Uses of Financial Statements in Different Accounting

FINANCE FOR MANAGERS

TABLE OF CONTENTS
Introduction .........................................................................................................................................3
Task 1....................................................................................................................................................3
1.1...............................................................................................................................................3
1.2...............................................................................................................................................4
1.3...............................................................................................................................................4
1.4...............................................................................................................................................5
Task 2....................................................................................................................................................6
2.1...............................................................................................................................................6
Task 3....................................................................................................................................................8
3.1...............................................................................................................................................8
3.2.............................................................................................................................................11
3.3.............................................................................................................................................12
CONCLUSION..................................................................................................................................13
References..........................................................................................................................................14

INTRODUCTION
Finance is a pillar of corporate and it deals in investment. It can be easily converted into
cash. Identification and analysis of financial problems has been carried out in this report. The
purpose of this project is to identify the uses of financial statements in different accounting and to
know about the selling price of the product. Budgets are estimated for launching a new product. Net
present value, payback period and internal rate of return estimated so that entity can launch the new
product (Ishikawa and Takahashi, 2010). In this report, the budget planning is to be described. To
get proper financial information of the company it is necessary to estimate the financial position of
the company. Investment policies are based on the fair and true financial report of the company.
TASK 1
1.1
Financial statement explains the financial activities of the company. By these statements, the
performance and stability of the entity can be identified (Fernandes, 2014). Mainly four financial
statements is there that is statement of cash flow, balance sheet, income statement and the statement
of equity.
 Balance sheet: It is a most prominent financial document of the company. It contains three
elements i.e. assets, equity and liability. Assets are something which is possessed by the
business for example, land, building, machinery. Liability is the obligation for the
organization. It is mentioned in the balance sheet (Lambert, 2012). Some examples of
liabilities are creditors, bank loans and overdraft. In short, it can be assessed that equity is
the difference between assets and liability.
 Statement of equity: - It signifies the changes in equity during the period. It includes the sale
and purchase of stock and payment of dividend. In this statement, profit and loss generally
fluctuates as per the financial position of the entity.
 Cash flow statement: - It indicates the inflow and outflow of cash and bank as well as
describes the movement of cash. It is divided into different segments: - Operating activity
represents the first activity of cash in entity. Investing activity denotes the purchase and sale
of assets except inventory (Bean and Hussey, 2012). Financing activity describes the sources
of funds and uses of find. It is helpful in taking decisions for the business.
 Income statement: - It signifies the net profit and loss of the corporate and through this it
identifies the company's financial position. It is divided into parts: - Income which is earned

by the business in a year such as dividend income. Expenses are that cost which is suffered
by the company such as wages.
1.2
Uses of the financial statements: - With the help these statements, it can be determined that
whether the entity can sustain in the market or not (Mohsin, 2013). According to the cash flow, the
company can take decision that where the investment should be done and cash should be used.
Evaluation can be carried out by these statements according to the performance (Director, 2012). It
is used by the government for checking the correctness of the payment of taxes. The documents are
helpful in taking the long term decisions and are also used as a source of historical records. These
assertions are used by the customers, employees, government, competitors etc.
Financial accounting denotes the position of the entity to its external shareholders whereas
the management accounting is used by the managers for daily operations of the business. Budgeting
count includes balance sheet, income statement and cash flow statement while administration rate
includes capital budgeting, breakeven point.
Significance of management accounting:-
1. Helps in increasing the efficiency of the management and assist in decision making (Vieira,
2016). Management accounting controls the cost of production; it can lead to increments in profits.
2. It aids to identify the risk, and resources should be allocated. Performance of the company is
measured by the management accounting.
3. For small business, management accounting is very powerful tool for making better decisions.
4. For achieving the goals, price determination should be done by evaluating, planning and
controlling the manufacturing operations (Marciukaityte and Szewczyk, 2011).
Substance of financial accounting:-
 It helps to improve the financial position of the company and provide information related to
finance of the entity.
 Management accounting is helpful in finding the omitted facts and figures.
1.3
Finding the selling price of new ice cream product:
Units produced is 8000
Direct material cost is £9000