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GCSE: Accounting & Finance

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How to calculate 'break even'

  1. 1 There are three ways this can be done. All will give the same answer which is the number of products the business must make or sell to ‘break even’. This means they receive as much revenue as their costs.
  2. 2 A break even table will list the fixed cost, variable cost, total cost (fixed plus variable cost), revenue and profit or loss for each level of output. As profit or loss is the revenue minus the total cost this can be calculated relatively easily, especially if you use a spreadsheet program..
  3. 3 A break even graph plots the total cost and revenue for all the levels of output. Where the total cost and revenue intersect is the break even point. This can be easily produced from the table using the chart wizard.
  4. 4 The break even formula gives you the break even output. The formula is fixed cost divided by the price of one unit minus the variable cost.
  5. 5 The margin of safety is the number of items being produced, over and above the break even point.

What is cash flow?

  1. 1 Cash flow looks at the cash flowing through a business. It is not the same as the profit being made as businesses may be receiving goods on credit or giving credit to customers. This means that although a business may be profitable, it may still run out of cash. This could cause the business to go bankrupt.
  2. 2 A cash flow forecast predicts the flow of cash going through the business. A business may use it to see if there are any months when it will run out of cash.
  3. 3 Knowing that it may run out of cash in any month means that a business can plan for this by possibly arranging a bank overdraft.
  4. 4 A bank overdraft is an agreement arranged with a bank whereby if the business runs out of cash, the bank will lend it money to keep it trading. This overdraft will normally be at a high rate of interest but is better for a business than running out of cash.
  5. 5 A business may also cover a period of negative cash flow by deferring payment to suppliers or getting payment early from customers.

What could be a source of finance?

  1. 1 Many students go wrong when discussing sources of finance by not relating them to the size of the business or the reason they need it. A new business starting up has different needs to an existing business looking to expand.
  2. 2 Sources of finance available to sole traders and partnerships include the owner’s funds, borrowing from friends and relatives, bank borrowing or funds from venture capitalists that specialise in lending to new businesses.
  3. 3 A problem for sole traders and partnerships is unlimited liability. This means that the owner is responsible for all the debts of the business, not just the amount they have invested.
  4. 4 Private limited companies and public limited companies have limited liability. This means that investors in the businesses can only lose the amount they have invested. This makes it much easier for them to raise finance as people are more likely to lend to them knowing the maximum amount they can lose.
  5. 5 A benefit of selling shares compared with borrowing from the bank is that the money does not need to be repaid. Share holders will expect a share of the profits. With a loan, the amount borrowed has to be repaid with interest.

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  1. In this report, I will outline key accounting policies and records for Harrington Books. As Harrington Books is a new company, I am going to try and keep my comments and recommendations as straightforward as possible.

    They will likely not support aggressive accounting methods. Since the bank has provided assets as collateral, I are going to presume them to be the most important user. It is essential that the information is useful for their purposes. As sole proprietor, Peter Harrington will be second, with key objectives of maintaining a strong system of internal control and tax minimization. Key Facts Some key facts we need to keep in mind as we assess accounting policies are: * the bank is presumably a sophisticated user of financial information, and therefore will understand the importance of HB minimizing taxes.

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  2. My hypothesis is that the top 3 sets (A, B and C) predict both the size of the angles and the lengths of the line better than the middle 3 sets

    When I kept clicking random on the calculator again and again, I noticed two things. Firstly, all the numbers I got were 0?n<1 and secondly all the numbers went up to 3 decimal places. This means I can get 0-0.999 so there are 1,000 random numbers (including 0). As I will get a lot of decimal places I need to choose a way of making them whole numbers. There are two ways I could do this. These are * I could truncate * I could round the numbers.

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  3. Social and Enviromental Accounting

    Nowadays, with the increasing awareness of the importance of environment, accounting is no longer just for the economic aspect or financial aspect. For example, the Global Reporting Initiative Guidelines (GRIG) defined their framework for reporting on 3 parts: the economic, environmental and social performance of an organization. Similarly, it can be seen in Accountancy and Business journal (Stikich, 1997), in which high lights that there are three aspects of core values of a modern sustainable business, one of them is environmental responsibility.

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  4. The role of a conceptual framework

    and West, C. (2004), Essentials of Financial Accounting in Business, Thomas Learning, London, pg .303). Another reason for the setting up of the International Accounting Standards Board is because in certain countries the accounting professional has a real impact on what businesses producing. For example the "...UK has a very strong accounting profession that has been active in promoting better accounting practices" (Bendrey, M., Hussey, R. and West, C. (2004), Essentials of Financial Accounting in Business, Thomas Learning, London, pg.303).

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  5. Activities of Tesco finance function.

    This is usually computerised operation in Tesco and virtually all organizations pay their staff monthly, direct into their bank account, usually using a system known as credit transfer. Tesco bank transfers the money from their account to all their employees' accounts each month. Normally in Tesco this data is held on a computer, which does the calculations for the payroll staff. However, there may be differences once the data in Tesco is input into the computer which must be sorted out by payroll staff such as maternity leave, sick pay, temporary workers.

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  6. Accountancy Notes

    purchases from small items made by the business, compiled from petty cash vouchers * General Journal - a record of non-regular transactions, which are not recorded in any other subsidiary book Double-entry Book Keeping This involves making two entries in the accounts for each transaction. Division of the Ledger The ledger has traditionally been divided into a number of sections: * Sales Ledger - personal accounts of debtors, i.e. customers to whom the business has sold on credit * Purchases Ledger - personal accounts of creditors, i.e.

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  7. Mathematics for Computing

    The properties following | help us to determine the elements of the set that is being described. Note: The notation {x | 1 ? x ? 5} is not an adequate description of the set A unless we have agreed in advance that the elements under consideration are integers. When such an agreement is adopted, we say that we are specifying a universe, or universe of discourse which is usually denoted by U . We then only select elements of U to form our sets.

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  8. Budget in multinational company

    * Balanced Scorecard enables all employees to focus on strategy rather than numbers. But it is more likely to reach its full potential if there is no budgeting barrier to act as a counterforce that drives managers toward meeting this year's targets. * Activity based management systems can lead to radical decentralization with local managers having the freedom and capability to act with minimal central control and without budgets. Table of Contents EXECUTIVE SUMMARY 2 1. INTRODUCTION 4 2. CRITICISMS OF BUDGET 4 3.

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  9. Victoria Kite Company is a small Melbourne firm that sells kites on the Web wants a master budget for the next three months, beginning January 1, 2005. When developing the master budget it was discovered that only 60% of the current sales are

    $ 66,100 $51,500 Cash Disbursements for Purchases $ 35,550 $ - $35,450 Rent $ 8,050 $ 250 $ 250 Wages & Salaries $ 15,000 $ 15,000 $15,000 Miscellaneous $ 2,500 $ 2,500 $ 2,500 Fixtures $ 3,000 Dividends $ 1,500 Net Cash receipts and disbursements $(15,400) $ 48,350 $(4,700) Excess (deficiency of cash before financing $(15,400) $ 48,450 $27,992 Financing Borrowing $ 15,500 Repayments $(15,500) Interest $ (258) Total Cash from financing $ 15,500 $(15,758) Ending Cash Balance $ 5,100 $ 37,692 $32,992 Budgeted Income Statement (Covering 3 months Jan - March)

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  10. computer system

    A signed 8-bit binary numeral can represent every integer in the range -128 to +127. If the sign bit is 0, then the largest value that can be stored in the remaining seven bits is 27 - 1, or 127. Using two's complement to represent negative numbers allows only one representation of zero, and to have effective addition and subtraction while still having the most significant bit as the sign bit. 2.Hexadecimal Hexadecimal numbers are used for the benefit of human programmers, as they are easier to handle than long strings of binary 1s and 0s - with less chance of making an error.

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  11. Personal finance

    Gifts from family and friends Sometimes you relatives or friends may offer you gifts in term of money. And this would most probably come as a surprise. Also if you are in debt you friends and relatives may help you to overcome your problems. Inheritances If one of your family members dies and they may leave you all there money to you, this money is called inheritance. Savings Savings is if you have money in the bank and invest a small amount of money every week or month.

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  12. Mr Carter has requested that I research the financial needs of potential and current Canada Life customers based on their stage in life. I have been given seven generic stages life stages.

    They might borrow money i.e. a student loan for university or for living expenses. Some people in this age group work; it is common to be a part-time job because they are students. This limits the amount of money they have and they find themselves often short of money. An overdraft would be used during times they are short of money. The appetite to risk here is medium because someone may have inherited a large amount of money and may want to spend it. At this stage majority they have no intention of investing as they have little money and the fact that they have focused their mind into their education.

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  13. Ethical and Legal Obligations in Accounting The recent and past scandals of major corporations such as Enron, WorldCom, Qwest, Tyco, HealthSouth

    The GAAP is not considered a written law, although the United States Security and Exchange Commission (SEC) do require it to be followed by all publicly traded companies. The United States government, through the Securities and Exchange Commission has taken steps to ensure that financial reporting of privately held companies are following the rules of generally accepted accounting principles. The SEC works closely with private organizations that set the generally accepted accounting principles, but it does not set the rules themselves.

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  14. Give an explanation of break-even analysis and explain how it supports the achievement of strategic aims and objectives.

    It is also of value for established businesses which are planning to produce a new product. It also helps to support applications for loans from banks and offer financial institutions-the use of the technique may indicate good business sense as well as forecast profitability, and therefore businesses would be able to get financial help to support and meet any of their business objectives. Break-even analysis can also be calculated, this requires: * The selling price of the product. * The fixed costs.

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  15. "If management accountants are to remain useful to the organisations within they work, they need to keep current with changes in management practices" (Horngern, 2002) Management accounting was evolved from financial accounting in the 19th century

    In the 1950's efforts were made to calculate the total costs involved in producing one unit of X. This emphasised the importance of absorption costing and the accurate apportionment of costs betweens overheads, labour etc. Then in the 1960s the main issues related to planning and control. No method existed that could be applied to every situation. This paved the way for a user orientated approach. A distinction was made between actual and opportunity costs. The main problem with this was the cost of obtaining information wasn't taken into consideration. This was eventually recognised and integrated into the accounting procedures.

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  16. Ethical behavior is just as important as competence in the accounting and financial field.

    The income statement is reviews a company's revenues and expenses, they also project sales, expense, profit or loss. The income statement just as the balance sheet is done quarterly or yearly. The third corner is the statement of retained earnings. This statement gives the company two opportunities to either distribute the dividends that have been saved rather been paid out and distribute them amongst shareholders or retain the dividends within the company to finance more assets. The fourth corner is the statement of cash flows it assists the company with keeping track of where the revenue comes from, and the expenditures.

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  17. 'Why was Bletchley Park able to break the German Enigma Codes?' The Enigma machine was a complicated machine that looked like typewriter, inside a wooden box. It had

    The enigma machine was so complicated that there was 159 million million million different possibilities. Breaking the Enigma codes was not going to be easy. To do so, they needed technology, good luck, different individuals, German mistakes and the help provided by the poles. Britain and her allies first understood the problem posed by the Enigma machine in 1931. A German spy called Thilo Schmidt was turned by the French, and allowed them to photograph stolen Enigma operating manuals. However no progress could be made, as British and French cryptanalysts could not even begin to try and break it.

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  18. Compare the two companies Tesco's and McDonalds

    Tesco aims to be as supportive as possible by providing as much as possible for their disabled customers. They will achieve this by holding themed customer question time 1/4 over the coming year, in partnership with disability organisations, to listen and respond to what customers with physical, hearing and visual disabilities tell them. . Tesco's design side aim is to develop a web service that works with many different makes and models of web browser. . Tesco aims to be associated by customers with high quality of animal welfare and the best industry practice in its supply.

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  19. This paper discusses the statement 'in a politically charged rulemaking environment, conceptual frameworks has only limited utility'.

    Definition The Australian Accounting Research Foundation (AARF) CF has been described as: Statements of Accounting Concepts set out the concepts which has been adopted by the AASB and PSASB in respect of the nature, subject, purpose and broad content of general purpose financial reporting in the private and public sectors (Para3, Policy Statement 5 (PS5)). Nature and purpose of a CF The CF is a body of interrelated objectives and fundamentals. The objectives recognise the goals and purposes of financial reporting and the fundamentals are the underlying concepts that help accomplish those objectives.

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  20. Why was Bletchley Park able to break the German Enigma codes

    Later on, a German who was willing to sell information about the Enigma contacted the French intelligence which later passed this information on to the rest of the allies, including the British. This gave them a crucial head start which greatly helped Bletchley Park crack the Enigma codes. Bletchley Park used certain methods to ease the task of finding the right combination out of 150,000,000,000,000,000 possibilities. To try and find a pattern in the German Enigma codes, Jeffrey sheets were created. Those were a number of sheets were to be perforated with holes at specified locations, and stacked.

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  21. The concept of financial statement

    The financial statements must show a 'true and fair view'. The accounting principles of the CA85 are similar to the fundamental accounting concepts. The four concepts are embodied in the legislation under the heading 'Accounting Principles'. A fifth principle was added requiring the separate determination of value of each asset and liability. Fundamental Concepts of Accounting Accounting policies are the specific accounting practice issued and consistently followed by a business enterprise or an organisation as being, in the opinion of the management appropriate to its conditions and most suited to present fair results and financial statements.

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  22. BREAK-EVEN ANALYSIS OF MCDONALDS

    Fixed cost include the rent of the shop, business taxes, fuel bill, insurance, staff salary etc. The business revenue is needed to cover the fixed cost or it will make a loss. BREAK-EVEN OF MCDONALD Calculate Break-even point, can either show on a chart or use equation Equation : Break-even = Fixed cost/ contribution Contribution= sale price - variable cost I get the data to calculate break-even of McDonald, which show as below: Average selling price of product: �1.50 Average variable cost of a product: �0.4 Fixed costs in an average outlet per annum: �1 000 000 Now I calculate the break even point by the equation: Contribution: �1.50- �0.40= �1.1 Break-even: �1 000 000/ �1.1= 909091 That show McDonald need to sell 909091 products in a year to make the break-even.

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  23. A Career In Accounting 2 A Career In AccountingManagement accounting is considered one of the most essential management services

    It is his primary job to ensure that managerial decisions are well within the cost prescriptions. The management accountant is expected to give a prognosis for projects to be undertaken based on past and present financial performances. In order to do this a management accountant needs to take into account factors like cost of raw materials, labor, transport and overheads. Knowledge of these costs will help the cost accountant prepare budgets for the operation that is planned. RESPONSIBILITIES: The position includes developing and maintaining automated systems to produce accounting and financial information.

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  24. Realistic and through recommendations on how your chosen organisation could improve its quality expectations, with an explanation of the changes the recommendations would bring out. Delivery Vehicles If Asda realistically wanted

    This will help Asda gain more of a surplus and more customers. Here are some changes and recommendations that Asda will have to make if more drivers are hired: * More Vans - this could mean more orders can be delivered to customers without to much hassle * Shifts - this will mean some workers will have to run less shifts and they can use the time of as a way to recharge themselves for the next day or to spend time with there family. * If more drivers are hired then this will require much more staff training but this will prove to be beneficial, as it will help work out ways on how to travel around certain areas and the easiest routes to take.

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  25. Dear Principal, NEW STUDY TIME TABLE I am writing concerning a new study timetable, which after various discussions with other students, have

    Eighty per cent of the college student who we confronted with this issue confirmed it that during the long breaks which sometimes is from two-fours hours, they find is really difficult to return to class, for this reasons, they end up missing after break subjects.

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