Unit 5 - Accounting Principles ( Pass Criteria )

Accounting Principles

Contents
INTRODUCTION................................................................................................................................
SECTION 1..........................................................................................................................................
a) Elaborate on the purpose accounting functions in the context of the organisation................
Demonstrate how the accounting function aids in making educated corporate decisions and
meeting the requirements and expectations of shareholders and society....................................
Describe the many branches of accounting and the accompanying work skills and
competences.................................................................................................................................
Explain the accounting system and the importance of technology in modern day
accounting....................................................................................................................................
e) Explain the extent to which ethical, regulatory, and compliance issues represent
restrictions or dangers to the organisation.................................................................................
CONCLUSION..................................................................................................................................
INTRODUCTION..............................................................................................................................
SECTION 2........................................................................................................................................
A. Income statement and Balance Sheet....................................................................................
B. Prepare financial accounts for sole traders, partnerships, and not-for-profit organisations
using a trial balance to comply with accounting principles, conventions, and standards also
find out these differences...........................................................................................................
C. How Digital software is used preparing financial statements...............................................
Compute the financial ratios from the given accounting statements.........................................
Prepare a cash budget for the organisation................................................................................
Identification of the problem and solution in the Cash Budget as well as impact led by the
same on the organisation............................................................................................................
Advantages and disadvantages of budgets, financial planning, and organisational
management:..............................................................................................................................
CONCLUSION..................................................................................................................................
REFERENCES...................................................................................................................................

INTRODUCTION
Accounting is procedure of recording business transactions which pertains to the
business. Book keeping process includes analysing, reporting and summarizing of business
transactions. Bookkeeping and maintenance of the accounts aids the group of shareholders in
making well-informed decisions. It also includes a review of accounting systems and the use
of technology in modern accounting. It also emphasises ethical, regulatory, and compliance
challenges, as well as the level to which they pose a threat to the firm. In this report, it also
includes the creation of a 12-month cash flow budget and its influence on various situations
(Sahaf, 2018). The report includes financial statistics such as the income statement and
balance sheet for Village Wide Catering. It also includes the computation of numerous
financial measures to analyse this financial statement on the basis of solvency, liquidity,
profitability, and efficiency.
SECTION 1
a) Elaborate on the purpose accounting functions in the context of the organisation.
Accounting functions help firms manage and leverage their strengths more effectively
and efficiently. Fully functional costs that assist the company should be included in the
budgeting process. The business concern has to retain a specific amount of money for the
spending on the business transactions. After deducting all operational expenses, the fiscal
model illustrates how much money is left over in the organisation. The projection has a
stronger impact on the organization's financial statement, and the payment made covers
multiple parts of the organisation. A capacity projection is a prerequisite for achieving that a
firm's activities are properly funded. Estimation also gives you more control over where your
funding originates from. Businesses can also obtain money from both internal and external
sources (Larkin and DiTommaso, 2018)
Accounting is extremely important in the operation of a firm. It is the activity of
capturing, summarising, and analysing data. It keeps track of all revenue, expenses, and
quantitative and qualitative financial data for a company. The reason behind this is as
follows:
Facilitates managerial decision: Internal users of the organisation are people of the
business who organise, execute, and plan that needs to happen and also the corrective
measures that need to be taken in order to manage the firm. What has to be done to improve
organisational efficiency is included in management decisions. It helps in determining the

actual outcomes of the organisation which can be ascertained from the analysis of the
accounting. A team is prepared and which helps in forecast and plan for the organisation.
Financial plan includes revenue, operating expenses, sales and cost controls. A team is
prepared to lead the operations of the management as well it forecast the financials of the
company as whole.
Project Management Decision: Managerial Accounting performs cost- benefit analysis for
an existing project and new project. These plans involve a significant outlay of cash which is
introduced as the capital of the company. It is critical decision of the management that the
projects are completed within the budgeted amount.
Demonstrate how the accounting function aids in making educated corporate decisions and
meeting the requirements and expectations of shareholders and society.
Financial accounting serves a critical function in allowing firms to maintain track of
their financial statements as they occur in day-to-day operations. The transactions are arrived
in the journal, then into the ledger, and finally into a summarised format that assists the
business as well as external interested users in gaining useful knowledge about the
organisation on numerous distinct aspects.
 The company enterprise analyses the reasons that require specific initiatives for
improvement by analysing and interpreting financial records. The firm can use this to
discover those tasks or actions that must be taken in an organisation unnecessarily and
cost a lot of money.
 By preparing accounting reports, a corporation can determine if it should buy, sell, or
repurchase shares in order to create a profit. Accounting is required in business to
create budgets so that operations may be carried out efficiently, to hire people, and to
buy a different fixed asset.
 The primary goal of any business is to make money. If accounting data is properly
managed, the company should review its results. The outcome can be divided into two
categories: profit or loss. If the company has no accounting records, it will be unable
to estimate profits and losses for a certain time period.
The preceding examples demonstrate that bookkeeping is beneficial to a firm. The
following points demonstrate how accountancy benefits a collection of shareholders as well
as society:
The financial statements are used by investors to measure the company's financial status in
terms of almost everything. The rationale for the investigation is that when a person invests

money in a business, he expects a significant profit. Investors examine the accounting records
to determine a company's profit producing potential and to ensure that his money is safe in
that form. Someone decides to fund the project after considering all of these variables
(Edeigba, 2020)
 Accounting professionals make advice to business owners and managers in order to
boost a company's productivity. This is only possible if he has a record that was
created using suitable morals and values. The account professionals will be unable to
provide recommendations if there is no record.
 They examine the company's financial records to determine how much money it owes
and how long it will take to repay it. Creditors and suppliers will extend credit to the
company if they feel secure.
 Accounting is extremely important since a corporation functions by utilising societal
resources, and in order to attract clients and support, it must donate a portion of its
profits as Corporate Social Responsibility.
Describe the many branches of accounting and the accompanying work skills and
competences.
A corporation requires many aspects of accounting from various perspectives. The
following are some of the branches of accounting:
Financial
Accounting
Management
accounting
Cost Accounting
Definition It is the skill of
collecting,
categorizing,
interpreting, and
summarising the daily
business transactions
that occur in a
business, and it aids
in the preparation of
financial statements
(Huber, 2021).
This branch of
accounting helps
corporate executives
monitor, control,
direct, and plan the
flow of money in their
organisations, as well
as devise various
techniques to prevent
waste of monetary
resources by
generating various
Cost accounting is a
process of assigning
cost to cost object
involved in the
activities taking place
in the process of
production.