• 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...


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.


=$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.


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

    Some of these newsletters also have pre-order capabilities. Online newsletters also let customers know about iTunes-only products like unreleased Beatles songs, which was only available to iTunes customers. See Fig. D in the Appendix for an example of an iTunes newsletter Product release emails Information about new versions of Apple

  2. Accounting terms Revision notes.

    Weaknesses (internal): Lack of finance, lack of skills, no experience. Opportunities (external): Gap in the market, new market, location, strong economy. Threats (external): Competition, new market, fashions and fads, declining market, legislation. Costs are expenses the company has to pay during the production of its product.

  1. Cross-cultural business. Report for Westerners doing business in China.

    or non-verbal communication because later in the process there will be major potential for error or miscommunication within the business. Chinese are very particular and draws on those four keys features of business etiquette. This paragraph will evaluate the significant kinds of characteristics which are different from Western culture by

  2. Business plan for Laundry Toaster laundry dryer.

    This will be expressed to the client as a per-deliverable fixed price in a quote. Clients can determine which deliverables they would like to purchase. Pricing structure will be based on the structure and the heat exchanger of the cupboard also the material and compartment inside the cupboard.

  1. Organisational Behaviour (in short called as OB) is concerned with the study of the ...

    On the other hand, the network structure may result in unpredictability of supply and lack of control because managers are relying on contractual workers to perform important work. Task 3: 3.1 Discuss the impact that different leadership styles may have on motivations in organisations in periods of change Leaders are

  2. Ford Company Analysis - corporate structure and financial analysis

    Mulally was elected President and Chief Executive Officer of Ford, September 1, 2006. Since March 2001, Mulally had been Executive Vice President of the Boeing Company and President and Chief Executive Officer of Boeing Commercial Airplanes. He was also a member of the Boeing Executive Council and served also as President of Boeing's space and defense business.

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

    ________________ 1. The stakeholders: A stakeholder in a business includes any individual or group that is affected by the business and therefore has an interest in the activities of the business. The following diagram shows the stakeholders of Reach Out: General Public Andrew Therapists Reach Out Neil Laura Suppliers of

  2. Does raising prices always result in more profit?

    price elasticity of demand and answer questions: in what circumstances, raising price would lead to higher profits and what circumstances lead to a loss of revenues and profits. represents price elasticity of demand, represents the percentage change in price while indicates the percentage change of quantity demanded.

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