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The maintenance of accurate records supplies the company with the financial data that assists them to function more effectively, it also helps to make it possible for the company to maximise profit. The key statements are the profit and loss account, bal

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Contents page Task A page 3 Task B page 21 Task C page 25 Task D page 27 Task E page 29 Task F page 38 Task G page 46 Appendix page 51 Task A Why accurate financial records need to be maintained The maintenance of accurate records supplies the company with the financial data that assists them to function more effectively, it also helps to make it possible for the company to maximise profit. The key statements are the profit and loss account, balance sheet and cash flow statement. Having this information helps to understand if company performance is meeting expectations and is in line with strategy. If the company knows where its money is going, it enables the company to make better and more considered decisions concerning its spending and savings in the future basically a method tracking the money flow. You need to bear in mind that accurate records don't need to be maintained for legislation purposes only. At the same time it pictures the business at a moment in time which will help management monitor and control the business and help them make decisions. Monitoring performance: In order for a business to be successful it requires the management to monitor financial performance strictly in turn to produce accurate financial accounts, which enables the business to judge the success of the business or to suggest short-term and long-term strategic plans and decisions. Improvement can only be achieved when the management is accurately informed about current performance. This enables the business to identify trends occurring. For example when a firm discovers flat profit performance over recent years, depending upon the size of the business (owner managed to large plc) it could hold board meetings to discuss different options it can undertake to raise profit. Some of the options would be cutting variable costs through finding new suppliers or exiting from certain loss making activities. ...read more.


of the company * Date of birth, occupation and details of the board of directors Form 12: This form needs to be signed by a professional legal person e.g. the companies' solicitor or secretary, it is a statutory declaration that states that all legal requirements regarding to a limited company has been completed. The legal requirements of partnerships and sole traders are less onerous compared to a limited company. Sole trader and partnerships must also comply with the Business Names Act and Regulations as discussed earlier. Similar to a limited company, partnerships and sole traders are also liable for taxations. A sole trader needs to make a payment of up to 40% on its taxable profit for Corporation tax, whereas in a partnership the rate of tax that is due per partner depends on the ratio distribution of the profits each partner receives and the level of profit. . For example: partnership xyz has a taxable profit of �300 000, it will need to pay �120 000 tax allocated between the partners based on their share of interest in the partnership. The owners or partners (who are classified as self employed for tax purposes) need to make a contribution towards National Insurance which is a fixed amount of �2.20 per employee weekly. If annual generated profit is less than �4635, then the partner or sole trader is not charged for National Insurance. Even though a sole trader and a partnership have lots in common due to its similar structure of ownership, there are some differences as a partnership has a statutory framework to follow. The Partnership Act 1890 shows the details of the statutory framework, which include the following: * The partnership is shaped to make a profit and there must be a sharing distribution for the profits * The partners must have common actions, to enable them to have an equal say in the management * The partners must be carrying on a business, I.e. ...read more.


It could be used as reserves for the future, instead of risking making repayments including huge amounts of interest on bank loans for investment in other operating activities; it could use the reserves to fund the business objectives without the business facing financial difficulties. Diversify, expand and develop The internal sources of finance that has been collected from reducing the level of stock, taking on the request, collecting debts quicker and extending the creditor payment periods can now be invested into the purchase of a delivery van that will help to increase the customer base and increase volume of sales. It could also be used to diversify into beauty products, which will with anticipation to result in an increasing volume of sales. This means that Russell will still end up with a positive net profit figure and a healthy cash flow, even though I discussed earlier that profit is not important compared to cash but external stake holders might have a different view towards it. So to prevent the loose of stake holders and creating a bad public image, Russell should expand and diversify Kutz ltd. Appendix Trading, profit and loss account of Kutz Ltd for the year ended 31 may 2007 after the reduction of stock *Workings Sales 450000 less sales returns -1923 net sales 448077 opening stock 100000 purchases 121009.5 less purchase returns 3635 117374.5 carriage inwards 1094 less closing stock -150000 cost of sales 368468.5 Gross profit 79608.5 Add other income: bank interest received 42 discount received 14887 94537.5 less expenses rent and rates 2 66000 motor vehicle expenses 7720 advertising expenses 14500 sundry expenses 2 34977 light and heat 3 16460 wages 76251 discount allowed 11238 Depreciation 1 10050 doubtful debts 4 (5200+2080 7280 loan interest 3 22500 266976 operating profit -172439 less directors dividends 12000 retained profit -184439 add retained profit at the beginning of year 2000 balance of retained profit at the end of the year -182439 *The workings are found in appendix ?? ?? ?? ?? 54 ...read more.

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