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Describe the purpose of accounting for an organisation. The organisation I have chosen is Future Fashion

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Introduction

´╗┐Unit 5 P1 In this task I have been asked to describe the purpose of accounting for an organisation. The organisation I have chosen is Future Fashion. I will be describing the purpose of why it needs accounting. Purpose of accounting Accounting is recording a financial transaction which means actions by a business that involve money either going in or out the business for example making a sale or paying a bill. Accounting also means planned or actual use of figures to produce financial information. Therefore future fashion should record their financial transactions and show what is coming into the business and what is going out of the business. This is so they have financial information which may come in use to them as future reference. Also they can use this information to see how much they are spending into the business and how much they are spending out of the business. It will also be a guideline to them to show them if they are doing well. Record transactions It is important that businesses keep their records accurate and up to date for them to run smoothly. ...read more.

Middle

Also if they do not keep up with their financial information they will get their tax payments wrong. Monitor activity In a business records will be updated on a regular basis and therefore provide a good indication of how the business is doing in terms of sales, receiving payments, paying expenses. Monitoring activity should also involve keeping an eye on the bank balance to ensure there are enough finds to meet day to day expenses. Therefore mangers of Future Fashion should monitor all activities that take place in the business. As it will show them how may sales they are making and if them sales are enough. It will also show them how much money will go out and if that is correct. Future fashion can also keep an eye in their bank balance and see if there is enough money for their expenses. Control The ability to control the businesses accounts is a direct result of record transactions and monitor activity. If these two things are maintained and closely monitored then actions can be taken to control the balance between money flowing in and out of the business. ...read more.

Conclusion

Also stock, mangers will have to order stock and orders stock when it has run out. Measurement of financial performance Without financial it is impossible to know if a business was making a profit or a loss or whether the business owned money or not. Or if the business is in dept. Future Fashions managers should record all its financial issues such as profit and loss. By doing this it will show how well they are doing if they are making a loss or profit also it will help them make future business decisions such as considering expansion of the business if they are doing well. Future fashion should record the following financial performances: * Gross profit- this is the amount of profit left after the cost of producing the good or service is deducted from the amount of sales revenue. * Net profit- this is the smaller amount of profit made after all other expenses are deducted from the gross profit. * Value owed to future fashion- this is the amount of money owed to the business from sales that have not yet been paid for. * Valued owed by future fashion- this is the amount of money that future fashion owes to others for goods or services purchased but not yet paid for. ...read more.

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