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The report lists out the benefits of keeping a proper accounting records and followed by, a brief description of how a computerized accounting system works.

Extracts from this document...

Introduction

Executive Summary Firstly, the report lists out the benefits of keeping a proper accounting records and followed by, a brief description of how a computerized accounting system works. Secondly, it lists out the possible benefits gained from the setup of a cost accounting system and a brief description job costing, the most suitable costing method in your business. Finally, it states out the disadvantages of a sole trader and both advantages and disadvantages of a limited company. The report recommends the immediate setup of both accounting and job costing system. The changeover of current business into a form of limited company is to be delayed. CONTENTS Executive Summary 1 1 Introduction 3 2 Findings 4 2.1 Records Keeping 4 2.2 Cost Information 8 2.3 Personal Exposure 12 3 Conclusions 15 4 Recommendations 16 Appendix - Reference and Bibliography 17 1 Introduction On 29 October 2001, I was appointed by you, Mr. Godfrey Boycott, in carrying a brief review of your business operations and to recommend any improvements if found. It is noted that you are running a special engineering business which consists of 5 employees and operated as a sole trader's business. You are concerned about the preparatory works within your business in matching the possible expansion of your business you foresee in the near future. You are also interested in the benefits of turning your business into a limited company. ...read more.

Middle

Overheads are those costs other than direct costs. (c) Job card: A job card is usually required for collecting cost data, like, the direct material, expenses, wage rates, labour hours, workshop overheads, selling and distribution costs. A specimen is available if required. (d) Brief details: Each order is given a job card with a specific job number that identifies it from every other job. All direct costs and overheads are recorded in the job card. Finally, when the job is sold and delivered, a share of selling and distribution costs is also added to the job card. Now the total cost of the job can then be added up and profit (or loss) of the job can be easily calculated. With some background on job costing method, benefits on implementing the cost accounting system are listed as follows: 2.2.2 Benefits from implementation of cost accounting system (a) Pricing: Quite often, your customers will ask for a quote for a specific job and certainly, you, being an expert in this field, have a rough idea of how much to charge for the job by adding up the required material costs, labour costs and a honourable percentage of profit. Unless all the costs and the time required for the completion of the job are definitely known, there may be cases of undercharging or in fact, making an actual loss. ...read more.

Conclusion

(b) Tax Rate: Compared with sole trader, limited companies are subject to a higher tax rate. (c) Difficulties and expenses in closed down the business: The only way to terminate the operation of a company is to wind up the company. This involves complicated legal procedures, lengthy in time and would require a lot of expenses. 3 Conclusions It is found that the current record keeping method is not sufficient and a proper accounting system is definitely needed. Also, a proper costing system based on the job costing method would enhance performance evaluation of business resources and provide information for better decision making. Whether the current form of business as a sole trader needs to be turned into a limited company, would largely depends on how the business would expand and how the funding for the expansion can be obtained. In view of the current economy, a budget for the expansion is required before the decision can be made. 4 Recommendations On the basis of the above findings and conclusions, it is recommended that: A proper accounting system should be set up as soon as possible and in the same time a job cost accounting system can be set up as well, in order to avoid possible duplication of works and to enhance the integration of the two systems during the set up. Moreover, the changeover of current business as sole trader to a limited company should be postponed until a concrete expansion of business is feasible. ...read more.

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