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Importance of Keeping Accounting Systems- Minty Cola Co

   

Added on  2020-02-05

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FINANCIAL SYSTEM ANDAUDITING
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TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1................................................................................................................................................11.2................................................................................................................................................21.3................................................................................................................................................3TASK 2 ...........................................................................................................................................42.1................................................................................................................................................42.2................................................................................................................................................52.3................................................................................................................................................6TASK 3............................................................................................................................................63.1................................................................................................................................................63.2................................................................................................................................................73.3................................................................................................................................................8TASK 4............................................................................................................................................94.1................................................................................................................................................94.2..............................................................................................................................................10CONCLUSION .............................................................................................................................11REFERENCES..............................................................................................................................12
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INTRODUCTIONFinancial resources of a company play a very critical role in its success and therefore, it isimperative for every enterprise to undertake appropriate measures for the management thefinancial aspect. Strategic and tactical objectives shall be set in place for better utilization of theresources. Fundamentally, financial system of a company is comprised of transactions anddealing of money with various stakeholders of the company (Gelinas, Dull and Wheeler, 2011).Some of the measures such as recording, in time reporting of transactions, verification etc. areincluded within the system. The effectiveness of the system can be further enhanced by conducting auditing of theinternal controls, which are vital for the success of an organization. In effect, it shall producedependable financial reporting, prevent the occurrence of frauds and misappropriation of theresources of a business unit (Zadek, Evans and Pruzan, 2013). In furtherance to this, the reportshall elaborate on the importance of keeping accounting systems particularly in the context ofMinty Cola Co. (Minty Cola), which is involved in manufacturing of soft drinks. It then analysesthe management control system of the company. Further, audit report of Minty Cola shall bepresented which is planned and prepared by interim audit supervisor of Parsley & Co. TASK 11.1The financial performance and position of a business unit is reflected by the accountingrecords, which documents the assets, liabilities, cash flow etc. of the organization. To complywith the laws, Minty Cola shall adhere to the requirement of maintaining the accounting records,which otherwise would also prove beneficial for the company.Balance Sheet shows the financial position of the company, by demonstrating the assetsand liabilities of the company Income Statement is the summarized record of the revenues and expenses. It is in theform of profit and loss account, which determines the net profit and loss of the company andTrading account, which ascertains the gross profit of the company (Norman, Rose and Rose,2010).
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Ledger is a complete record reflecting all the elements of finance such as equity, revenue,expenses, assets etc. It provides account information of all these elements for the life of thecompany. Trial Balance is the combination of balance amount of all the ledgers and is useful in theascertainment of arithmetical correctness of the varied transactions documented. Prime Entry Books are utilized for the purpose of primary recording of the data beforeentering it in the double-entry book keeping system (Knechel and et. al., 2012). Cash Book illustrates all the cash transactions in the form of receipts as well aspayments in a chronological order and is used as a tool for internal auditing. Sales Book is the record of credit sale transactions of the whole day and is furtherused to prepare the sales ledger of the specific day. Purchase Book contains all the original entries of only credit purchases and isaggregated on a monthly basis. The resulting outstanding figures are credited in therespective account of the suppliers. 1.2The postulates or conditions which constitute the basis of recording the accounts andpreparing various financial statements is termed as Accounting concepts. Some of the conceptswhich shall prove useful for Minty Cola have been described herein under: Accrual refers to recording of the earned revenues in income statement, even if notactually realized. This is termed as accrual-based accounting and determines the economiccondition of the company by recording events irrespective of their actual realization (Mennicken,2010). Going concern implies that the specific firm is functioning with no threat of liquidationin the coming time duration and can be assumed to operate in the market at least in theforeseeable future. Business entity is a body which is administered by the commercial laws of the nation andhas come into existence to carry out business activities or any other ascertained work. It can be inthe form of corporations, partnerships, sole proprietary firms, limited liability companies etc. Forinstance, Minty Cola is a company, incorporated under the commercial law of the nation, formanufacturing soft drinks.
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