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Case Study Of Minty Cola Co- Effective Accounting System

Added on - 03 Feb 2020

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Financial system andAuditing
Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1 Purpose and use of different accounting records..................................................................31.2 Meaning and purpose of different accounting concepts.......................................................41.c Factors that influence the nature and structure of accounting system...................................5TASK 2............................................................................................................................................62.1 Different components of business risk..................................................................................62.2 Analysing the control system in Minty Coca cola...............................................................72.3 Evaluating the risk of fraud and methods to detect fraud.....................................................8TASK 3............................................................................................................................................93.1 Planning an auditing for the Minty Coca cola......................................................................93.2 Identify and use appropriate audit tests.................................................................................93.3 Audit process for proposed audit plan................................................................................10TASK 4..........................................................................................................................................114.1 Preparation of the draft audit report....................................................................................114.2 Drafting the suitable management letters in relation to the statutory audit report..............12CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................14
INTRODUCTIONAccounting is the process of reporting and analyzing business transactions which help toform a successful management. It is the way through which the company can measure its successand can confirm that whether business is in line with the target goals of company or not.Accounting theories and policies form the basis to maintain and record financial transaction. Theinternational financial reporting standards are designed in such a way that they keep theaccounting practices effective, efficient and correct (Vogel, 2014). This report is based on thecase study of Minty Cola Co. that manufactures fizzy drinks. It evaluates the importance ofkeeping effective accounting system and evaluates the management control system of a business.TASK 11.1 Purpose and use of different accounting recordsAccounting records means all the documents which help in preparing financial statementsand record the transactions that are related to financial reviews and audits (Loughran andMcDonald, 2016). It includes recording of assets and liabilities, ledgers, journals and any otherdocuments to record the business transactions. It is important for Minty Coca Cola to recordtransactions to evaluate the financial position of the company. Being an auditor, working forParsley & co. explains the purpose and use of different accounting records which the company isrequired to prepare:Prime entry books or journals: Transactions are firstly recorded in the prime entry booksas and when they are occurred. It helps the firm to maintain date wise records of alltransactions along with the details of accounts and amount (Horngrenand and et.al.,2013). It also includes short explanation of transactions which is known as narration.Since Minty Coca Cola has expanded its business and dealing at a large scale so, it needsto maintain special journals such as purchase books, sales books, bills book, etc.Ledgers: Journal is not sufficient as it cannot provide entire information regardingparticular account at one place. Thus, it is important for Minty Coca Cola to prepare theledger. It can record warehouse expenses, wages and salaries as well as machinery repairexpenses in the ledger. For instance, if manufacturing unit wants to determine the amountdue to a particular supplier or figures that is required to be recovered from customer, he isnot required to go through the whole journal which is a quite tedious task. They can
directly review the ledger and find out the amount (Floyd and List., 2016). It isconsidered as the king of all books of accounts as it alone discloses the position of eachaccount head. Minty Coca Cola can determine the complete picture of accounts as itrecords debit and credit side in different margins in each account.Trial balance: Once ledger accounts have been prepared, company records eachtransaction with both the balances that is debit and credit side (Verver., 201). Afterposting the accounts in ledger, accountant prepares the statement to show debit and creditbalance separately. It helps the company to ascertain the arithmetical accuracy and toprepare the final accounts. Accountant can easily detect the errors through this statementand can easily provide summary information of financial results and position.Final accounts: These are the statements that give rough idea about the profitability andfinancial position of a business. It includes the preparation of cash flow, profit and lossaccount as well as the balance sheet (Brief and Peasnell., 2013). It helps management ofMinty Coca Cola to determine the financial soundness of business.1.2 Meaning and purpose of different accounting conceptsAccounting concepts are designed to maintain uniformity and consistency in preparingand maintaining different books of accounts. Minty Coca Cola is required to comply with allaccounting concepts for recording and preparation of financial statements. So, the meaning andpurpose of different concepts are:Accrual concept:This concept states that incomes and expenses must be recognized inthe accounting period to which they relate rather than on cash basis. So, Minty Coca Colaneeds to record all transactions that arise in the accounting period rather than in thesubsequent period in which it will be received (Kaplan and Atkinson, 2015.). It ensuresthat expenses are matched with the revenues earned within an accounting period. It helpsmanagement to determine the accurate profits and losses of current year by taking intoaccount only current year's income and expenditure. For instance, if Minty Coca Cola hassold products to the dealer and dealer has not made payment of it in the year in which itwas supplied, but this transaction is required to be recorded by the accountant in thebooks as outstanding income.Going concern:It is based on the assumption that business will continue to run in thepredictable future. Therefore, it is deemed that Minty Coca Cola will realize its assets and
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