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Forename: Muhammad Fauzan
Surname: Pratama
Kent
12941085
Number:
Kent Login: Mfpb2
Module: LZ018
Assignment:
EssayAccounting
Finance
&
Submission
Question 1 and 2
Title:
Please do not fill in the following section – For markers only.
Category
Mark
Comments
Task
Achievement
and
Demonstration
of Knowledge
Structure and
Coherence
Analysis
Accuracy of
Writing
Mechanics of Referencing:
In-text Citations
& Bibliography
Decrease overall mark
to nearest grade
Inaccurate citations or
unclear delineation.
Limited reference to the
bibliography.
Or
Incomplete bibliography
or no effort to use
standard referencing
style.
Remain on current
grade
Attempt to use correct
referencing but
mechanical errors
remain.
References relate to the
bibliography.
Or
Bibliography contains
some errors and
omissions.
Increase overall mark to
nearest grade
Clear, correct and
consistent in-text
referencing. Bibliography
covers all aspects that
would be expected.
FINAL
MARK
%
Final mark must be one of the following:
0 10 20 32 35 38 42 45 48 52 55
58 62 65 68 72 75 78 85 95 100
Q1:
Accounting data is generally able to act as evidence and envision the track record or
performance of an organization. This record will be able to interpret the financial
business position to the owner. Following to that, the owners of a business will most
likely to refer on the accounts before making a business decision whether it would
take effect in the future or the present. Owners will be able to take on the right
pathway an organization should go trough by having accurate accounting information
(P. Atrill D. Harvey E. Mclaney, 1994).
In order to asses company performance, owners will have to look at the company
final accounts, which includes balance sheet and income statement, profit and loss
accounts or cash flow statement. Information from these final accounts will help to
create predictions on company’s future and current performance such as the growth
of revenue, business possession/assets even also the cash position (E. Mclaney P.
Atrill, 2005). This will then lead to investment decision that primarily concerned with
the profitability of the business either by the availability of cash dividends and
increasing the capital fund in research and development, management, or marketing.
The expansion from them would create a stronger trademark for which then increase
the value of their shares in case of take over or mergers by other organization.
Furthermore, owners will evaluate whether to hold or sell their ownerships according
to the risks associated with their investment in order to avoid total loss before the
bankruptcy. In addition, as an organizations get larger the owner tend not to control
day-to-day performance of production inside the business, hence, managers will run
the business as a representative of the owners. Although, owners expected that
managers will operate their business out of their interests, they do have different way
to run or use the resources in order to sort out this conflict managers need to provide
information referred to as stewardship accounting primarily aim to keep track on the
cash flow because in spite of growing revenues if there is no significant cash
available, it would cause a failure in the business production. Other than that is to
prevent misuse of resources, to avoid financial fraud, to keep track of their assets
and liabilities, or to assess managerial performances (P. Atrill D. Harvey E. Mclaney ,
1994). There is a good case that relates to stewardship decision where the chairman
of Starbucks coffee taken over the role of chief executive officer and president in
January 2008 again after 8 years hiatus from Jim Donald due to the agreement
between shareholders because Howard claimed that Starbucks has lost its
originality. The company used to surprise customer from what they provide but under
Jim it’s only served what Wall Street expect from them this is why Howard aims to
restore “distinctive Starbuck experience” (H. Schultz J. Gordon, 2011).
Other than owners, accounting information also gives benefit to a range of
stakeholders. Firstly, government uses it to charge tax with the basis of accounting
profits for which to avoid tax evasion. Moreover, following to that there may be some
implementation or investigation to whether or not an organization follow the policies
that promoting a greater competition or new policies are necessary to be formulated.
Furthermore, managers are the users who need accounting information the most
because they are in charge with the planning and decision in the area of the
production, For example the quantity of goods to produce, the purchase of the stock,
and the investment in new equipment. Finally, lenders need to Asses financial
information before loan money to a business to analyze the ability to be able to repay
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the money borrowed plus the interest when it falls due and also to value the of
security offered from the respect of the loan (P. Atrill D. Harvey E. Mclaney, 1994).
In conclusion, accounting information is necessary for historical evidence in financial
record and to reduce uncertainty of decision making plus to interpret its current
performance and future position of an organization (E. Mclaney P. Atrill, 2005). The
failure of providing such information would lead to catastrophic in financial fluctuation.
Q2:
Organizations produce several accounting information in order to be updated on the
production of goods and services or ownership of assets owned by them. Profit and
loss account and balance sheet are the fundamental methods to keep track on their
financial income and expenditure both produce with different purposes but mutually
connected.
They are separately produced because balance sheet is referred as position
statement, which is simply to show financial position of an organization at certain
moment in time (E. Mclaney P. Atrill, 2005), therefore, it interpret something that
provides a benefit for the organization which is assets on the one hand, financial
obligation from the business to person, community, or other organization. Asset is
considered as the economic benefit that would be obtained and controlled by the
organization in the future. Following the characteristic of an asset such as a probable
future benefit must exist which is basically mean that the value of an asset must have
good return in the future and an organization must become the sole control out of the
benefits. Moreover, claims are about the obligation by the organization to provide
goods in terms of money or services to particular other organization or consumer for
example when supplier goods and bank money are owed by the organization will be
put as creditors/liabilities (P. Atrill D. Harvey E. Mclaney , 1994). Balance sheet
format conclude with non-current assets, current assets, capital, non-current
liabilities, and current liabilities. In simple terms balance sheet can be defined as this:
Assets = claims (capital + external liabilities)
In the balance sheet it is necessary at the same time give and take arbitrary to put
different types of assets either it is an intangible assets such as goodwill and tangible
assets such as premises. Firstly, simply because the properties of a business may be
almost totally different than one and another although even in the same line of
production there may be a significant different among firms. Determination of the
name of assets accounts to be use will fall upon management and certain business.
Admittedly, exceptions will arise due the organization common usage or where the
official authority requires the standardizations of accounts. There will be two
classifications of whatever the name or number of the assets, fixed and current
assets. Fixed assets contained long-term presumably permanent assets such as
premises, machineries, and vehicles, hence, they are unlikely to change from day to
day. However, current assets change more frequently depend on daily business
activities than fixed assets. It is essential for a company to keep track on these things
such as debtor receivable that change whenever customer pays his debt and trade
payable increase simultaneously with loans plus they can instantly turned into cash
(Dr. Scott, 1976). Moreover, in order to produce balance sheet there is certain
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principles to be followed such as business entity where organizations need to
differentiate between owners and its assets in order to determine legal position inbetween them. However, sole proprietorship and partnership need to make their own
agreement about, hence, law does not involve unlike private limited company (E.
Mclaney P. Atrill, 2005). Furthermore, matching principle implicates companies to
use the accrual basis of accounting such as depreciation of assets, therefore, it is
better to put different types of assets because each of them have different
depreciative values. In addition, objectivity convention which Eddie Mclaney and
Peter Atrill stated “ seeks to reduce bias in financial statement” (2005).
Income statements are produced in the end of financial year in order to record the
magnitude of revenues that a business has generated over a period unlike balance
sheet act as a snapshot of business’s wealth at a moment in time. It emphasizes on
how much expenses must be deducted from cost of sales in order to get net profit (P.
Atrill D. Harvey E. Mclaney , 1994). In simple terms income statement certainly be
defined as this:
Income statement = Revenue – expenses
Finally, income statement has different format than balance sheet. It contains cost of
sales resulting amount of gross profits then the deduction of expenses for which then
lead to net profit at last.
Despite of the differentiation between two final accounts, they work together as the
ultimate summaries of the system of accounts. It is not enough for a company to
know the condition of the business as the annual statements for stakeholder or
investors they also need to be convinced of the progress of income and expenditure
or the magnitude of production each period in detailed by being provided with income
statement (Dr. Scott, 1976). In simple definition regarding the combination of those
two is this:
Assets: Capital + (Sales revenue – expenses) + liabilities
Lastly, as Dr. Scott a professor at university of Missouri stated in his book “the
balance sheet and income statements are the two focal points to which all accounting
records lead” (1976).
Bibliography
1. Mclaney, E Atrill, p (2005). Accounting an introduction. 3rd ed. Edinburg gate,
Harlow, Essex: Pearson Education. p6-67.
2. Schultz, H Gordon, j (2011). Onward. New york : Macmillan. p60-61.
3. Atrill, P Harvey, D Mclaney, E (1994). accounting for business. 2nd ed.
Linacre House, Jordan Hill, Oxford: Butterworth-Heinemann Ltd. p4-58.
4. Scott, DR (1976). theory of accounts. New york : H. Holt. p24-34.
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