3.5 Final Accounts Questions
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Introduction
3.5 Final Accounts (Leading Questions) 1. What are the main purposes of Final Accounts from a business ?point of view? First and foremost, one of the main purposes of Final Accounts from a business point of view is that final accounts act as a form of appraisal on the financial position of a business. Final Accounts allow business owners to see where their money is spent and how well their investments are working. In short, Final accounts provide business with information for better financial planning and control. Additionally, final accounts also make businesses accountable to all the monies within it. This force a business makes sure all the payments and receipts in the business is accounted. 2. Name some stakeholders of Final accounts and why they should care? There are numerous stakeholders of final accounts and some of these includes employees, managers, and financiers (bankers). To begin with, employees care about the final accounts of a business because it tells them their job security and is there likelihood for wages rising or dropping. ...read more.
Middle
An example would be wear and tear eventually leading to the replacement of certain assets in a business. The eventual replacement of assets does not mean cash is saved for the replacement but just means that the depreciation is recorded as a non cash in the profit floss account. 5. Comment on methods of depreciation and provide an example where each is most appropriately used One of the methods of depreciation is the ?straight tine method". The straight line method is a common and very simple method to evaluate depreciation. The method is essentially the purchase cost of the asset minus the scrap cost of the asset divided by the expected lifespan of product. A problem with this method of depreciation is that the depreciation calculated through this method is the same every year which does not fully apply to all assets. An asset where this example can be used could be electronic goods like a TV or phone where depreciation is more constant than something like a motor vehicle. ...read more.
Conclusion
8. Window Dressing- List three ways this type of ?legal manipulation" can flatter the final accounts. There are many different ways of window dressing in the business world that makes the final accounts appear better for stakeholders. One of the method would be to record the sales revenue of products paid in credit The effects of this is that the profit number in the profit loss account would be higher. On top of that, bills and loans could be paid off after final accounts are duo. This would allow for tho business to from tax concessions. Lastly, the business can use LIFO or FIFO stock valuation to manipulate tho gross profit levels. 9. What are the main limitation of final accounts. The main limitations of final accounts were discussed earlier in question #3. The limitation is that final accounts only covers the quantitative aspect of a business. There are many other factors that affect the performance of a business these include the qualitative aspects like its image and reputation and its organizational objectives. On top of that, final accounts also leaves out human resources and the people that make up a business are the most valuable assets a business has. ...read more.
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