• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Adequacy of Profit & Loss and Balance Sheet as reports

Extracts from this document...

Introduction

A) THE ADEQUACY OF PROFIT & LOSS AND BALANCE SHEET AS REPORTS HIGH LIGHTING BUSINESS SITUATION 1.1 Why the adequacy Profit and Loss Account as report business situation Before the profit and Loss Account prepared, businesses prepare the Trading Account. In the trading account businesses only get the gross profit or gross loss, but this is not actual profit or losses. Further step businesses have to prepare the Profit and Loss Account. The businesses prepared the Profit and Loss Account is to calculate all the expenses and gain of the business. It's easily for the businesses to understand in this Profit and Loss Account where all the expenses and the gain are summarized in this account. All expanses are written down in this account like transport cost, salaries, rent and other expenses. That mean businesses know what they have expanse during the operation of the business and immediately know all the expanses they have expand. For example of expenses: a) Rent = $10,000 / month b) Transport cost = $500 spend in a month c) Salaries = $6,000 for all workers in a month The total of rent, transport cost and salaries for that month is $16,500. ...read more.

Middle

=$86,000 The assets of the business is $86,000 B) SALES RETURNS AND PURCHASES RETURNS ARE SEPARATELY IDENTIFIED FROM THE RECORDED SALES AND PURCHASES 1.3 Returns of Goods Mostly good are sold in credit by the business. Some good have to return back because: 1) The goods defective or faulty construction 2) Wrongly specification, type, quality and the size 3) Goods are damaged In business transaction good always sold on credit and usually written down in form of credit note. Credit note always sends by the seller to the buyer, which to inform the buyer account is credited in their (seller) former's book. There are two types of returned goods: 1) Return Inward (Sales Return) 2) Return Outward (Purchases Return) 1.4.1 Return Inwards In Return Inward Journal or Sales Return Book always recorded the good return by the buyer. When customer overcharged, this book also records the deduction amount in a customer's account which refers from the copies of credit note. It's important to separate the account from sales ledger and return inwards journal because in the return inwards journal, it had complete detail. ...read more.

Conclusion

Business bought insurance for some purpose for reclaiming loses, if in case there's problem occurs during transportation. Insurance also debited in trading account, it's also increase the value of purchases. D) NOTES TO FINANCIAL STATEMENTS 1.6 Why Notes on Financial Statements Indispensable Financial Statement is important because it's the summaries and the analysis of an organization. Investor need for decision for investment purpose. Creditor need financial statement from the firm for approval their credit sales / loan. Governments need the financial statement for the taxation purpose. An auditor is enquiring for auditing purpose. Manager needed financial statement to analyst and to running business in decision making for future business planning. These are the reasons for making the notes on Financial Statements: a) Users of Financial Statement must understand the details of the happening of the important transactions; b) Investors need the notes for investment. The investors want to know the situation of the business. c) Auditing also need this note for checking the business operation. If there any mistake in the accounting for adequacy. Sometime for checking the corruption in the business. d) Government needs the note, especially for collecting the tax. This is important because the tax is part of the government income. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Business Studies section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Business Studies essays

  1. Ratio analysis measures company financial position from past data. Ratio analysis is based on ...

    issuing share, partnerships. Firm should try to decrease account receivable. c) Return on Capital Employed (ROCE): Return of capital employed measure the net profit over total capital employed. Higher ROCE indicates more efficient use of capital employed. Capital employed includes owner's capital and loans and retain earnings.

  2. This paper will concentrate on Apples Apple TV business, and its complementing iTunes business.

    -- from the charisma of Steve Jobs to the notion that its products are sold for a love of technology. He goes on to say that Apple's flat-screen iMac or iPhone, for example, were marketed as though they were created personally by Steve Jobs, not by factory workers in Asia.

  1. BP Financial analysis

    BP recorded the largest ever loss of a UK company in the 2nd quarter of 2010. By the 3rd quarter it was back in profit, with its share price improving. The company's new CEO is focusing on safety and risk reduction.

  2. New business plan

    12 2.9 CONSUMER BEHAVIOUR 12 2.9.1 Gap in the market 13 2.9.2 Target Market 13 2.10 MARKETING 15 2.10.1 Positioning 15 2.10.2 The Marketing Mix 15 2.11 RECRUITMENT 22 2.12 FINANCIAL PLAN 22 2.13 RISKS 26 3. CONCLUSION AND RECOMMENDATION 27 4.

  1. Business plan for Laundry Toaster laundry dryer.

    to generate growth of around 1% over the next 3 years, reflecting a value of around RM1 million. Whilst market penetration is generally perceived as the least risky method of generating additional sales in the garden products market, a disproportionate amount of R&D and marketing budget is devoted to product development.

  2. Ford Company Analysis - corporate structure and financial analysis

    Single-source supply of components or materials 8. Labor or other constraints on ability to maintain competitive cost structure; 9. Substantial pension and postretirement health care and life insurance liabilities impairing liquidity or financial condition 10. Worse-than-assumed economic and demographic experience for postretirement benefit plans 11.

  1. Case Study of Reach Out, a business providing therapy to children with autism.

    1. Appointment To select an individual to fill a position in the office. 1. Recruit To add a new member to an organization. 1. Investment Using money to purchase a product or item of value with an expectation of a higher future return.

  2. Globalisation needs to be controlled.Analyse this statement in the light of recent events (such ...

    However, the negative point is that those countries with the most number of FDIs are the first to be affected in case of the global financial crisis. 2. Employment opportunities ? are likely to be high in developing countries, as a lot of international companies are setting up their factories and plants in emerging countries like, China, Vietnam and Malaysia.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work