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Describe the purpose of accounts in an organisation. Explain why it is important to keep accurate financial records

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Introduction

P1: Describe the purpose of accounting for an organisation. In this activity I am told to describe the purpose of accounts in an organisation. I have to explain why it is important to keep accurate financial records. Accounting is based on the recording of financial transactions, planned or actual, and the use of these figures to produce financial information. Accounting is important to business success for many reasons. Record transactions: Keeping business records up to date and accurate is very important for running the business smoothly. The business owner must keep a record of all of the money coming in the business (from sales) and all of the money going out, such as expenses. If a business fails to do so the business may find itself not chasing payments, forgetting to pay bills or even more seriously in trouble with HM Revenue and Customs (HMRC). ...read more.

Middle

Tesco monitors all its activities. They keep an eye on the money in the bank and how many profit their sales have made. They even find out through monitoring if there sales are doing good or not or what strategy they have to use to make it better. Control: The actions can be taken to control the balance between money flowing in and out of the business by having accurate records of transactions and by monitoring the activity closely. For example, if it appeared that expenses were creeping up and but sales staying the same, then the owner could look for ways to control or cut costs. Tesco has a control over their monitoring and they keep the accurate transactions so that helps Tesco to have better control over their cash flowing in and out. Tesco tries to maintain the proper balance by organising everything properly. ...read more.

Conclusion

Key indicators of financial performance include: * 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 owned to the business- this is the amount of money owed to the business from sales that have not yet been paid for. * Value owed by the business- this is the amount of money the business owes to others for goods or services purchased but not yet paid for. Tesco even has the measurement of financial records. This helps them figure out how much profit or loss they have faced. This helps them calculate the gross profit, the net profit, the value added to the business and the value added by the business. All these help Tesco in functioning properly and maintaining the business well and it helps the business make profit. ...read more.

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