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Accounting assignment 1
1 In a brief but comprehensive response, define the role of accounting. (You are required, amongst others, to address accounting information, users of financial information, the accounting process and the role of financial accounting vs. management accounting.)
Accounting is one of the fastest growing fields in the UAE. In today’s society, the demand for good accountants for exceeds the supply. As our country has expanded, business and industry have become more and more complex, so control here is very important. And control depends on a great deal of the bookkeepers and accountants who can analyze figues and advise management on what should be done. They are using more scientific ways changing money, figuring change, and collecting sales taxes. Moreover, department stores and other companies now have plants and offices widely scattered throughout the country. A new set of bookkeepers and accountants, is needed at each branch. I know there are many managements supervisory, and junior or senior executive positions are bing filled by people who started as accountants because accountants have the knowledge of methods and finance and comprehension of the fundamentals of business, and accounting is the foundation of sound business.
The two kinds of accountants, public accountants and private accountants serve different important functions in business organization. Business enterprises, government agencies, and nonprofit institutions, such as universities and churches more are more likely use public accountant. They offer their services to the general public on a fee basis in much the same way as do lawyers, doctors, and dentists. In addition, the larger firms have professional accountants on their staff who work for a salary, but are also considered public accountants. The two important areas, auditing and tax services are also the job for public accountants.
In a single business enterprise or nonprofit organization, the main job for private accounts in to handle the finanacial records. Manufacturing or other concerns are also need accountants, in that situation, they are often called industrial accountants. In addition, accountants are employeed by all branches of federal state, and local government, including government-owned corporations. Accountants in private and government work customarily specialize in the performance of a single type of accounting service, they may do any of the types of accounting service just described above. They also tend to become specialists in a narrow field of employment such as a particular branch of manufacturing, public utilities, or transportation.
- In general, explain what the statement of comprehensive income (income statement) and statement of financial position (balance sheet) portray about a business entity and briefly discuss what is contained in each statement.
The balance sheet and income statements are used in financial accounting because they are regarded as the most important financial statements. The Balance sheet lists assets and liabilities of the organization in a given financial period or fiscal year. An income statement was also known as Profit and loss statement and it’s a report for income and expenses over a specific period of time maybe quartile year.
In regard to performance an income statement shows how a company has performed by listing sales and expenses and the resulting profit or loss. A balance sheet summarizes the company’s assets liabilities and shareholders’ equity at a specific point in time to analyze how a company pays for things (Weygandt, Kieso, 2008). Income statements report operating results such as, sales and expenses. This allows investors to evaluate company’s performance and gives a prospect on the way forward. The balance sheet on the other hand presents the strengths of a company which enables investors to factually calculate days of working capital. Balance sheets can also identify trends of how net profit is used, receivables and the payables.
Balance sheet in organizations helps the managers to know what is in the business (assets) also to know what is not in the business (liabilities). The balance sheet, on the other hand, provides information to the managers on how debts should be paid, and to assess the operations to finance the business.
The balance sheet assists many managers of the business how to make right decisions in the business regarding equipment purchasing in the organization. Business managers also need the balance sheet for deciding on the best credit sources for business by showing accounting equations representations in a physical way.
For the investors, balance sheet is a document which is necessary for review learning to the company to know the total cash amount in hand, and how much does the company owes plus when the payments are to be done. Many investors tends to compare the company’s present balance sheet to find out whether that it has any increased debts, by building up the inventory, and depleting cash which might raise concern. Balance sheets helps government agencies in making sure that businesses are complying to the set laws. It provides information for all the potential lenders in businesses on credit worthiness in the business.
- Briefly discuss the difference between the cash basis and accrual basis of accounting using the example of rent of 24000AED being paid in advance by Company A for 12 months from 1 September 2014. Company A has a December year end.
The major variance between cash and accrual basis accounting is the timing when revenue and expenses are to be recognized. The cash method of accounting is used revenue only when the money is received and for expenses only when money is paid out. The accrual method records the revenue when it is earned and expenses goods and services when they are incurred. The revenue is recorded even if money has not been received or if expenses have been incurred but no cash has been paid.
For the accrual method 24000AED is recorded even if it has not been paid while for the cash method, 24000AED will not be recorded till the amount is paid.
4.The CEO has described an item in the financial statements of Brave Brands Marketing as “…a present obligation, arising from a past event, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits.” Describe using accounting terms the above statements.
In finance, a liability can be explained as an obligation of an entity coming from past events or transactions, the settlement of which may come from transfer or use of assets, service provision or other economic future yielding.
A liability has the following characteristics;
A liability is any borrowing type that a person takes from another person or bank for the aim of bettering his project and is always payable within a set period of time. It is also the responsibility to other people that comprise settlement by future transfer or assets use, service provision, and other transaction yielding an economic advantage. Assets = Liabilities + Owner’s Equity.
- You received the following chart:
You need to:
- Arrange these costs in a table that lists factory overhead costs for the year.
Bad debt expense
Depreciation expense-office equipment
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