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

   

Added on  2019-12-04

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Financial Accounting1

Table of ContentsINTRODUCTION ...............................................................................................................................3TASK 1.................................................................................................................................................31.1 Describing the different users of financial statements along with their needs..........................31.2 Stating the extent to which legal and regulatory framework affects the financial statements...41.3 Assessing the implications of legal and regulatory framework for users..................................41.4 Explaining the ways through which different laws and legislation deal with the accounting and reporting standards ...................................................................................................................53.1 Summarizing the ways through which information needs of the different users vary..............53.2 Fundamental principles which are used by the different types of business organization while preparing the financial statements...................................................................................................6TASK 2.................................................................................................................................................62.1 Preparing financial statements for the variety of business by making appropriate adjustments .........................................................................................................................................................6Adjustments.....................................................................................................................................72.2 Preparing financial statements from incomplete records ..........................................................92.3 Framing consolidated balance sheet and P&L a/c...................................................................11TASK 3...............................................................................................................................................144.1 Calculating financial ratios to assess he performance and position of ABC Ltd.....................144.2 Interpreting accounting ratios by making suitable comparisons.............................................15CONCLUSION..................................................................................................................................16References..........................................................................................................................................172

INTRODUCTION Financial accounting may be defined as a field of accounting which serves informationregarding all the monetary transactions made by the firm during the accounting year. In this,personnel prepare financial statements and present it to the general public at large. There are severalstakeholders who have keen interest in the financial statements which are prepared t6heorganization (Edwards, 2013). Thus, by preparing and presenting the financial statements to thegeneral public company is able to build faith in the mind of investors. The present report is based onEL Ltd who provides all type of domestic electrical work to homes and business in London. Thisreport will describe the information need of all the users of financial; statements. Besides this, italso depicts the legal and regulatory framework which business organization needs to adopt whilepreparing the annual accounts. Further, it will also develop understanding about the financialstatements which are prepared by the different types of business organization. TASK 11.1 Describing the different users of financial statements along with their needsThere are mainly seven users of the financial statements who have different informationneed are enumerated below:Managers: They are the one who manage all the financial and business activities of firm.Thus, manager of EL Ltd undertakes all the the financial statements in order to frame thecompetent financial strategies and policies for the future.Employees: Human resources of EL Ltd. make assessment of profit and loss a/c. Thisstatement provides information to the employees about the stability and profitability aspectof the business organization. Thus, high profit develops confidence among the employeesabout their jobs (Mulford and Comiskey, 2011). By taking into account this fact employeesare able to discuss the salary and other aspects with the employer. Owner: Business entity of EL Ltd make use of financial assessment to evaluate theirprofitability and performance in against to their competitors. It also helps company inidentifying the extent to which business unit has attained its mission and goals. Investors or shareholders: In order to assess the financial health and performance of ELshareholders conduct ratio analysis by making use of the financial statements (7 Users offinnacial statements, 2016). Financial institutions: Bank and other lending institutions make use of balance sheet whichhelps them in identifying the financial capacity of the firm. Through this, bank can decide3

that they need to issue new loan to EL or not. Suppliers: In order to determine that the amount which is owing to EL will be paid on timesuppliers make use of financial statements. Government: To make verification of tax amount government authority undertakes incomestatement (Agoglia, Doupnik and Tsakumis, 2011). Through this, governing authority candetermine the amount which EL Ltd needs to pay to the government. 1.2 Stating the extent to which legal and regulatory framework affects the financial statementsAccording to the Company Act 2006 all the business organization including EL Ltd needsto prepare and present the financial statement to the general public at large. Company requires toundertake all the rules and regulations which are mentioned in the International AccountingStandards. Thus, EL Ltd is obliged to give appropriate and detailed information top the stakeholdersabout the revenue, profit, assets and liabilities. Through this, company is able to develop trust in themind of stakeholders. Further, according to the laws and legislation company also requires to present the auditedfinancial statements. Usually, audited statement have high level of accuracy as compared to others.In this, audit team maker verification of the each and every financial transactions in against tovouchers. EL Ltd needs to follow Generally Accepted Accounting Principles during the preparationof financial statements. According to this, business organization needs to follow commonaccounting principles and conventions while recording, summarizing and presenting the businesstransactions of the firm (Bamber, Jiang and Wang, 2010). Through this, EL Ltd can compare itsfinancial statements from other business entities. Through this, manager of the firm is able toprepare the competent strategie4s and policies which aid in the growth and success of EL Ltd. 1.3 Assessing the implications of legal and regulatory framework for usersLegal and regulatory framework places positive influence on the users of financialstatements. When organization prepares financial statements according to the laws and legislationsor IAS then they are able to present the fair and realistic view of the monetary performance. In this,manager is able to prepare suitable strategic framework for the upcoming years by taking intoaccount the current profitability and performance. Further, according to the InternationalAccounting Standard 16, EL needs to record all the benefits which are highly associated with thehuman resources of firm. Through this, they can take appropriate decision about their career. Besides this, as per the laws and legislation EL Ltd requires to conduct annual generalmeeting and disseminate the information through annual report. Thus, such report and meetingsatisfy the information need of investors to the large extent. In addition to this, IAS 7 provides4

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