an assortment of deterioration procedures, income treatment,
capital cost, stock valuation, and so on to decide the element's
pay. Subsequently, the income showed up at in a condition might
be wrong because of the absence of objectivity.
 Fixtures are recorded at their original cost: Because of
changes in innovation, the progression of time, and different
variables, there might be an error between the ongoing substitution
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cost and the underlying expense of a decent resource. Thus, the
monetary record could not precisely mirror what is going on.
 Precision is not Promised: Bookkeeping recorded the earlier
incentive for each monetary exchange. The market worth or
genuine worth of liabilities and resources are not recognized. The
qualities are easy to change.
4.0 Explanation of main branches of accounting
Accounting consists several branches but generally eight
branches of accounting are considered as main branches which
are as follows:
1. Financial accounting: Monetary bookkeeping utilizes fiscal
summaries to follow, gather, and report an organization's
business exercises. These incorporate the income
proclamation, the assertion of held profit, the monetary
record, and the pay explanation. These monetary reports
give charge specialists, financial backers, and lenders data
about how an organization performed. Monetary
bookkeeping is separated into two classifications:
accumulation bookkeeping and money bookkeeping.
2. Cost accounting: An organization's all's creation related
costs, both variable and fixed, are followed, broke down, and
detailed utilizing cost bookkeeping. The four primary
classifications of cost bookkeeping that are Standard based
costing, ABC costing or Activity based costing, managerial
costing or lean costing. They all are play a different role in
business.
3. Auditing: Accounting auditing is the objective interior or
outside survey and evaluation of an organization's fiscal
summaries by an administration office, for example, the
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Internal Revenue Service. Following are three different of
auditing function are explained
I. Internal Auditing: These are utilized as administrative
apparatuses to upgrade inside controls and cycles.
II. External Auditing: A bookkeeping firm much of the time leads
this review. It inspects the interior controls of the business as
well as the budget summaries (Christensen and Rocher.,
2021). The review report contains the Auditor’s appraisal.
III. IRS Auditing: This is an investigation of an association's
monetary records to see whether the information has been
recorded accurately and as per charge rules.
4. Managerial accounting: Expanding benefit and limiting losses
is the principal objective of administrative bookkeeping. It
assembles, evaluates, analyzes, interprets, and transfers
monetary information to the executives. This information
helps navigation by organization proprietors and the board.
5. Accounting information systems: Bookkeeping movement
that has been combined with data innovation assets is
followed by a Accounting information system (AIS), a PC
based strategy (Le Theule, Lambert and Morales., 2021).
AIS is a structure that organizations use to accumulate,
coordinate, process, recover, and report their monetary
information so evaluators, business experts, CFOs,
bookkeepers, and duty specialists might utilize it.
6. Tax accounting: Rather than accentuating public monetary
records, charge bookkeeping focuses on taxes. It centers
around ways of behaving that significantly affect an
organization's duty obligation and how such activities
interface with precise expense computation and record
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readiness. The Internal Revenue Code, which should be
circumspectly stuck to when individuals and organizations
set up their expense forms, oversees it.
7. Forensic accounting: Insightful, auditing, and bookkeeping
expertise are utilized in forensic accounting to assess what is
happening. In legal methods, criminological bookkeepers can
pass their discoveries on through reports and introductions in
the wake of gathering monetary information.
8. Fiduciary accounting: The documentation of transactions
involving a trust or house is known as fiduciary accounting. It
is run on the basis of money.
5.0 Accounting systems and the role of technology
Accounting system are generally two types that are single entry
and double entry (Singh and et.al., 2021). Single entry system is
mainly used by the small enterprises for recording their day-to-day
transaction in a lender whereas double entry system means
recording of each and every transaction in both debit or credit side
of the books of accounts.
 Role of technology in the accounting system
The last several years have seen a massive technological change
that has had an impact on many different corporate activities. This
development has also had an impact on accounting, which has
seen a dynamic shift in terms of productivity.
Applications and investigation have replaced heaps of paper,
empowering bookkeepers to make the enormous change from
task-arranged ventures to contemporary business counsels.
Regardless of whether new advances have been gigantic, some of
them have rearranged bookkeeping systems. Various
organizations utilize cloud-based arrangements, a popular
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bookkeeping innovation, to smooth out data and empower
straightforward access. By utilizing the web, bookkeepers can
acquire essential data whenever and from any area. As putting
away colossal documents are currently accessible with distributed
computing, which gives limitless extra room, this likewise makes it
more straightforward to break down information continuously.
6.0 Issues of ethics, regulations and compliance
 Issue of Ethics: The most effective method to behave
ethically and morally while planning, introducing, and
revealing monetary data is a subject of morals in
bookkeeping (Nyathi, K.A. and et.al., 2018). Various
monetary announcing scandals during the late 90s
uncovered this issue. There are number of issues are
generated like Assets theft and misappropriation, fraud
financing reporting and penalties of violations.
 Issue of Regulations: Accounting face several types of
regulation challenges at time of running the business. It
includes basically fifteen types of different issues that are
cash flow, financial recording and reporting, selecting the
candidate as per their knowledge and skills, boosting existing
employees' skills, changes in laws of taxes, challenges of
regulatory and fresh position of accounting, management of
spendings, management of employees payroll, cyber
security, remote work, etc.
 Issue of Compliance: Ensuring an organization's monetary
detailing is precise and consistent with the law consistently is
known as bookkeeping compliance (Iandolo and et.al, 2021).
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Clear strategies and systems for recording and checking
monetary exchanges are fundamental to guaranteeing this
exactness.
7.0 CASH BUDGET
A Cash budget is an arrangement or timetable of expected
cash inflows and outpourings for the given time span. These
money inflows and surges comprise of pay got, costs made, and
receipts and installments for advances. At the end of the day, a
money spending plan is an extended gauge of how much money
the business will have from now on.
Particula
rs
Janu
ary
Febr
uary
Ma
rch
Apri
l May
Jun
e July
Aug
ust
Septe
mber
Octo
ber
Nove
mber
Dece
mber
Receipts
Opening
Balance
800
0
1608
0
-
301
00
-
660
50
-
116
700
-
144
900
-
132
540
-
175
930
-
21661
0
-
2331
30
-
27882
0
-
30202
0
Sales
660
00
4400
0
495
00
440
00
550
00
660
00
440
00
495
00 71500
4950
0 44000 66000
Issue of
Shares 0 0
200
0 0 0
200
0 0 0 0 0 0 0
Issue of
Debentur
es 0 0 0 0 0 0 0 0 0 2500 0 2500
Total (A)
740
00
6008
0
214
00
-
220
50
-
617
00
-
769
00
-
885
40
-
126
430
-
14511
0
-
1811
30
-
23482
0
-
23352
0
Less:
Payment
s
Purchase
s
480
00
8000
0
810
00
900
00
750
00
480
00
800
00
810
00 80000
9000
0 60000 48000
Selling &
Administr
ation
Expenses
280
0 3400
180
0
100
0
200
0
240
0
250
0
240
0 2600 2600 2400 1500
10

Marketin
g
Expenses
550
0 4620
330
0
275
0
440
0
308
0
264
0
462
0 3080 2750 2640 3300
Property
/ Rental
Expenses
162
0 2160
135
0 900
180
0
216
0
225
0
216
0 2340 2340 2160 1350
Total (B)
579
20
9018
0
874
50
946
50
832
00
556
40
873
90
901
80 88020
9769
0 67200 54150
Closing
Cash
160
80
-
3010
0
-
660
50
-
116
700
-
144
900
-
132
540
-
175
930
-
216
610
-
23313
0
-
2788
20
-
30202
0
-
28767
0
Impact of cash budget:
Based on the expected budget provided, the organization sales by certain
percentage every month. This is due to continuous marketing and discounting offer
provided by the organization comparing to the expected budget provided. the sales
revenue differs from budgeted one. Company has issued debenture to infuse fund in
order to bring growth in the organization. Business entity’s rental expenses seems to
go down every month by 15% while the expected rental expenses show a
fluctuating. The selling administration expenses seems constant which should be
increasing to generate higher revenue. Expected sales revenue and budgeted is
different because there 10% net increase with all the efforts buy marketing and
discount while expected shows an irregular increase and decrease in the sales
revenue. Purchases of the company is also on trade credit of 1 month that means
that purchases for the current month have to be paid in the upcoming one which will
help the organization with better liquidity, this also depict that organization have good
credit rating among the suppliers. If the firm is able to meet the standards it will earn
good profit and stand a better chance in stability in the market.
8.0 Conclusions
From the above report, it can be concluded that accounting it
key element or tool of every small and large enterprises for making
accurate decision and business plan for the future. Accounting
principles are required when organizations make their monetary
reports. As well as giving clients an exhaustive outline of an
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organization's monetary status, fiscal reports ready as per
acknowledged bookkeeping guidelines console buyers that the
data they have procured is reliable, trustworthy, and transparent.
The above report explains the role of accounting function in a
company as well as the aim or objective of bookkeeping. Further,
include the advantages or disadvantages of accounting function in
an organization or industries for running the business. Branches of
accounting such as Financial, cost, auditing and managerial
accounting are also defined in context of the successful business
organization. Moreover, it explains the types of roles which are
plays by the technology in accounting or accounts department as
well as determine the ethics, rule of law, and compliance issues.
This above report, also consist the cash budget of given
information.
References
Agyekum, A.A. and Singh, R.P., 2018. How Technology is
Changing Accounting Processes: Institutional Theory and
Legitimacy Theory Perspective. Journal of Accounting &
Finance (2158-3625), 18(7).
Apriyanti, H.W. and Yuvitasari, E., 2021, July. The role of digital
utilization in accounting to enhance MSMEs’ performance
during COVID-19 pandemic: Case study in Semarang,
Central Java, Indonesia. In Conference on Complex,
Intelligent, and Software Intensive Systems (pp. 495-504).
Springer. Cham.
Christensen, M. and Rocher, S., 2021. Phantom images in public
sector accounting reform: A French study. Comptabilité
Contrôle Audit, 27(1), pp.159-187.
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Iandolo, F. and et.al, 2021. Drilling down the viable system
theories in business, management and accounting: a
bibliometric review. Systems Research and Behavioral
Science, 38(6), pp.738-755. McNellis, C.J., 2018. Middle
Road Media: A codification research case on the accounting
for software development activities. Issues in Accounting
Education, 33(3), pp.135-144.
Le Theule, M.A., Lambert, C. and Morales, J., 2021. Accounting to
the end of life. Scarcity, performance and death. Critical
Perspectives on Accounting, p.102377.
Nyathi, K.A. and et.al., 2018. The role of accounting information in
the success of small & medium enterprises (SMEs) in
Zimbabwe: A case of Harare. Journal of Business and
Management (DRJ-JBM), 1(1), pp.01-15.
Singh, P. and et.al., 2021. Accounting Carbon Footprints and
Applying Data Envelopment Analysis to Optimize Input-
Induced Greenhouse Gas Emissions Under Rice–Wheat
Cropping System in North-Western India. Journal of Soil
Science and Plant Nutrition, 21(4), pp.3030-3050.
Skouloudis, A., Malesios, C. and Dimitrakopoulos, P.G., 2019.
Corporate biodiversity accounting and reporting in mega-
diverse countries: An examination of indicators disclosed in
sustainability reports. Ecological Indicators, 98, pp.888-901.
Zhang, E., 2021. Discourses on public sector accounting reforms
in China: A brief history (1949–2019). Accounting History,
26(2), pp.255-279.
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Table of Content
Assessment Part 2
SectionB:
Detailed letter to client p
Financial Statements p
i] Profit & Loss Account p
ii] Balance Sheet p
Ratio Analysis p
Conclusion p
Recommendations p
References p
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Part 2
Detailed letter to client p
Write your answer here
Financial Statements p
Present your answer as below
i] Profit & Loss Account p
ii] Balance Sheet p
Ratio Analyses p
Present your calculations here
Conclusion
Write your answer here p
Recommendations
Write your answer here
References
Write your answer here
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