Financial Accounting For Business Assignment
Added on 2021-02-19
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Financial Accounting
Table of ContentsINTRODUCTION...........................................................................................................................1MAIN BODY...................................................................................................................................1Part (A).........................................................................................................................................1Part (B).........................................................................................................................................4CONCLUSION..............................................................................................................................21REFERENCES..............................................................................................................................22
INTRODUCTIONFinancial accounting is process of collecting, distributing and allocating the information tomanagement department for better financial and strategic decision. It is a field of accounting thatis associated with analysing, collecting, evaluating the business activities in order to representthe company's financial statements. It keeps track the firm's transaction by using the industrialstandards. The business operations are recorded in summarized way and presented the financialreport in form of income statement and balance sheet to the management of an organisation.These reporting system in the business are really helpful in order to know the financial conditionof an organisation. For the better understanding the concepts of financial accounting, a companyBrooks city consultancy is selected to prepare this report of financial accounting. The particularfirm is providing the services related to the recording, summarising and preparing the financialstatement of an organisation and measure the business efficiency by preparing some elementaryreports. It is also included the various accounts like suspense account, bank-reconciliationstatements to present the true and fare reports to the business. MAIN BODYPart (A)1. Meaning and purpose of financial accounting.Financial accounting Financial accounting is systematic mechanism of recording the business translation andpreparing the financial reports to the business organisation (Nilsson and Stockenstrand, 2015). Itis specific branch of accounting that keep the track on the business transaction in order to preparethe annual reports. These reports shows the financial position of the business so that investorscan make investment by knowing the business stands. These report may includes some financialstatement such as general business transaction, statement related to cash flow, fund flow, balancesheet. Financial accounting are truly different from management accounting. Basically the financial accounting are prepared by considering the business standards andprinciples. Accounting standard such as International financial reporting standards(IFRS),International accounting standard (IAS), generally accepted accounting principle (GAAP) arereally helpful in the business to prepare the final statements true and fare. 1
Some of the purpose of financial statements are discussed as follows : Formulation of financial statements- This is the primary function of the financial systemto make the final reports by using the general transaction of the business. These reportsare includes income statements and balance sheet (Wang, 2014). It is also help in takingthe business decision in the future by considering the business reports in the business.It helps in configuration the record of commercial enterprise transaction in a organizedway. Financial statements are the real evident of the business that shows the liquidityposition as well as cash flow of the business. It provides a surety to the individual whoprovides the goods and services on credit basis so firm can have enough money to repaytheir liability at any period of time. It summarise and analyse the financial dealings of the firm. It also help in plan the futurebusiness strategies by using the past data. So management can be able to convert thefinancial information into valuable inputs. Assistive in decision making- Apart from preceding benefits, the financial accounting isalso useful for making effective business decision. As a firm has better financial status somanagement can make the decision regarding the further expand of the business. So thesekind of the healthy situation of the business are helping to grow in future.Beneficial in comparing the business trends- This is also a benefit of financial accountingto comparing the business trends in the business with industrial standard or anotherrelated company. By these financial reports company can compare the past profit andsales with the current year. So that companies can make required changes in the strategiesplans and standard. All the preceding points are the important purpose of financial accounting as it is obligatoryaccounting method for a firm. 2. Internal and external stakeholders.Stakeholder- The stakeholders can be affected by the business organisation's activities,action, rules and regulation. These are the individual that has a interest in the firm and theactivity of the business affected to these persons (Zeff, 2016). The main motive of thestakeholder is to analysis the company's structure to earn more profit by investing in the share ofparticular company. Basically, There are two kind of stakeholders that are as follows: 2
External stakeholder.Internal stakeholder.Detail Description of these stakeholders is mentioned under:External stakeholders- External stakeholder are the group or persons outside of a businessbut they can be affected by the business activities. They doesn't belongs to company butdirect impacted or influenced by financial performance of the company. These are theperson who is not involved in the operating business activities but they track the businessreport to understand the firm's scenario (Gheorghe, 2012). In the persons or individual ofstakeholder includes customer, creditors, supplier, government etc. The main purpose ofall these stakeholders is ordinary that is to gain return on the investment by analysing thevarious aspect of the business organisation like financial position, market share. Here,some of the external shareholder are discussed below:Investors- These are the persons that invest their money in the particular equity of thecompany by deep analysing the price of the share and the performance of the company inglobal market. The main motive of the stakeholders is to yield more return out of thecapitalised money. That is only the reason to have a look on the company's financial dataso they can make the decision on it if they wants to invest in it or not. For this purposethey show their interest in the financial information of companies so that they can takedecision about whether they should invest or not. In the absence of these detail offinancial information, it would be difficult to make the investment decision. Government- In the external stakeholder of a company, government rules and regulationplay a important role. Government of any nation analysis the company performance andimposed the tax rate as per its profit and sales limit. They set up several rules tocorporates that needs to be followed as per their requirement. Government purpose toimplement the augmented tax structure to maximize the tax revenue. Suppliers- Suppliers are the external stakeholder of a particular firm. suppliers are thosepeople who supply raw material and production material to the firm. They make thebusiness transaction related to companies on credit and cash basis (Gray, Coenenberg andGordon, 2013). They only render the material supply when company's status is good inthe market. If financial status or reputation is not good in the market it would be difficultto business to avail the goods on credit basis . 3
Creditors- creditors can be a person, bank and the supplier of the goods and services andexpect the payment of the goods at later time period. These are the business entity thatreceives the payment on after the supplying the goods and services. They also shows thetheir interest in the financial condition of the company to determines whether theyprovides the supply or not.Internal stakeholder- Internal stakeholder are the basically the particular person who areemployed within a organisation boundaries (Gupta,2016). They are affected by the organisationperformance for example customers, management, worker of a firm that are discussed below inwide meaning:Employees- Employees are the person who execute the business operations and activitiesin consideration of salary and wages. financial status of a company totally depends on theactual performance of these employees. These stakeholder show their involvement in thefinancial subject matter of the organisation so that they can assure about financialperspective of system.Board of manager (BOD)- These are person of an organisation who are involves in thedecision making of the firm. Internal stakeholder of the organisation are really eager toknow the actual performance of the organisation. These person are very important to abusiness organisation to responsible for the business declinism. They prepare the businesslong term plan and implement it in the business in order to represent the business positionin front of external stakeholder. Part (B)Client 1.Business transaction- In every firm , there are broad range of business transactions such as:Sales- It can be defined as trading of the goods and services within the boundaries of acountry. The firm sales the goods to its demanded customer. Purchase- It is basically acquiring products and services from manufacturer. Income- It is a list of earning that comprise of subjective concern direct and indirectearnings. It may be generating by selling the goods or earning from other sources. andacknowledging to person who has received money.Payments- It is defined as disbursement of the money in paying off to its creditors andother expenses. 4
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