Please enable JavaScript.
Coggle requires JavaScript to display documents.
3.4 FINAL ACCOUNTS (STAKEHOLDER AND ACCOUNTING INFORMATION (Creditors…
3.4 FINAL ACCOUNTS
ROLE OF ACCOUNTS
As a financial records of business transactions
Provide essential information to groups both within and outside the organisation
STAKEHOLDER AND ACCOUNTING INFORMATION
Creditors (Suppliers)
Assess whether the business is a good credit risk
Decide whether to press for early repayment
Assess whether the business is secure and liquid enough
Customers
Determine whether they will be assured of future suppliers
Establish whether there will be security of spare parts and service facilities
Assess whether the business is secure
Banks
Assess whether to allow an increase in overdraft facilities
Decide whether to continue an overdraft facility or loan
Decide whether to lend money to the business
Government & Tax Authorities
Confirm that the business is staying within the law
Determine whether the business is likely to expand and create more jobs
Calculate the amount of tax due from the business
Workforce
Find out the average wage in the business
Determine whether if profit increase, the wages would be increase or not
Assess whether the business and the jobs are secure enough
Investors
Decide whether the business has potential for growth
Establish whether the business becoming more or less profitable
Assess the value of the business and their investment in it
Business Managers
Provide information for making decision
Control and monitor the operation of each department
Measure the performance of the business
Local Community
See if the business is profitable and likely to expand
Determine whether the business is making losses
LIMITATIONS OF ACCOUNTING INFORMATION TO STAKEHOLDERS
The accounts of one business do not allow or comparisons
Effective assessment of a business performance can only be made in comparison with other firms engaged in similar activities
Business accounts will only publish the minimum information required by law
Publish accounts are a summary and they do not tell the whole truth about a business
Accounts do not measure items which cannot be expressed in monetary terms
Accounts do not indicate the state of technology within the business or the ability and skils of the management team
Accounts are historic
Accounts can be up to six months out of date at the time of publication and they never contain the future financial plans or budgets of a business
One set of accounts is of limited use
Able to compare the performance of a business over time and with other similar business
Window dressing
Presenting the accounts of a business in the best possible, or most flattering way which could potentially mislead users of accounts
PRINCIPLES AND ETHICS OF ACCOUNTING PRACTICE
Professional competence and due care
Accountants are required to carry out their work with a proper regard for relevant technical and professional standards
Confidentiality
Accountants should not disclose professional information unless they have specific permission or a legal or professional duty to do so
Objectivity
Accountants should not allow bias, conflict of interest or the influence of other people to override their professional judgements
Professional behaviour
Accountants should comply with all relevant legal obligations when dealing with a client's affairs and assists clients to do the same
Integrity
Accountants should act honestly in all dealings with clients
MAIN BUSINESS ACCOUNTS
Balance Sheet
Balance sheet consists of:
Current liabilities
Non-current liabilities
Current assets
Shareholders's equity
Fixed assets
Record the net wealth or shareholders equity of a business at one moment in time
Profit and Loss Account
Sections of a profit and loss account
Profit and loss section
Appropriation account
The Trading Account
Use of profit and loss account
The actual profit data can be compared with the expected profit levels of the business
Bankers and creditors will need the account to help them decide whether to lend money to the business
To measure and compare the performance of a business
What it shows?
The gross and net profit of the company
Details of how the net profit is split up between dividends to shareholders and retained profits
DIFFERENT TYPES OF INTANGIBLE ASSETS
Artistic-related intangible assets
i.e:
photography, musical works, pictures, video and audiovisual material
Contract-related intangible assets
Come from the value of rights arising from contractual arrangements.
ie:
licensing agreements, construction permits
Customer-related intangible assets
Result from business relationships with outside parties.
i.e:
list of regular and reliable customers
Technology-related intangible assets
Arise from patents taken out on innovations or technological advances
Marketing-related intangible assets
Use to market or promote products or service.
i.e
:
trademarks, logos, phrases
Goodwill
Arise when a business is value at or sold for more than the balance sheet values of its assets