Financial Accounting - Assignment Solution

Added on - Nov 2020

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FINANCIALACCOUNTINGPRINCIPLE1
Table of ContentsINTRODUCTION...........................................................................................................................3BUSINESS REPORT......................................................................................................................31: financial accounting and its purposes......................................................................................32: Internal and External stakeholder............................................................................................4Client 1.............................................................................................................................................7Client 2...........................................................................................................................................11Client 3...........................................................................................................................................16Client 4...........................................................................................................................................18Client 5...........................................................................................................................................18CONCLUSION..............................................................................................................................20REFERENCES..............................................................................................................................21Appendices....................................................................................................................................222
INTRODUCTIONFinancial accounting principles are the set of rules and regulations that helps tounderstand the financial position of the company and gives idea to take next step to run thebusiness (Edwards, 2013). Moreover, it is the rules and guidelines that enterprises should befollow at the time of preparing financial statements. KPMG is a professional UK basedaccounting service company that provides tax and audit services. It is auditors company that isdealing in auditing, tax and other advisory services. As a junior accountant of the company,financial accounting principles helps to understand the inflow and outflow of any organisation.The main purpose of this report is make understand the importance of financial accounting and itpurposes. Accounting principles and concepts defines goals and objectives of any organisationand helps to take corrective decisions by using this. This report also would contain internal andexternal stakeholders, purpose of control accounts, bank reconciliation statement and explanationabout term imprest and suspense accounts and its main features.BUSINESS REPORT1: financial accounting and its purposesFinancial accounting is the process of accounting and preparing financial statements ofany organisation that helps to define the financial performance and position of company.Financial accounting provides a broad and accessible information to business enterprise that canbe used to improve the decision making quality and take better financial decision (Ahn, Amitiand Weinstein, 2011). For example , a business enterprise is running a business and preparesfinancial statements such as income statement and balance sheet that shows company's profitsand loss situation by defining income, expenditure, assets and liabilities. Financial accounting isused for recording the transaction and bookkeeping. In other words, it is the specific branch ofaccounting that keeps records and maintain financial information. By using standardizedprinciples and guidelines an organisation can record of financial transaction, present andsummarize in a financial statement. Financial statements includes trading, profit and loss accountand balance sheet. These final accounts helps to understand the profits and loss and also showsthe assets and liabilities of the company. Financial information is used to make effectivedecisions by external users like as creditors and investors. The main object of financialaccounting is to provide clean and clear information regarding company's financial position and3
its performance that helps to make solid economic decisions. This also helps to take correctiveactions whether company need to run a business or not by seeking financial accounts. Whilepreparing final accounts an industry or company should follow GAAP (generally acceptedaccounting principles) that is collection of accounting rules and principles for final reporting. Itis the duty of an accountant that follow rules and regulations which provides accurate andrelevant information it can be analysed. It provides a great methodology for recording monetarytransactions and impact on financial position of the enterprises. It has various purposes which areas follows-The main purpose of financial accounting is to provide financial information whichincludes income statement and balance sheet.To get true and fair data of final accounts of enterprises.To evaluate and analysis the fundamental financial statements.Financial accounting also helps to know the business's profitability situation as a result itwould be easy to make future plans and strategies for further growth of organisation.Its purpose is to accumulate and report on financial transaction and cash flows of abusiness.This also helps to suggest that how to manages or control the business and organisation.To make effective and corrective economic decisions by using financial statements.It helps to give results of operations, cash flows and final position of the company.It maintains double entry system by using financial information.It provides a comparative data that helps to compare with past data and information.Financial information also helps to take taxation decision that is depend on businessincome and assets.It also helps to give actual performance and business position of any businessorganisation.2: Internal and External stakeholderStakeholders means a person or group of people who has an interest in operations of thecompany in order to make profits. In other words, it is the part of business who invests in theorganisation, participate in business activities and its decisions (Archer, Ahmed Abdel Karimand Sundararajan, 2010). Stakeholders can affect by goals, objectives, actions and policies ofcompany. It helps to control external risk to improve business decision and outcomes. Every4
large organisation includes two types of stakeholders such as internal and external stakeholders.They helps take effective or corrective decision in order to make profitable organisation.Internal stakeholders:Internal stakeholders means entities or person who has vitalinterest within business and its functions (Dyreng and Lindsey, 2009). In addition, anorganisation has people who are ready to serve a business as a staff, volunteers, donors and boardmembers. They formulates tactics, strategies, and operations activities to make profitableorganisation. It involves managers, board of director and employees whose have interest in thefinancial information of the company such as:Employees:Employees means a person or group of person who are working inenterprises for getting something in monetary term like: wages, salary, bonus, incentives etc.Employees are interested in financial information because they can analysis the pay ability andemployees benefits of any organisation (Edwards, 2013). Moreover, financial data gives an ideato employees whether they should work or not in an enterprises. They might be interested infinancial information to assess the company's career development opportunities and expansionpossibilities of business. Employees can take further decision to be stable or not by gettingfinancial information.Board of director:Board of director is the corporate body or group of people whoestablish rules and policies of any business and take effective decisions with the consent of allmembers: Board of directors are interested to get financial information because they areresponsible and liable for setting the business policy and accountable to shareholders forfinancial position of the company (Fraser, Ormiston and Fraser, 2010). By getting financialinformation BOD can take effective decision in order to make profitable industry. Financial dataprovides budget that helps to board of director to make policies and further budgets.External stakeholders:External stakeholders means an individual or group of peopleoutside a business who are affected by its business performance. It includes customer, regulators,government, investors,creditors and suppliers. They might be interested in financial informationsuch as :Government:Government is the group of people who has authority to govern a countryor state and make policies in order to development of the country (Hillier and et. al., 2013).Government is interested to get financial information because it helps in development of the5
country by using tax amount. If financial position of the company would be good then it will paytax and this tax amount helps government authority to take development decision.Investors:Investors means who invests money in the business of any organisation. Theyare most interested person in financial information because it gives idea to investor for furtherinvestment or not (Marshall, McManus and Viele, 2011). Investors also can measure the risk andinvest return in the company and also helps to assess the property of the company to pay theinvest amounts.Creditors:Creditors means an individual or entity who lends money or give credit toother person or enterprises (Needles and Powers, 2010). They are also interested in financialinformation and statement in order to get back their credit money by assessing financialinformation and wants to be full repay amount in certain period. Creditors may use financialinformation to define business credit risk and company's ability to repay debt amount.Suppliers:Suppliers means a person or enterprise who provides goods and services tocustomer or others (Weil, Schipper and Francis, 2013). Suppliers might be interested in financialinformation because they can see company's ability and stability to pay obligations orcompensation and check the profitability conditions of the company. In addition, Providers areinterested to get financial information to continue the purchasing system from organisation'sside.6
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