Managing Financial Resources - Victoria Babies
Added on 2020-07-23
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MANAGING FINANCIALRESOURCES
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1Different kind of business structure and their differences...........................................................1TASK 2............................................................................................................................................2Explain management and financial accounting...........................................................................2Key difference between management and financial accounting..................................................2TASK 3............................................................................................................................................4Financial statements.....................................................................................................................4Illustration of annual accounts.....................................................................................................5Income statement......................................................................................................................5Balance sheet............................................................................................................................5Statement of cash flow.............................................................................................................6TASK 4............................................................................................................................................7Identify 5 stakeholders and their information requirement..........................................................7CONCLUSION................................................................................................................................7REFERENCES................................................................................................................................9
INTRODUCTIONFinancial management is about making solid plans and strategies for acquiring requiredfunds and assure its right utilization. It involves planning, organizing, allocation, monitoring aswell as controlling the money. Victoria Babies is a small sized manufacturing concern which isspecializes in producing innovative “Non Spill Toddler Bowl”. The current paper will investigatedifferent form of business structures and highlight key difference to select the best one.Moreover, the report will clearly present three key statements and differentiate financialaccounting from managerial accounting. Lastly, important stakeholders and their informationrequirement will be examined. TASK 1Different kind of business structure and their differencesAccording to the given case, Victoria Babies was set up as an Ordinary Partnership inwhich her parents joined as partners with a total turnover of GBP400,000 in 2015. With theimmense growth, a venture capitalist keen to invest GBP 700,000 in its business which will helpthe business to meet its capital requirement for expansion program. Thus, it need business tochange their structure either to Limited Liability Partnership or set up business as a PrivateLimited Liability Company.General or Ordinary Partnership: Partnership is simply a combination of two or morepeople who take responsibility to run a business with putting their combined efforts and shareprofit in set ratio. In this form, all the partners have unlimited liability towards lenders andcreditors (Ahmed and Manab, 2016). Moreover, they are liability for each other’s acts andomission. Under the legal requirement, to set partnership, there is no need of registration. Limited Liability Partnership: It is a form of partnership, in which, some partners limittheir liabilities. It does not means that other partner will be obliged for the misconduct andnegligence of copartner. It is different from general partnership because in this, partners havelimited liability. In order to become LLP, Victoria Babies need to incorporate the entity and alsoneed to follow LLP Act. At the same times, its benefits includes separate legal status, taxtransparency and others. 1 | Page
Private Limited Liability Company: It is small organization which cannot issue share topublic as these firms are not listed on any recognized stock exchange. They can offer and issueshare only to their friends, relatives and known members for fundraising (Garrison and et.al.,2010). As its name, members have limited liability but it involves compliance with multiple oflaws, thus, it includes excessive legal formalities such as compliance with Company Act 2006and registration. Still, there are number of benefits associated with this form of business structurei.e. separate entity, tax benefits and full control. Taking into account all the requirement, it is better to suggest Victoria Babies to convertbusiness into Limited Liability Partnership, because it involves comparatively less legalrequirement such as LLP Act and incorporation only. Moreover, it overcome the main drawbackof general partnership that is unlimited liability and also will be treated as a separate legal statusunder the corporate law. TASK 2Explain management and financial accounting Management accounting is concerned with preparation of internal business reports andsupply it to managers with the view to devise more effective and solid strategies which enablethe entity to achieve sustainable progress (Ahmed and Manab, 2016). Victoria Babies managerswill require sales, cost, inventory and other reports for business planning and decisions. Unlike this, financial accounting is just aims at recording each and every financialtransaction of the undertaking in annual statements to know profitability and financial health ofthe enterprise (Nam and Park, 2016). It includes recording, classifying, summarizing andanalyzing the final results.Key difference between management and financial accounting Basis ofdifferenceFinancial accounting Management accounting PurposeTo know financial position andoperational performance ofVictoria Babies (Schipper, Francisand Weil, 2017)To devise better business plans,decisive actions and make growthstrategies Statements Profit and loss statement Sales reports2 | Page
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