Importance of Accounting Principles and Concepts

ACCOUNTING
SKILLS

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................3
MAIN BODY...................................................................................................................................3
Part A......................................................................................................................................3
Question 1. .............................................................................................................................3
Question 2 ..............................................................................................................................5
Question 4...............................................................................................................................6
Question 5...............................................................................................................................8
Question 7 ..............................................................................................................................9
Part B....................................................................................................................................11
Exercise 1.............................................................................................................................11
Exercise 2.............................................................................................................................12
Exercise 3.............................................................................................................................13
Exercise 4. ...........................................................................................................................14
Exercise 5.............................................................................................................................14
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................18

EXECUTIVE SUMMARY
The report summarise about importance of accounting principles and concepts in a
detailed manner. The report is categorised into two parts. First part abstracts information regards
to role of financial information, accounting principles and about dividends. While the second
part summarise about preparation of different financial statement in order to get information
about total liabilities, assets etc.
MAIN BODY
Part A
Question 1.
(A) If you were a banker, why would you need information from PepsiCo’s financial
statements?
Bankers need the financial statements for multiple purpose. Basically, bankers ask for financial
statements for companies at the end of a financial year. Generally, banks want to check balance
sheets, profit & loss account statement etc. Herein, below reason for which bankers can see the
financial statement:
 Balance sheet- The Balance Sheet shows the assets, debt and net value (equity) of
business at a particular time period (Ahadiat and Martin, 2015). Taking the time to
analyse the balance sheet of business enable bankers to get a clear understanding of
company's plan. The Bank must aim for good net worth and the liabilities-to-equity ratio.
Analysing the balanced sheet lets the bank decide whether its existing and/or potential
debt obligations can be met by the company.
 Income statement- The Income Statement or Profit and Loss Statement shows how
much money the corporation received over a number of years and how much was left
after payment of costs (net income). Analysing this argument will enable companies as an
owner to assess whether there are possible areas for controlling costs or areas that seem
out of line. By help of it, bankers can become able to analyse whether they should make
credit transaction with company or not.

So these are the reasons for which bankers will be interested to assess financial information of
PepsiCO's company.
(B) If you were a potential investor in PepsiCo stock, what information would you want from
their financial statements?
Investors are those who make investment in company’s practices and securities. They
need to analyse financial position of companies so that they can take decisions whether they
should make investment or not. Herein, below list information is mentioned which is needed by
investors:
 Net profit- Financial reports will show the net income of a corporation, net profit is the
cash left over by a corporation after all costs have been paid. "Does company make
money?" is often the first question asked, but it's just a point of departure (Ragland and
Ramachandran 2014). By analyse the information about net profitability, investors take
decision about making investment.
 Sales- It is also a key information which is assessed by investors in order to take suitable
actions for investment. This is so because if PepsiCo's company's sales revenue is higher
then it may leads to higher payment of dividend to shareholders. Hence, investors
evaluate information about sales.
 Cash flow Statement- For business entities, cash is the king. Investors interpret the
bank's cash as a symbol of being able to deal with unexpected issues and focus on new
possibilities. Free cash flow is a sign of successful operations and in accordance of the
information of cash flow, investors analyse efficiency of companies.
(C) If you were a labor negotiator for a union that represents a group of PepsiCo’s employees,
which financial statement would provide you with the most useful information?
For labour union, income statement will be suitable. This is so because under it, detailed
information regards to companies operations, revenues, cost of sales etc. is provided (Stone and
Lightbody, 2012). Such as in the aspect of above company, there are income statement for two
years 2013 and 2014. The labour union can analyse key information about how much salary and
wages expenditures is done by company during these years.