Accounting for Managers Report: Financial Performance

This report provides a comprehensive overview of accounting principles and their application in financial reporting. It begins by discussing the purpose and aims of accounting within an organization, differentiating between financial and management accounting, and highlighting the role of the IASB and SAC. The report then delves into practical accounting tasks, including preparing journal entries, constructing general ledger accounts, and creating a trial balance. It also covers the preparation of key financial statements such as the cash flow statement, income statement, and balance sheet. Furthermore, the report includes the computation of financial ratios to assess the financial performance of the Woody Train Organization, providing valuable insights into the company's profitability, liquidity, and solvency. The content covers a range of accounting concepts and practices essential for understanding financial statements and analyzing business performance.

Accounting for Managers

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1. Discussing purpose and aim of accounting to organisation...............................................1
2. Users of accounting information........................................................................................2
3. Discussing role of IASB and SAC.....................................................................................3
TASK 2............................................................................................................................................3
1. Prepare journal entries........................................................................................................3
2. General ledger accounts.....................................................................................................5
3. Adjustment entry................................................................................................................9
4. Producing trial balance.....................................................................................................10
5. Cash flow statement.........................................................................................................10
6. Income statement..............................................................................................................11
7. Balance sheet ...................................................................................................................12
TASK 3..........................................................................................................................................13
1. Computation of financial ratios of the company..............................................................13
2. Financial performance of Woody Train Organisation......................................................13
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................17

INTRODUCTION
Accounting plays significant role in the company so that management may take effective
decisions with much ease. Present report deals with importance of financial accounting in the
company. Various accounting records are prepared which are helpful to stakeholders in the best
possible manner. Computations of financial ratios are made to assess performance of
organisation. Thus, financial statements are helpful in attaining results in effectual way.
Financial and management accounting are useful for managers to take enhanced decisions quite
easily.
TASK 1
1. Discussing purpose and aim of accounting to organisation
Accounting has immense role in the business so that it may be able to provide necessary
information to users in the best possible way. In this regard, management and financial
accounting are both important for company so that financial statements may be prepared quite
effectively. This is essential so that various stakeholders may be able to analyse financial health
of the firm in the best possible manner. Financial accounting is recording and summarizing data
which occurs in the business on daily basis. Moreover, main purpose of financial accounting is to
provide reports containing financial information to various users of accounting information so
that they may be able to take better and enhanced decisions quite easily. Accountant of the firm
is required to follow guidelines provided by GAAP (Generally Accepted Accounting Principles)
which is the accounting professional body guiding accountants. It provides various guidelines so
that proper financial statements may be prepared in the best possible manner exhibiting true
financial position of the company (Fracassi, 2016).
Aim of financial accounting is that it should be relevant to users of financial information so
that they make take effective decisions. Moreover, another aim of financial accounting is that
information presented must be reliable. This means that financial statements must be free from
biasness and must not be misleading in any manner. The financials of the organisation should be
comparable which means that investors must be able to compare data so that they may assess
performance of the company in the best possible manner. Another aim of financial information is
that consistency should be present. This implies that same accounting policies should be
followed by the company for a longer time frame. If accounting methods are changed then
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reliability of the financial information will be lost. Thus, consistency must be there so that
financials may be easily compared as well.
On the other hand, management accounting is another branch of accounting which is
relevant to managers so that they may be able to take enhanced internal decisions for the
betterment of firm. Management accounting has various aims and purposes. The main purpose of
management accounting is that it helps in planning and forecasting needs of various departments
of the company in the best possible manner. Budgets are prepared with much ease by taking into
account managerial reports. Main essence of such accounting is that it is not available for various
stakeholders of the company and is available to management only for taking decisions.
Controlling and monitoring are another important aspect of this accounting. This help
management to analyse whether actual outcome is same as per budgeted one. Thus, if any
deviations exist, then corrective action is taken to improve upon the condition (Gitman, Juchau
and Flanagan, 2015).
In relation to this, management accounting has various aims. The main aim is that is to
assist in planning and formulation of policies so that tasks may be accomplished with much ease.
Moreover, management accountant provides information in that way which helps to identify
performance of company quite easily. Moreover, strategic problems can be resolved with much
ease. Another aim of management accounting is that performance of employees can be enhanced
quite easily. Thus, both the branches of accounting are important to organisation.
2. Users of accounting information
The users of financial information are numerous. Mainly among them are investors,
creditors, suppliers, managers, employees and many other users. These people require to assess
financial performance of the company so that they may take better and effective decisions. These
stakeholders require accounting information so that adequate decisions can be taken by them.
This helps them to assess liquidity, profitability and solvency position of the company in the best
possible manner.
Investors seek for accounting information so that it may assess effectiveness of the
company whether it is generating adequate profits or not. Thus, they mainly focus on the
profitability position of the firm and analyse whether good earnings are made by the company or
not. This clarifies them whether adequate dividends will be provided by the firm or not. On the
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other hand, creditors require accounting information for assessing debt payment of the company
whether it will be able to repay debt within stipulated time or not. Moreover, financial
information is used by them so that company may make payments timely.
On the other hand, suppliers also require accounting information so that they assess
solvency of firm in making payments for materials supplied by them. Thus, they assess capacity
of the company in effective way so that timely payment may be recovered by them. Managers
assess accounting information to take better and effective decisions to strengthen internal
operations of the company. Employees also require to assess profitability of the company so that
they may analyse whether they will be benefited with amenities and higher salaries and also
analyses whether firm is helpful for developing career of them or not. Thus, users of financial
information assess about the effectiveness of the company (Burritt, Schaltegger and Zvezdov,
2011).
3. Discussing role of IASB and SAC
IASB (International Accounting Standards Board) and SAC (Standards Advisory Council)
are important accounting professional bodies regulating companies of UK in effective way.
IASB has the role of issue accounting standards to the companies so that proper financial
statements may be prepared with much ease. The main role of this accounting body is that all the
accounting standards are followed by the companies and as such, transparency can be maintained
with much ease.
The business may be benefited by following accounting principles in the best possible
way. Moreover, financial reporting guidelines are provided to company so that adequate
financial statements may be prepared exhibiting real position of firm. SAC has the role of
providing expert advice to the company and associated funds which come under B Impact Rating
System. This council provides advice to the company so that it may invest funds in emerging
markets and yield adequate returns (Caglio and Ditillo, 2012).
TASK 2
1. Prepare journal entries
In the books of Jack Uzi
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Date Particulars L/F Amount Amount
A Prepaid rent a/c Dr 500
To Rent a/c 500
(Being advance payment made for
lease)
B Cash a/c Dr 4847
To Sales a/c 4847
(Being sales made)
C Cash a/c Dr 4486
To Sales a/c 4486
(Being sales made)
D Cash a/c Dr 4702
To Sales a/c 4702
(Being sales made)
E Cash a/c Dr 1827
To Sales a/c 1827
(Being sales made)
F Office supplies a/c Dr 416
To Accounts Payable a/c 416
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(Being purchased office supplies)
G Drawings a/c Dr 1600
To Cash a/c 1600
(Being withdrawal made by
owner)
H Creditors a/c Dr 390
To Bank a/c 390
(Being payment made to creditors)
I Wages a/c Dr 2500
To Cash a/c 2500
(Being wages paid)
J Cleaning services a/c Dr 74
To Cash a/c 74
(Being payment made in cash)
K Purchase a/c Dr 4044
To Cash a/c 4044
(Being payment made)
L Purchase a/c Dr 3597
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To Cash a/c 3597
(Being payment made)
M Purchase a/c Dr 4169
To Cash a/c 4169
(Being payment made)
N Purchase a/c Dr 1382
To Cash a/c 1382
(Being payment made)
2. General ledger accounts
Cash a/c
Particulars Amount Particulars Amount
Sales a/c 4847 Prepaid rent a/c 500
Sales a/c 4486 Drawings a/c 1600
Sales a/c 4702 Wages a/c 2500
Sales a/c 1827 Cleaning services a/c 74
Cash Balance 2000 Purchase a/c 4044
Balance C/F 4 Purchase a/c 3597
Purchase a/c 4169
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Purchase a/c 1382
17866 17866
Balance B/F 4
Office supplies a/c
Particulars Amount Particulars Amount
Accounts Payable 416 Balance C/F 416
416 416
Balance B/F 416
Accounts Payable a/c
Particulars Amount Particulars Amount
Balance C/F 75 Office supplies a/c 416
Accounts Payable 416 Balance C/F 75
491 491
Balance B/F 416
Drawings a/c
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Particulars Amount Particulars Amount
Cash a/c 1600 Balance C/F 1600
1600 1600
Balance B/F 1600
Bank a/c
Particulars Amount Particulars Amount
Balance C/F 390 Creditors a/c 390
390 390
Balance B/F 390
Creditors a/c
Particulars Amount Particulars Amount
Bank a/c 390 Balance C/F 390
390 390
Balance B/F 390
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Wages a/c
Particulars Amount Particulars Amount
Cash a/c 2500 Balance C/F 2500
2500
Balance B/F 2500
Cleaning services a/c
Particulars Amount Particulars Amount
Cash a/c 74 Balance C/F 74
74 74
Balance B/F 74
Purchase a/c
Particulars Amount Particulars Amount
Cash a/c 4044 Balance C/F 13192
Cash a/c 3597
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Cash a/c 4169
Cash a/c 1382
13192 13192
Balance B/F 13192
Sales a/c
Particulars Amount Particulars Amount
Balance C/F 15862 Cash a/c 4847
Cash a/c 4486
Cash a/c 4702
Cash a/c 1827
15862 15862
Balance B/F 15862
Capital a/c
Particulars Amount Particulars Amount
Balance C/F 2000 Cash a/c 2000
2000 2000
Balance B/F 2000
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