Describe the purpose of accounting for an organisation.

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Unit 5 – P1

Purpose of accountancy

Accountancy involves the recording of financial transactions that take place in a business, planned or actual, and the use of these figures to produce financial information. The business I am going to write about is FF I will talk about the accountancy in FF.

Record Transaction: It is important that businesses keep their records accurate and up to date for them to run smoothly. The business owner must record all the money coming into the business from sales and all of the forgetting to pay bills. They may even get into seriouse trouble with HM Revenue and customs whichisa British government department for the collection of all of all typesof taxes. If a business doesnot record its transactions correctly it cannot report it finacial performance accurately and thereforetaxpayment maybe wrong.

Monitor Activity: FF’s records must be updated on a regular basis so they have a good indication of how the business is doing in terms of sales, receiving payments, paying expenses and so on. This is useful for FF because they would realise if money going out seemed be on the increase while sales were dropping off, so they could make a change. Monitoring activity should also involve keeping an eye on the bank balance to ensure there are sufficient funds to meet day to day expenses. Overall it is important for FF to update their activity regularly so they know exactly when something changes so they can improve their business.
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Control: Future Fashion needs to keep business records correct and up to date like any other business. The business owner/owners or a bookkeeper must record all of the money that comes into the business (from sales) and all the money that goes out, such as expenses which could include bills, and purchasing stock. If FF does not have accurate recordings of their transactions they may find themselves not chasing payments, forgetting to pay bills, or even more seriously, in trouble with HM Revenue and Customs. If FF does not record all their transactions correctly their financial performance won’t ...

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