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Users of Financial Statements (PDF)

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Added on  2019-12-03

Users of Financial Statements (PDF)

   Added on 2019-12-03

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FINANCE1 | P a g e
Users of Financial Statements (PDF)_1
TABLE OF CONTENTSINTRODUCTION......................................................................................................................4Task 1.........................................................................................................................................41.1 Description of different users of financial statements................................................41.2 Influence of regulatory body on preparation of financial statements.........................51.3 Assessment of implications for users in the conceptual framework...........................51.4 Explanation of reporting standards required to be followed by business entities indealing with regulatory requirements...............................................................................6TASK 2......................................................................................................................................7AC 2.1 Preparation of financial statements from incomplete records..............................7AC 2.2 Preparation of Financial statements of Sajid's Trader .........................................8AC 2.3 Preparation of consolidated financial statements of subsidiary and holdingcompany............................................................................................................................9TASK 3....................................................................................................................................10AC 3.1 Different users of financial statements...............................................................10AC 3.2 Financial statements for various types of organizations....................................10TASK 4....................................................................................................................................11AC 4.1 Calculation of Gearing ratio, earning per share and price earnings ratio:..........11AC 4.2 Interpretation of accounting ratios.....................................................................12CONCLUSION........................................................................................................................12REFERENCES.........................................................................................................................132 | P a g e
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INDEX OF TABLESTable 1: Table 1: Trading A/C as on 30 September, 2015 (In £)...............................................1Table 2: Profit and Loss A/C as on 30 September, 2015 (In £).................................................1Table 3: Balance sheet as on 30 September, 2015 (In £)...........................................................2Table 4: Trading Account of Sajid Trader for the year ended 31st December, 2014(In £).......2Table 5: Profit and loss account for the year ended 31st December, 2014 (In £)......................2Table 6: Balance sheet of Sajid Trader as on 31st December, 2014 (In £)................................2Table 7: Calculation of profit after interest, tax and preference dividend (In £).......................43 | P a g e
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INTRODUCTIONFinancial statements are prepared to know the profitability and financial position ofbusiness. It is prepared by every business organizations for the recording of financialinformation in a proper manner. Present project report is based on the understanding ofregulatory framework for financial reporting. It will include description regarding differentnorms to be considered by entities while preparation of financial statements. Financialstatements are statements that are used by various parties, thus business entities are requiredto assure that provided statements are reliable and accurate. This report will helps us inidentifying different users of financial statements. In addition to this, the report also describesthat format of financial statements tend to vary according to the nature of business such assole proprietorship, partnership and company.TASK 11.1 Description of different users of financial statementsFinancial statements prepared by business entities are used by different parties inorder to viable decisions which are linked to the commercial activities. Description ofdifferent users and their needs is as follows-1.Banks- Financial institutions require information of business in order to assess theirsolvency position. By the assessment of financial statements, they are able todetermine capability of company in repayment of loan. 2.Potential investors and shareholders- These party assess financial statement in orderto assess profitability position of the business. By considering this information,potential investors make decision regarding future investment stock of company(Gibson, 2010). Further, shareholders decide for reinvestment or divestment in theequity of company.3.HMRC- For the purpose of tax evaluation, HMRC consider the financial statementprepared by the business. Through their evaluation, they assure that manipulation isnot done by company for the purpose of tax evasion (Deakins, Morrison andGalloway, 2002).4.Employees- In order to assess, growth opportunities employees of the organizationalso assess information in the financial statement. By considering the financialposition of the company they make their decision regarding career and futureemployment. 4 | P a g e
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