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The final accounts should be a true reflection of the financial state of a business on a particular date, however, there are several ways that a business can make its final accounts look good or even bad, therefore Im going to talk through the differen

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Introduction

D2 Hannah Jackson Unit 8 The final accounts should be a true reflection of the financial state of a business on a particular date, however, there are several ways that a business can make its final accounts look good or even bad, therefore I'm going to talk through the different ways on accounts that can make a business look different to how they actually may be and explain the small changes that allows this to happen. The accounts of D Simpson showed that he had a positive outcome, through his year. Overall he made a Net profit of �17'166 which is a good outcome, it also shows that he made good sales throughout the year. You can't always guarantee that this information is a 100% accurate because Owners of business want to show the best on their accounts to show anyone interested in their business, that they have good sales, and are coming out with a profit at the end of the year. ...read more.

Middle

Business owners choose the value of them, and this goes down on the accounts, therefore we don't know the specific value for them and what they are worth, they can be over valued to make it look like the business is worth more than it actually, on the other hand they could under value making the business not look to be worth as much. Current assets Current assets of the business are stock, debtors and cash. The stock that is sold in the business may go down in value after a long time, for instance clothing styles change throughout season therefore they have a sell by date on them. Debtors are also part of current assets and there could be problems with them, either though they appear on the accounts they may not actually pay up due to going bankrupt or you may not be paid on time, meaning a lost of money when the accounts are being made. ...read more.

Conclusion

This method can't be used all every year, but for a year when accounts may need to be shown it will make it look good. Operating expenditure Vs capital expenditure Capital expenditure is where they buy more assets. It like they have two separate bank accounts so they have the current assets that is there everyday bank account where they use on a regular basis that bank account, the saving accounts is where money goes in that isn't touched often other than to buy bigger items. On the cash flow, if they are struggling, they are able to transfer the capital expenditure into operating expenditure when selling a business to make the cash flow look good. To conclude, there are many different ways in which you can make you accounts look good for people who are interested in buying the business. By altering the accounts by window dressing them, and slightly changing the amount on them it makes it look as though the company is doing better than it actually is so that it makes the people interested believe that it is doing well, and is making a profit. ...read more.

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