Accounting For Business Assignment
Name:Rifat Muzib Bin Mustafiz
Id#0052m0fm0f0619
Introduction
One of the most vital element of a business is accounting. Accounting
enables anorganisation to surveil and keep track of the organisations
economical progress. It also provides the stakeholder of the
organisation with calculable data which in turn helps them in making
accurate decisions benefiting the organisation. In this assignment we
will briefly discuss on the benefits and uses of accounting.
Financial statement
The definition of financial statement can be stated as Formal reports
preapared by by the organisations management targeted to surveil and
convey an organisations Financial performance, their financial
position and cash flows. It also provides data of the organisations
leverage, its capability, this in turn provides the organisation
consistency and helps the management estimate the organisations
future financial standing. (Murphy,2019). The use of financial
statement benefits both international and domestic organisation in
decision making, as the report consist of important data regarding the
organisations return on investment which is also abbreviated to
ROI(okok).
Financial statements consist of four primary type of reporting which
are income statement, statement of retained earnings, statement of
cash flows, and balance sheet.
Income statement
This is the calculation of an organisation’s net profit or loss or net
interest, using data over an accounting period. (Arya,2004)By
deducting expenditure from the sale, net profit/Awning all deficit of
the organisation can be measured.
(www.beximco-pharma.com)
RETAINED EARNING STATEMENTS
This plants out and organisations growth awful and retained earnings
over a given period of time. (Schmidt,2019)This statement can be
used by stakeholders and investors to optimise and analyse revenue,
As this statement utilises and gathers Data from several other
financial reports.By using data provided by the other financial
report/statement, this statement can show shareholders their portion of
earning and retained earnings.(Peavler,2019).
CASH FLOWS
This is are used to measure how the company earns cash from the
business to provide for the operational cost, to repay The
organisations debts and provide financial support for the organisations
development over a given period of accounting (Murphy,2019).Data
provided from this statement is used by the investors to determine The
organisation financial background depending on sales and expenses
(Carabeli,2019)
Balance sheet
A statement that can be used to describe an organisation financial
status at a given date. This date will consist of debts, resources and
the lenders equity. In a balance sheet of an organization, the
organisations avaregae asset should be equal to net loans plus all the
owning of the owner in the statement. This statement provides a clear
insight on whether the owner is funding his investment from debt or
equity. (BusinessDictionary, 2019)
Accrual accounting principal
Accrue meaning to obtain, generate or multiply regularly is the
where the word Accrual was derived from.
The accrual accounting principal states, instead of cash received or
spent to report as income when any cash is obtained, and when
incurred to be stated as expenditures. (Ittelson, 2020) This is a
significant reason why credit sales ate reported as profit, and cost
reported as credited transaction by the auditors regardless of spending
or earning of cash in the transaction. (UAB Online Degrees, 2020).
CONSERVATISM PRINCIPLE
Conservatism Principle or mostly regarded as the accounting’s
Prudence Concept. The prudence concept is often highly used and
implemented to set a lower rate for the stock cost or non-accrual cost
(Mullis, 2008). It does not hint that accountants needs to be
conservative but rather accountants needs to be rational and impartial.
(Bragg,2020)The conservatism principle suggest that an accountant
would go for and choose the ones expressing minimal amount of
assets or a big amount of liabilities, and a gross profit with lower rate.
ECONOMIC ENTITY PRINCIPLE
Economic entity principle is the fundamental process that specifies
and distinguishes the owner and the organization as two different and
solely individual entities,thus there financial statements should be
made and presented (Chaplin, 2016)
GOING CONCERN PRINCIPLE
The Going Concern Principle can be stated as the most basic form of
providing report, with the specification of structuring the financial
statement in such a possible manner that the organisation does not go
bankrupt or has to forcefully liquidate in the nearby future, i.e a
twelve month of term. (Francalanza, 1997)
TASK-2
MARGINAL COSTING
(Kieso,et al, 2008) In this measurement the cost of the duration is
considered as the fixed cost and the cost set for the product is
considered to be the varying cost.
MARGINAL COSTING PRINCIPAL
In production of commodity unit, all the additional expenditures
involved in its production is considered to be the variable cost of the
production. The cost of operations tends to remain same, also
whenever there is an increment in production literally no fixed cost is
produced. (Warren, Reeve and Duchac, 2013)
The income tends to decline by the exact amount of investment
correspondent to that same unit when and whose volume of revenue
decreases by one.
When and if the selling value of one product decreases, consequently
the amount of earning decreases, as the revenue earned from that
product decreases.
ABSORPTION COSTING
Unlike the marginal costing dealing with fixed and variable cost,
absorption costing is a system of measurement that takes regard of all
fixed expenditures and variable expenditures as the final cost of the
product. The relevancy of this valuation system is insignificant to the
accounting realm. (Horngren, et al, 2015)
CONCLUSION
In this assignment the importance of financial statement has been
emphasised on. For an organisation to Flourish, prosper and grow the
preparation of financial statement is crucial, vital and unparalleled.
The use of this financial accounting system allows and provides the
management enough intel to convey varieties of shareholder along
with accurate and coherent data on the betterment and well earning of
the organisation.
State of the art and extraordinary ways are being adapted by the
organisations for maintaining and collecting there financial data to
reach there goal in this new era of competitive business.
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