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Accounting Case Study - Sparks Company

   

Added on  2020-07-23

11 Pages3377 Words57 Views
ACCOUNTING

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1Short explanation of events occurred in the month of September 2017 within Sparks Company................................................................................................................................................1TASK 2............................................................................................................................................3Explanation of various record keeping systems used by accountants to keep financial records3The Day Books and Journals.............................................................................................3The General Ledger...........................................................................................................4The Double Entry System For Recording Transactions....................................................4Trial Balance and Annual Reports.....................................................................................5TASK 3............................................................................................................................................6Description of accruals concepts along with five examples of this particular concept..........6CONCLUSION................................................................................................................................7REFERENCES................................................................................................................................9

INTRODUCTIONA procedure used at the workplace for keeping records of wide range of financialtransactions is considered as accounting. On the basis of this particular process an enterprise ableto prepare financial accounts or statements which are like profit and loss account, balance sheet,cash flow statement etc. The present case study is based on Sparks Company in which financialstatements of business year ending 30 September 2017 are completed. In these all accountsseveral numbers of events or transactions occurred which are explained in the current project.Apart from this, for completing record systems of financials some methods and techniques areused by the accountants. Such tools which must be taken into consideration while keepingrecords are described under the present assignment. At the end of study, accruals concept ofaccounting is explained with the help of some examples.TASK 1Short explanation of events occurred in the month of September 2017 within Sparks CompanyAt the workplace of Sparks, several transactions come into consideration which arerecorded in the books of accounts. Such transactions are made on the basis of events occurred inthe business environment which are like sales, purchase, expenses etc. In the business year 2017some events existed in Sparks which are identified by observing some accounts like ledger, trialbalance, income statement and balance sheet (Judge, Li and Pinsker, 2010). Further, explanationof events occurred within stated organisation is mentioned below:In the month of September 2017, the enterprise generates sales amount which is worth of191,170 GBP. It is one of the big transaction incurred at the workplace and reflects thatmanagement has capability to earn big level of revenue. Major sales amount is carriedforward from the last year and sales day book. Apart from this, very few revenuesgenerated by cash sales where the firm needs to consider attractive strategies ofmarketing. When looking at the purchase account among ledger entries then it can be seen that, totalpurchase made by Sparks in September 2017 is worth of 106780 GBP. It is lower ascompared to sales proportion which is beneficial condition for the company. Further,purchases include balance of last year, purchase day book as well as cash purchases. 1

Apart from this, grant income generated by the selected company is worth of 14,000GBP which is better for the business. When looking at the wages and rent expenses incurred in September are like 38,100 and22,900 GBP respectively. As per the sales amount these both expenditures are neitherhigh nor low. This level comes at the moderate level where firm will become able togenerate sales. On the basis of inventory account it can be said that total stock level is worth of 31,740GBP which is a big event. As per the accounting principles and rules, lower theinventory is beneficial for an enterprise because of helping to raise stock turnover ratio atthe end of year (Deegan, 2012).It can be analysed that, Sparks is liable to pay loan amount of 30,000 which is takenfrom commercial banks. Further, total trade receivables and payables amount for themonth ending September 2017 is worth of 41,330 and 32,700 GBP respectively. In addition to this, amount of capital and drawings i.e. 80,000 and 15,000 GBPrespectively are also huge in comparison to other few expenses. Moreover, sum ofmoney under equipment account seems high which is total 90,000 GBP. It can be seen from the trial balance that amount of accruals credited in September 2017by Sparks is worth of 6,000 GBP. On the other hand side, prepayments debited from thecompany's account are total 2,000 GBP which are the lowest as compared to othertransactions. Moreover, gross profit as well as net income earned by the mentioned company is worthof 99,200 and 30,540 GBP respectively. When comparing these both the incomes withrevenue earned then it can be said that net profit is low. At this position the managementrequires working and apply strategies so that, it will become more financially sound inthe industry (Brown, 2011). TASK 2Explanation of various record keeping systems used by accountants to keep financial recordsInitial stage of recording the transactions is journal entries and after that ledger account isto be prepared by accountant. Once general ledger completed then comes at the third step in2

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