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The Importance and Meaning of the Fundamental Accounting Concepts

   

Added on  2020-06-04

16 Pages5498 Words45 Views
FINANCIAL SYSTEM ANDAUDITING
The Importance and Meaning of the Fundamental Accounting Concepts_1
Table of ContentsINTRODUCTION...........................................................................................................................1TASK.1............................................................................................................................................11.1 Explain the purposes and use of different accounting records for the Minty Cola Co.........11.2 Assess the importance and meaning of the fundamental accounting concepts below:.........31.3 Evaluate the factors which influence the nature and structure of accounting system ..........4for Minty Cola Co (Minty)..........................................................................................................4TASK.2............................................................................................................................................52.2 Analyse the control systems in place at Minty Cola.............................................................62.3 Evaluate the risk of fraud within Minty Cola and suggest method for the detection ...........8of fraud that could be used..........................................................................................................8TASK 3............................................................................................................................................93.1 Plan an audit for a Minty Cola with reference to scope, materiality and risk.......................93.2 Analyse the control systems in place at Minty Cola...........................................................103.3 Audit process in an appropriate manner of a proposed planned audit ...............................11for Minty Cola...........................................................................................................................11TASK 4..........................................................................................................................................124.1 Prepare a draft audit report (unqualified) of a Minty Cola................................................12CONCLUSION..............................................................................................................................13
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INTRODUCTIONThe Audit is the main thing which is used to make the firm sustainable, and also determine theweaknesses in the accounting systems, and moreover gives the suggestion to improve the firm.Audit helps the directors not to indulge the accounting functions on a daily basis that the firm isfunctioning in accordance with the information they are getting (Ajmi and et. al., 2014). An auditin the Minty Cola Company assist the firm to reduce the opportunities for fraud and pooraccounting. The Minty Cola Company is a manufacturer of fizzy drinks and performing well inthe current year. The success of the firm depends upon the consistent review of the accountingsystem and also do proper audits in order to reduce the risk of regulatory norms (Brusca and et.al., 2016.). This is the system which are need to be followed by all the companies that is essentialfor every company to get the positive results. Audit reports assists the various stakeholders toknow about the company's performance so that these stakeholders can draw a valid outcomes. TASK.11.1 Explain the purposes and use of different accounting records for theMinty Cola Co.Accounting record is the summarization of all the documents involved for making the financialstatements and records the relevant information for the review and audits which covers recordingof journals, ledgers, and invoices. Journals:- Journal entry is recording of transactions to the journals. Journal is known as “booksof genuine entry” ,where transactions are first recorded. The journals covers many of the primarybooks such as, sale book purchase book, cash book, general journal and many more. Ledger:- Maintaining ledger is necessary in entire accounting system. Ledger is useful formaking the trail balance so that the accuracy can be checked. Which checks the arithmeticalaccuracy of the ledgers. It keeps the records of the entire information which is ultimately usefulfor making the final accounts and financial statements. Final accounts:- These are the final accounts which are used in order to interprate by theoutsiders and various stakeholders so that that they could take their decisions in a better way.Final accounts covers the entire information about the company (Cojocaru and et. Al., 2016). It1
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covers income statement, balance sheet and the cash flow statements. These are discussed indetails hereunder: Income statement: This is the tool which is used in order to records various income generated bythe company and list out the expenses in a better way so that the management of the companycan get the basic overview about the company. Now, this has been seen that the incomestatement is used to assess the profits of the company. This can be generated for various timeperiods such as,monthly. quarterly, half yearly and yearly. Assessing the income statement trendsenables the firm to identify if there are periods when business incurs more expenses or earn moreincomes in order to plan a budget shortfalls or surpluses. Balance Sheet:- This is the statements which records the assets and liabilities of the company.The assets and liabilities are separated into current and non current categories on the balancesheet. Current accounts information represents the accounting information which are consumedor expected within a year, and non current account balances will take more than one year. Theliquid assets are recorded first on the balance sheet, and covers the cash and account receivablebalances. These items enables the investors and lenders to review the potential financial positionof the company. Statement of cash flows: The cash flow statement records the inflows and outflows of the cash.This differs from the income statement, as an income statement covers information for generatedincome which consumers have not yet paid, and outstanding expenses that the firm has not paidyet (Ellis, Haldane and Moshirian, 2014). The cash flow statements only concerned to thetransactions which have incurred for operating, investing and financing activities. Accounting plays a major role by generating the information in order to answers many questionsthat can be faced by the accounting information user. Accounting reflects about the companyimage in front of the public that how good or bad the financial condition is?, and what are theactivities or the products have generated the most of the profits. As, this is important for a firm.Some of the objectives of the accounting are given below:Accounting record helps the company to compare the data with the other rivalry so thatthe cited firm can get the competitive advantage and generate the more revenues. Accounting records helps the firm to produce the documents in case of any litigationoccurred. As, it reflects a good source of evidence. 2
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