Accounting System and Process: Financial Decision and Inventory

This assignment provides a comprehensive overview of accounting systems and processes, focusing on practical applications and financial decision-making. It begins with an exploration of useful Excel functions, including IF, AND/OR, LEFT/RIGHT/MID, and VLOOKUP, demonstrating their application with examples and formula views. The assignment then delves into inventory management, contrasting perpetual and periodic inventory procedures with journal entries and discussing the suitability of each for different business types, specifically Bike World. It also includes a comparative analysis of LIFO, FIFO, and Average Cost methods for calculating the Cost of Goods Sold (COGS). Further, the document addresses bank reconciliation, identifying items that impact bank and cash balances. Finally, it touches on bad debt management, comparing perceived credit quality and delay recognition methods, and includes a ratio analysis to assess financial performance. This detailed analysis is aimed at providing a practical understanding of key accounting principles and their application in real-world scenarios, and it is available with other solved assignments on Desklib.

Accounting System and Process
Name of the Student
Name of the University

Table of Contents
Part A: Spreadsheet...............................................................................................................................3
[A1] Three Useful excel functions:.....................................................................................................3
[a] Excel IF Function:......................................................................................................................3
[b] Excel AND / OR Function:.........................................................................................................5
[c] LEFT/RIGHT/MID function:.......................................................................................................6
[A2] VLOOKUP Function:...................................................................................................................7
Purpose of VLOOKUP:....................................................................................................................7
Demonstration:..............................................................................................................................8
Part B: Inventory Management.............................................................................................................8
[B1] Perpetual inventory procedure Vs Periodic inventory procedure:.............................................8
Perpetual inventory procedure.....................................................................................................8
Periodic inventory procedure:.......................................................................................................9
Journal entries:..............................................................................................................................9
[B2] Cost of Goods sold using LIFO, FIFO and Average Cost method:..............................................11
LIFO Method:...............................................................................................................................12
FIFO Method:...............................................................................................................................13
Average cost method:..................................................................................................................13
[B3] Which method is appropriate?.................................................................................................14
Part C: Bank Reconciliation..................................................................................................................14
[C1] Requirement 1:........................................................................................................................14
[C2] Requirement 2:........................................................................................................................14
Part D: Bad debt management and financial decision.........................................................................14
Bibliography.........................................................................................................................................17

Part A: Spreadsheet
[A1] Three Useful excel functions:
There are several excel functions that are useful in various ways. Among them, below are three such
functions that are important in many ways:
[a] Excel IF Function:
The excel IF function or commonly referred as IF statement is used to validate a condition and
provide solutions when the condition is true and when the condition is false. In other words the
function is used to come to a solution basis certain condition.
The syntax of IF function is:
=IF(logic_test, value_if true, value_if_false)
The excel IF function can be used in several ways. One such example if SUMIF function. Here, the
function is a combination of excel SUM function and IF function.
The syntax of SUMIF function is:
=SUMIF( range, criteria, [sum_range] )
Another useful example is NESTED IF function. The NESTED IF function is used to check multiple
conditions and return the value when condition is true or false.
The syntax for nested IF function is:
=IF( condition1, value_if_true1, IF( condition2, value_if_true2, value_if_false2 ))
Example of IF function:
Raw data:

Conditions:
Calculations:

With formula view:
[b] Excel AND / OR Function:
The excel AND function is a logical function which return TRUE if two or more given conditions hold
true. On the other hand, the excel OR function is also another logical function which return TRUE if
any one of the two or more given conditions hold true.
The syntax for AND function is:
=AND (logical1, [logical2], ...)
The syntax for OR function is:
=OR (logical1, [logical2], ...)
Example:

With formula view:
[c] LEFT/RIGHT/MID function:
The excel LEFT, RIGHT or MID function is a specific text function which helps in identifying specific
text content.
The syntax for LEFT, RIGHT, MID functions are as follows:
=LEFT(text_string, char_numbers)
=RIGHT(text_string, char_numbers)
=MID(text_string, start_number, char_numbers)
Example:

With formula view:
[A2] VLOOKUP Function:
Purpose of VLOOKUP:
The VLOOKUP function performs a vertical lookup by searching for a value in the first column of a
table and returning the value in the same row in the index_number position. The VLOOKUP function
is a built-in function in Excel that is categorized as a Lookup/Reference Function. It can be used as a
worksheet function in Excel. As a worksheet function, the VLOOKUP function can be entered as part
of a formula in a cell of a worksheet.
The syntax for the VLOOKUP function is:
= VLOOKUP( value, table, index_number, [approximate_match] )

Demonstration:
With formula view:
Part B: Inventory Management
[B1] Perpetual inventory procedure Vs Periodic inventory
procedure:
Perpetual inventory procedure
Organizations utilize perpetual inventory procedure in an assortment of business settings. Generally,
organizations that sold stock with a high individual unit esteem, for example, autos, furniture, and
machines, utilized perpetual inventory procedure. Today, modernized money registers, scanners,
and bookkeeping programming programs consequently monitor inflows and surges of each stock
thing. Computerization makes it prudent for some, retail locations to utilize never-ending stock
method notwithstanding for merchandise of low unit esteem, for example, groceries.
Under perpetual inventory procedure, the Merchandise Inventory account gives close control by
demonstrating the expense of the products that should be available at a specific time. Organizations
charge the Merchandise Inventory represent each buy and credit it for every deal with the goal that
the present parity is appeared in the record consistently. As a rule, firms additionally keep up
itemized unit records demonstrating the amounts of each kind of merchandise that ought to be
available. Organization work force likewise take a physical stock by really tallying the units of stock

available. At that point they contrast this physical tally and the records demonstrating the units that
ought to be close by.
Periodic inventory procedure:
Promoting organizations moving low unit esteem stock, (for example, stray pieces, nails, Christmas
cards, or pencils) that have not electronic their stock frameworks frequently find that the additional
expenses of record-holding under perpetual inventory procedure more than exceed the advantages.
These marketing organizations regularly utilize periodic inventory procedure.
Under periodic inventory procedure, organizations don't utilize the Merchandise Inventory record to
record each buy and clearance of stock. Rather, an organization revises the parity in the
Merchandise Inventory account as the consequence of a physical stock tally toward the finish of the
bookkeeping time frame. Additionally, the organization as a rule does not keep up different records
appearing precise number of units that ought to be close by. Albeit intermittent stock technique
decreases record-keeping, it likewise lessens command over stock things. Firms accept any things
excluded in the physical check of stock toward the finish of the period have been sold. In this way,
they erroneously expect things that have been stolen have been sold and incorporate their expense
in expense of merchandise sold.
Journal entries:
Given data:
 Dec. 01: Beginning inventory; 200 units @ $10 each.
 Dec. 02: Sold 160 units @ $16 each.
 Dec. 12: Purchased 300 units @ $12 each.
 Dec. 18: Sold 240 units @ $17.50 each.
 Dec. 22: Purchased 320 units @ $14 each.
 Dec. 29: Sold 200 units @ $18 each.
Perpetual Method:

Periodic method:

For the given Bike World Business Periodic method will be more appropriate.
[B2] Cost of Goods sold using LIFO, FIFO and Average Cost
method:
Given data:

LIFO Method:
Formula view: