Financial Accounting of Halford Group Plc : Report
Added on 2020-01-23
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Introduction to financial accounting
Table of ContentsEssay Writing.............................................................................................................................1REFERENCES...........................................................................................................................9
ESSAY WRITINGEach and every business organization has to keep a detailed record of all the businesstransaction. Financial accounting is the process of maintaining the record of organization'sfinancial transactions that aim at determining the business performance. There are differentkinds of stakeholders in every organization that include both internal and external. Internalstakeholders are the part of organization such as manager, employees and directors.However, external stakeholders are the outsiders that have some kind of interest in theorganization such as customers, suppliers, government and competitors (De Chernatony andHarris, 2000). Halford Group plc is a public retail organization established in the year 1892.Headquarter of the company was established in Redditch, England, United Kingdom. Itproduces cycling and other automotive products as well as provides repairing services to itscustomers. Vision of the company is to help and inspire their customers with their life onmove. The present report will help in identifying the importance of financial accounting inthe respect of its external stakeholders. It explains that how produced financial statementssatisfy stakeholders through providing information. Moreover, the role of corporategovernance in the respect of stakeholders will also discuss in this report. It is the compositionof organization's directive and controlling rules, regulations and policies. The governing rulesare designed in such a way that is used to reduce conflicts between stakeholders. Financial statements: Two statements are prepared in the financial statements thatinclude income statement and balance sheet that are described below:Income statement: It is the summary of Halford’s expenses and revenues. It helps todetermine the net operation result in terms of gross and net profitability. Revenue: Halford has two operating division that are retail and Autocentres in the UKand Ireland. The company mainly operates in two markets that are motoring and cycling. Carparts, accessories, technology, consumables and car services are the parts of motoringoperations. Halford includes the income from selling its motoring and cycling products,online retail revenue and service income. Its retail segment incomes are to be reported at fairvalue of sales of goods and service, rebates, promotion and returns. It is recognised when therisk and ownership of goods are transferred to the buyer. However, income from providingservices will be shown at the time when services are rendered to the customers (Hendersonand et. al., 2013). Further, any returns that are made by consumers to the organization will betermed as sales returned. It will be deducted from total sales so as to determine net revenue.1 | P a g e
In addition to it, other income also will be shown in the income statement such as financeincome. It is the interest income that is earned by the organization on their investment. Thisinformation is useful for the distinct external stakeholders. For instance, suppliers can detectorganization sales to formulate their terms of conditions and take qualified decisions.However, investors can determine the organization earning capacity and its stability. Further,government determines the organization's contribution in the economy on the basis of totalsales. On contrary, customers can identify the sales with the discount and rebates offered.Thus, it has become clear that such information helps stakeholders to take effective decisions.Expenditures: Under the expenditures, two head cost of goods sold and other indirectexpenditures will be shown. Cost of goods sold is the total of purchase and the efforts that aremade to bring goods in sale able position. Retail division comprises expenditures forpurchasing the motoring and cycling products. Moreover, it also includes the expendituresthat are incurred for purchasing accessories and other equipment (Halford Group plc annualreports and accounts, 2015). Further, marketing and finance expenditures are also involvedin the total expenditure. For instance, under the finance expenditure, payment that are madeby Halford on the taken amount of borrowings will be shown. It helps lenders to assess thefinancial liability of company and determine that organization is making regular payment ornot. It helps them to take effective lending decisions. In addition to it, dividend payment toshareholders helps investors to determine their income. They can assess that organization isproviding better return or not on their investment on the basis of total revenue and profits. OnContrary, Halford's tax payment helps government to assess that company is paying regulartax on the total income or not. Government also can identify the business operating activitiesthat are legal or not. Government can determine that organization is following the framedrules or regulations or not. Profit: Gross profit is the excess of total sales over the cost of goods sold. However,net profit is the excess of gross profit plus indirect income over the indirect expenditures. Ithelps investors to detect business profit margin. Moreover, suppliers and creditors providecredit to the business, therefore they are mainly concern for the credit security. Hence, theyanalyse profits earning capacity of the company and take good decisions. On contrary,government determines Halford's tax liability on the basis of business profits. Competitorsalso analyse business profitability for the comparative study. They can determineorganization operating policies and technology. Further, investors assess Halford's return onequity and capital employed. 2 | P a g e
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