Financial Reporting Requirements for Malta Private Limited

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FINANCE FOR MANAGERS

Table of Contents
INTRODUCTION...........................................................................................................................................4
1.1 PURPOSE AND REQUIREMENTS FOR KEEPING FINANCIAL RECORDS.................................................5
1.2 Technique for recoding financial information....................................................................................7
1.3 ANALYSIS OF THE LEGAL AND ORGANIZATIONAL REQUIREMENTS OF FINANCIAL REPORTING........8
1.4 Evaluate the usefulness of financial statements to stakeholder........................................................9
3.1 Explain the difference between management and financial accounting.........................................10
3.2Explain the budgetary control process.............................................................................................11
3.4 Evaluate the use of different costing methods used for pricing purposes.......................................12
TASK 2........................................................................................................................................................14
3.3..........................................................................................................................................................14
TASK 3........................................................................................................................................................17
CONCLUSION.............................................................................................................................................23
REFERENCES..............................................................................................................................................24

INTRODUCTION
This assignment covers the aim and need to keep the financial records. It also helps to analyze
the methods to record the financial information. Further the organizational and legal need of
financial reporting is also being covered. The variances will also be covered that will be
calculated. The further part will provide the understanding for the project appraisal method
with the help of accounting rate of return, net present value, and Payback and Internal rate of
return.

TASK 1
1.1 PURPOSE AND REQUIREMENTS FOR KEEPING FINANCIAL RECORDS
Malta Private limited keeps the financial record that is the important and vital part for the
organization. The purpose to keep the financial records is as below:
Keep stakeholders informed
The main purpose to keep the accurate financial records is to present the information to the
stakeholders of Malta Private Ltd. It is the responsibility and legally entitled to present the
accurate the position of the organization in financial terms at a particular time. The main
purpose to present the current financial status of Malta private ltd is to inform their
stakeholders about the progress of the company throughout the year (Gitman et al., 2015).
Internal stakeholders
Internal stakeholders of the Malta Private limited contributes for expansion of their efficiency
and financial revenues annually. Financial records are being informed to the employees of
Malta private ltd so that the organization can run effectively on a daily basis. The employees
must be informed for keeping the track of financial position of Malta Private ltd. Along with this
the managers must also be informed as they also assess the financial documents to see the
improvement in needs and what solutions to be delivered to get rid of problems.
Requirements to keep financial records
To set the right record keeping system for the business helps to work in an efficient manner,
meeting legal requirements and to strengthen the staff and customer relationships.
Companies act
In context to the Companies act, Chapter 386 of the Malta Laws have the obligation to keep a
register of debentures, members etc. and it also ensures the companies to keep the records of
accounting with respect to below:

1) All sums of money expended and received by the company and the matters related to
the expenditure takes place and the receipts
2) The liabilities and assets of company
3) If the business of company includes dealing in the goods
4) Stock statements held by the company at the ending of accounting period
Such all records must be enough in explaining the records of the transaction of the company
and it must also reflect the accuracy at any time. It must also ensure the directors must
prepare the profit and loss account and balance sheet and it must comply with the
companies act requirements. The records of accounting are kept for at least 10 years (Fields,
2016).
Commercial Code
According to this act mentioned under chapter 13 of the Laws of Malta, every business must
keep the trade books including orders of date, telegrams, invoices, letters, type-written and
hand written, letters, press copy forwarded.
VAT act
In context to the act, every registered company with VAT which is mentioned in Laws of Malta,
every registered company from VAT must keep the following documents and records:
 Proper records and accounts of its economic activity
 Value added tax account
 All invoices of tax receives
 Issued copies of all tax invoices (Statman, 2018)

1.2 Technique for recoding financial information
There are many techniques to record the financial information for the Malta Private ltd that
helps to decide keeping track of expenses, income and inventories. Below is main technique to
record financial accounting:
Accrual or Cash: Business has the option to use either accrual method or cash of accounting
when to record the transactions. Large organization can use the accounting based on the
accrual accounting. The organization can select among the two methods.
Perpetual or Periodic: Malta Pvt Ltd has the option to use the periodic inventory system and it
records all finished products and goods when placed in the inventory. With the use of this
system business is taking the inventory count twice or once a year (Flower, 2018).
Inventory methods: Business may select the account for the inventory they sell by selection of
the inventory method and the options are first in and first out and last in first out that are
(FIFO) and (LIFO).

1.3 ANALYSIS OF THE LEGAL AND ORGANIZATIONAL REQUIREMENTS OF
FINANCIAL REPORTING
Different nations have introduced and developed their own accounting principles over the time.
For ensuring the comparability and uniformity between financial statements prepared by the
different companies, a set of different rules and guidelines are used. This are commonly
referred as Generally Accepted Accounting Principles, these se of the guidelines provide the
basis in the financial statements preparation although many companies disclose the
information voluntarily beyond such requirements scope. The New Year has brought the
significant changes for the financial requirements in Malta (Williams and Dobelman, 2017).
There is the introduction of the new law through the General Accounting Principles for Small
and medium-sized Entities and also the amendments to the Companies Act of Malta. This
reduce the amount of the financial information in the financial statements and such companies
need to present only a balance sheet, notes for the financial statement and income statement
for complying with the new framework for the presentation.
Sole traders control their business as this is not entities of table nature. They do not need to
have filled the separate forms of tax for the business. They also add the business to their
personal tax return. The accounts are very simple for this and single entry bookkeeping are
used. The financial reporting requirements are similar to the sole traders. Along with this the
limited companies need to use the double entry bookkeeping for using the account statement
of the year-end. The other one is public limited companies and they need to provide all
financial information to the public too. The financial data and information are transparent and
available to all public and shareholders (Pratt, 2016).

1.4 Evaluate the usefulness of financial statements to stakeholder
Users/Stakeholders: The reliability and significance of financial statements affects the users
decisions that are also known as the stakeholders as it assist in taking management and
financial decision. The information from the financial statements reflects the relationship of
stakeholders with the organization. The users include owners, managers and employees. There
are other stakeholders also includes customers, creditors, investors etc. According to the
interest the financial statements are being utilized for the different reasons (Henderson et al.,
2015).
Managers: As managers requires the financial data to analyze the performance and position of
the business for helping them to take appropriate measures for improving the results.
Owners: Similarly the owners need the financial information for analyzing the investment
viability and to assess the future course of action.
Employees: To assess the profitability of the company and the results of their future job
security and remuneration and to make the agreements for the employees and to discuss
rankings and promotions.
Creditors: To determine the worthiness of credit of the organization and to set the credit terms
through taking the resources of the business.
Regulation and Taxation Authority: Through assessing the tax returns credibility by the
organization and to assure that all information of the disclosed accounting in accordance with
all regulations and rules (Warren and Jones, 2018).

3.1 Explain the difference between management and financial accounting
Financial accounting is prepared in context to the legal financial reporting needed. It is being
used for interpretation of the past performance of the organization and it is being compared
with the other organization and with previous years. It is also being useful for the decision
making of the long-term investments.
Management accounting focuses on the relevant, incremental costs of the situation and more
details are being prepared and presented in the financial accounts. It helps to guide
management for arriving at specific decisions instead of the purpose of reporting (Barth, 2015).
Management Vs Financial Accounting
Financial accounting considers the full organization scope whereas other one focuses on the
relevant and immediate scope. Financial will focus on the financial information, whereas other
one focuses on the non-financial information and other management aspects. Financial
accounting focuses over the purpose of reporting while other one focuses on the decision
making. Financial accounts are prepared in specific format while there is no particular format
for the management accounting. Financial accounting helps to make decision for the
investment while other one helps to make the process for the decision making
(Narayanaswamy, 2017).

3.2Explain the budgetary control process
The budgetary control process is the continuous process that reflects that the people of the
organization are liable for their things which they have and also for that they do not have. Also
the budgetary control process identifies and takes remedial actions that can be taken for
ensuring the objectives of the organization. This process starts with the analysis of the results of
the current years; analyze the target forecasts for upcoming year, evaluation of results e tc.
Through evaluation of the outcomes and identification of correct actions that can be taken. It
enables the organization in recognizing the areas that are being performed as per the planned
performance. Further with the help of this the organization can give specific people the great
flexibility for carrying out their work for the year and to make the necessary changes for
adjusting the planned performance.
Thus this process starts with the forecasting of the budget period of current year, preparing and
approving the budget for the next period of budget. After it the actual performance is
measured against the budget during the period of budget. The variance analysis is being found
out by investigating the differences in reference to actual and budgeted performance. Further
the corrective action can be taken for producing the performance in relation to budget
(Weygandt et al., 2018).

3.4 Evaluate the use of different costing methods used for pricing purposes
There are various and diverse costing methods that can be applied by the organization. These
costing methods are divided into two main types and which are specific order costing and
continuous order costing. The different costing methods are being refers to the situations
where all incremental costs occurred are allocated to the individual jobs worked. And it can be
used to cost per unit. The different costing methods that can be used for presenting the
challenges and it can also make the best utilization of the information to take the appropriate
the pricing decisions. This is also used to assess the cost of the production per unit and the cost
of the service provided (Weygandt et al., 2018). These methods are important for identification
of not costs that must be recovered but the sales and production must also be attained so that
the organization can achieve the objectives of organization. The costing methods helps to
decide the price and it also assist in deciding the pricing methods.