Describe the purpose of accounting for an organisation.

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 be recorded accurately and therefore tax payments may be wrong. Overall it is very important for FF to record all transactions because they need to know exactly how much money they make and spend, so they can get things like tax and profit right. FF needs to have the ability to control their accounts. If accurate records of transactions are maintained and activity closely monitored, then actions can be taken to control the balance between money flowing in and out the business, for example if expenses were creeping up but sales staying the same, then FF could look for ways to control or cut costs, like funding new dress suppliers to cut costs

Management of the business: Mangers of future fashion must make sure they plan and control all resources to make it easier for tehm to handle, this will make sure they consider their staff member as they help FF run. They will have to control their money as is important the right amount of money goes in and out of the business. Also stock, mangers will have to order stock and orders stock when it has run out.

Measurement of Financial performance

If FF didn’t have any financial records it would be impossible for them to know if they was making a profit or a loss, or whether or not the business was owed money or in debt to others

Indicators of financial performance include:

* Gross Profit – this is the amount of profit left after the cost of product the goods or services is deducted from the amount of sales revenue.

* Net Profit – this is the smaller amount of profit made after all other expenses are deducted from the gross profit.

* Value owed to the business – this is the amount of money owed to the business from sales that has not yet been paid for.

* Value owed by the business – this is the amount of money the business owes to others for goods or services purchased but not yet paid for.

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Future Fashion has managers who are responsible for the planning, monitoring and controlling of the resources for which they are responsible. The management of a FF store involves co-ordination or resources including staff, materials, stock and money. The manager must ensure there are sufficient funds to pay wages, order new stock, pay bills and meet other demands for cash outflows by balancing this with the money coming in from sales.