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Btec Business Level 3 Year 1 - Introduction to Accounting

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Introduction

Pass one Introduction - In the section, I am working as a trainee for one of the retail company mentioned, which has been trading for many years. I have been asked to spend some time in the company's accounting department. In the purpose of accounting, there are many reasons why accounting is necessary to a business. Recording Transactions - Appropriate records are vital: if reports or documents are lost the Next store may forget to demand payment for some jobs that have been done or forget to pay bills that become due. It must be avoided at all costs because not paying your debts promptly or quickly is technically an act of bankruptcy or ruin. Monitoring activity and controlling the business - The recording of day to day accounts activities allows the Next managers of the organisation to keep track of orders, the sales and bills that means they must have a good idea of how business is doing well. The management of the business - Accounting records also helps the management of business and assist the board to make better decisions in dealing with investment. It is important to prepare accounting statements for Next managers to monitor the progress of the company and to endure day to day activities runs smoothly and proceed over activities. Measuring the financial performance of the business - Profit is the aim of the Next Store business and enjoyable accounting records will enable managers to assess accurately the levels of profit that are being achieved. Account records will also give clues about strategies that will be able to improve the profitability of the business. The accounting documents that they will consider and reveal a number of key figures: * Gross profit - it is the diversity between Next total revenue and how much it cost to make the product or buy goods in. * Net profit - it is the gross profit minus (take away) ...read more.

Middle

The most common of these are: Salaries - Paid to sales staff Carriage - The cost of delivering products Marketing - Advertising and promotion costs Finance costs - Many few firms can operate without a bank account, but there are further expenses associated with having a bank account such as: Bank charges - These can become very costly for business customers. Individuals generally benefit from free banking, as long as the account does not go overdrawn, all transactions are free; but this is not always the case. There are bank charges for every firm's transaction and every cheque that the company writes, for each time cash is withdrawn, every cheque paid in, and every time cash and coins are paid in over the bank counter, as well as all standing orders and direct debits the bank pays for the business. Overdraft, loan and mortgage interest - Every form of bank borrowing will also incur interest charges that must be paid. Good advice is to compare the various deals offered by banks as some will cost more than others. Purchase of stock or raw materials - The firm that sells goods need stock to sell to customers and it is always a very large expense. When the business first starts up, most of the money for stock or raw materials will have to be made immediately, these are known as cash transactions or transaction costs (costs arising from such transactions as buying and selling). Because it is important for an accountant to understand these terms, it's just measuring and recording transactions of these businesses. Accounting will have some knowledge about financial accounting. To ensure that this is done correctly considerable attention will be paid to accounting concepts and to any requirements of legislation. PASS 3 * How much cash will flow into Broadway Farms during March? The amount of money that will flow in Broadway Farms during March will be �20,000 * How much cash will flow out during June? ...read more.

Conclusion

* Customers are slow to pay: If customers are slow always like this then Valley farms will be in problems. * Suppliers demand to be paid more quickly: From the cash flow attached, it looks like valley Farms are paying their suppliers too quickly. For example, from the month of July, although the business operate on a 30 day credit scheme, it paid its suppliers �4600 and this increased all the way to December and then again in April and May. * Problems within wages and drawings: Another problem I have identified in my cash flow forecast is that there are too much drawings going on. Firstly Mrs Verdi is drawing �2000 for herself every month. This is too much as it adds up to �24000 at the end of the financial year. She is also paying 2 managers at the cost of �4000 each month. The main problem is that the business is not doing very well and therefore any cash available needs to be used wisely in order to avoid huge debts. * Overheads /fixed assets too high: Valley Farms owner paid �13000 on capital expenditure at the very first month. These were too high and eventually lead to a huge deficit at the end of the financial year, so this is the worse and serious problems for his firm. * Too much stock: Another problem within the cash flow is that there is too much stock being held by Valley farms. The business is not selling quickly enough to generate enough cash. * Too little capital: Also Mrs Veridi's capital was too small at the beginning of the year. She only had �25000 to start the business but spent �29900 on expenses; making her go overdraft at the very first month. * Bad debt: Due to the 30 day credit, there will be a bad debt of �25000 at the end of the financial year. This will affect Valley Farms badly as it may end up being declared as bad debts. ?? ?? ?? ?? Unit 5 - Introducing to Accounting 1 ...read more.

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