logo

Financial Accounting and Reporting : Assignment

   

Added on  2020-01-16

24 Pages4306 Words66 Views
FINANCIAL ACCOUNTINGAND REPORTING

TABLE OF CONTENTSINTRODUCTION ..........................................................................................................................31.1 Different users of Financial Statements and their needs........................................................31.2 Explain the legal and regulatory influences on financial statement......................................41.3 Assess the implication for users in the conceptual framework..............................................51.4 Reporting standards dealing with regulatory requirements ..................................................5TASK 2............................................................................................................................................62.1 Financial statements on the basis of adjusted trial balance ...................................................62.2 Preparation of financial statements from incomplete records................................................82.3 Consolidated income statement and balance sheet................................................................9TASK 3..........................................................................................................................................113.1 Way in which information needs of different user groups vary from each other................113.2 Financial statements of sole trader, partnership and company............................................12...................................................................................................................................................13....................................................................................................................................................14TASK 4..........................................................................................................................................194.1 Ratio analysis of Alpha and Beta ltd....................................................................................194.2 Interpreting the Accounting Ratios from Investment Point of view....................................21CONCLUSION..............................................................................................................................21REFERENCES..............................................................................................................................22

INTRODUCTION Financial Accounting refers to the recording, organizing, summarizing and presenting thefinancial transactions in a meaningful manner by following standard guidelines and reporting theinformation into a prescribed Financial Reporting Framework in Financial Statements such as Balance Sheet, Income Statement and Cash Flow Statement. This report covers widely the implications and assumptions underlying the regulatory framework and how different laws and regulations govern the accounting and reporting standards moreover preparation of financial statements from incomplete records and making appropriate adjustments and consolidation as well and further calculations of some of accounting ratios and their interpretation and decisions and recommendations based thereon.1.1 Different users of Financial Statements and their needsOwners and Investors: Stakeholders or owners who have invested their capital inCompany are always eager for release of financial statements to value their investment asovervalued, undervalued or fairly priced to make decision to buy, sell or hold the amountalready invested and also to calculate their Return On Investment (Council, 2013).Potential investors willing to invest in Company would like to know the returns andprofitability offered to investors. In case of small firms or partnership entity financialinformation acts as deciding factor to analyses to continue, improve or drop the idea ofcontinual.Management: Management of a company comprises hired professionals who have expertisein various fields to support effective decision making. Financial Statements serve their needfor organizational growth and sustainable development by providing basis for decisionmaking and in continuous improvement in company performance and overall development.Management carries feasibility study of various ventures available by comparing variousitems of financial statements.Employees: As per Maslow's theory on hierarchy safety is major concern for employeewhich he can assess from financial statements of a company hence for employees salaries, bonus, perks and perquisites plays a major role and which comes from strong financial

position of a company which ensures employees of its safety and continual period ofrelationship with Company (Münch, 2014). They may also be interested in Company'sfinancial statements to assess company's expansion possibilities and various careerdevelopment opportunities available with him.Others: Customers of Companies such as seller’s distributors are interested intocompany's existence and stability to analyses its association with companies. Forformation of taxation and regulation purposes government is also interested in financialstatement of a company. Public such as students, researchers, analysts need financialinformation for some valid reason and to add value to their theoretical reports (Green,2014). Trade creditors and lenders are also interested in financial statements to examinethe company's liquidity and its ability to pay the obligations and assets to recover thedues. 1.2 Explain the legal and regulatory influences on financial statementFinancial statements are prepared following the policies and procedures acceptedgenerally. To make the Accounts of various entities comparable, reliable, relevant andunderstandable various legal laws and regulations are decided and made mandatory for equalapplicability to all the organizations. Tax Laws govern the extent of tax payable by entity on itsdirect and indirect income. Some indirect taxes which mainly impacts entity are customs, excise,VAT, service tax, sales tax etc (Sikka, 2015). and besides this company has to pay Income taxdirectly to Government. Various Legal and regulations govern the agreements enforceable bylaw regarding sale deeds, registration and transfer of immovable properties etc. which have largeimpact on financial statements. Regulations or legal compliance with Laws related to labor playsa vital role on financial statements by way of providing for Bonus, Leave encasement, Travelallowance, Gratuity payments etc. As per the regulations issued Company has to followFinancial Reporting Framework to present the financial statements in a better manner. Forbeneficial and fair reflection of accounting information the way accounts are produced andpresented plays a major role in analysis and interpretation of Financial Statements. Structure of taxes and design and implementation of workplace by Government affect a businessenvironment on a large basis. The amount of support and financial help granted by ways ofsubsidies, tax holidays, Government grants etc. Plays a major role on financial statements.Amount and nature of government investments into infrastructure and human capital,

development and research programs acts as incentive to business organization and therefore laysgreat emphasis on financial information (Khalifa, 2013.). Protection and Licensing of IntellectualProperty Rights such as Patents, Royalties, Copy rights etc. acts as deciding factor and increasethe asset side of Balance sheet. Therefore, recognizing the diversity, issues and complexity ofthese issues impact the Financial Statements to allow and drive economic growth. ASB(Accounting Standard Board) being a senior technical committee for quality control, attestationand auditing for measuring the performance and issuance of reports for non-issuers. IASB(International Accounting Standards Board) issues a framework with theoretical base, astatement of principles, a philosophy and a map and acts as a guide to preparation of FinancialStatements in a better and presentable manner which is quickly and easily understandable. IASCwas replaced by IASC on 1st April 2001. IPSAS (International Public Sector AccountingStandards) issues set of accounting standards for use by public sector Companies around theworld for better and fair presentation of financial statements. Compliance with Companies Actfor provisions regarding Board meetings, Directors, Financial statements etc. have a majorinfluence on financial statements of accompany. Stock exchange rules have to be abided by allthe listed companies for comparison and regulation in a better and fair manner. Directives issuedby European Union have to be followed as being the member of such union policies andframework need to be looked upon.1.3 Assess the implication for users in the conceptual frameworkConceptual framework refers to a system of ideas and objectives which ultimately leads tocreation of per-defined and consistent set of standards and rules (Mendoza, 2014). Users whileusing Financial Information from different sources or prepared with reference to distinctAccounting Auditing Standards will produce financial information which will be at variance witheach other as various guidelines or principles takes into consideration various assumptions andpolicies which are outcome of different scenarios and circumstances existing at the time ofpreparing Financial Statements. Since each conceptual framework has several variations andcontexts therefore comparison of Financial Statement using different regulatory frameworks isnot allowed. Therefore, thorough knowledge of each of framework is necessary to compareinformation from Financial Statements.

1.4 Reporting standards dealing with regulatory requirements Reporting Standards are developed using regulations governing the business organizationto present the financial statements in a better and practical manner which gives out a clear pictureto the user. Reporting standards covers areas and rules provisioned by regulations for exampleValuation of Inventories shall be strictly governed by the regulations of custom in case ofimports/exports and excise in case of manufacturing in the same country (Bakre, 2014).Regulations form the basis of uniform inter and intra firm comparison for formation of policiesand standards and help even auditors to form opinion and provides a better approach andunderstanding of Financial statements as whole by interpreting various policies and proceduresunderlying the formation. Underlying assumptions of regulatory authorities is that all thecompanies falling under the specified criteria follows Reporting norms perfectly and in themanner prescribed therein (Brief, 2013). According to capital Maintenance concept profit is saidto be earned if there is any value addition to the net assets of the company during the year.Therefore, profits should not be recognised until and unless assets have been maintained andessentially there should be increase in value of assets during the period. TASK 22.1 Financial statements on the basis of adjusted trial balance Table 1 Adjusted trial balanceRevenue72900Purchase31220Inventory 1 Oct 20146390Distribution cost 29240Administration cost7480Land at valuation40000Property at cost42000Property accumulated depreciation840Plant and equipment at cost56260Plant and equipment accumulated depreciation8439

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Financial Accounting and Reporting | Report
|28
|5743
|43

Users of Financial Statements (PDF)
|13
|3786
|491

Accounting and Reporting 1 INTRODUCTION 3 TaSK 13 1.1 Describing the different users of financial statements along with their needs
|18
|5378
|74

Financial Accounting and Reporting - Doc
|16
|4247
|68

Principles of Financial Accounting
|23
|5057
|163

Financial Accounting and Reporting - Assignment
|21
|5486
|59