Financial Accounting Reporting (Essay Sample)

Name: University: Course: Tutor: Date: Financial Accounting and Reporting Question 1 Workings (Account Adjustments) Trade Payables A/C Dr Amount Cr Amount Bal b/d 11,700.00 Bal b/f 11,200.00 Material Purchase 500.00     11,700.00   11,700.00 bal c/f 11,700.00 Cash A/C Dr Amount Cr Amount Bal b/f 11,700.00 Purchase 500.00 Sales 240.00 Wages 260.00   Bal c/f 11,180.00   11,940.00   11,940.00 Bal c/f 11,180.00 Purchases Dr Amount Dr Amount Bal bdf 12,400.00 Bal b/f 13,400.00 Cash 500.00   Credit 500.00       13,400.00   13,400.00 Bal b/d 13,400.00 Sales A/C Dr Amount Cr Amount Bal b/f 15,640.00 Bal b/f 14,600.00 cash 240.00 Credit 800.00     15,640.00   15,640.00 Bal b/d 15,640.00 Recievables Dr Amount Cr Amount Bal B/f 12,000.00   Sales 800.00   Bal b/d 12,800.00     12,800.00   12,800.00 Bal b/f 12,800.00 ABC Trial Balance ABC Trial Balance March 31, 20x7   Unadjusted Adjusted Item Dr ($) Cr ($) Dr ($) Cr ($) Bank Loan 12,000.00 12,000.00 Cash 11,700.00   11,180.00   Capital 13,000.00 13,000.00 Rent 1,880.00   1,880.00   Trade payables 11,200.00 11,700.00 Purchases 12,400.00   13,400.00   Sales 14,600.00 15,600.00 Sundry Payables 1,620.00   1,620.00 Recievables 12,000.00   12,800.00   Bank loan on Interest 1,400.00   1,400.00 1,400.00 Other Expenses 11,020.00   12,380.00   Vehicles 2,020.00   2,020.00   Wages   260.00   Equity 3,240.00               Total 54,040.00 54,040.00 55,320.00 55,320.00           ABC Profit and Loss Account ABC Profit and Loss Account March 31 20x7 Amount Sales     15,600.00     Cost of sales 12,400.00     Gross Profit 3,200.00     Expenses   Rent 1,880.00   Wages 260.00   Bank loan interest 1,400.00   Other Expenses 11,020.00 14,560.00     Profit/Loss (11,360.00)                             Question 2: Consolidated Financial Statements How information needs of different user groups vary Financial information obtained from reports is used by a wide number of stakeholders in all business industries. Users of financial information are divided into external and internal users. Despite the class or group of user one is placed, it is necessary to take note of the fact that users need this information to make better financial decision (Jury 2012, pp. 42-49). Financial information users are therefore classified or listed as follows; * Internal users * Management * Employees * Owners/ Shareholders Financial information is always presented to internal users in the form of management accounts, budgets, forecasts and financial statements. The above tools or documents are important to the users in that they need them to steer effective decision to the company. Ranging from pricing, allocations and investment decisions, it is wise for a user to consider comprehensive usage of these statements. Management – Management is considered to be the engine of any organization. This is because the management takes charge of day to day running of the organization. Based on this, the management needs financial information to help them analyze organizational performance and position. From effective analysis of organizational position, the management will be well placed to make appropriate decisions towards improving company results. The manner in which management uses financial information is different from how other users apply the same. For example, management needs a budget to determine allocation and funds sourcing for various projects. It is important to note management is a center of decision making when it comes to resource allocation, investment and income sharing. This makes the management a vital user of financial information. Employees - Every company or organization is served by employees, this implies that employees need vital information for effective service delivery. In most cases, employees assess various situations such profitability and stability among others. It is important to note that employees find it pleasing working for well performing and stable organizations. To ascertain the stability of their employers, employees use information from financial statements such as balance sheet, income statement and forecast among others. Employees love working for organizations with a going concern concept. A going concept in any organizations is only assessable through information obtained from balance sheet and income statement. Owners – Owners or shareholders happen to be a special group of information users. This is because they have a special interest in terms of financial investment. Based on the fact that owners invest and expect income, it is the important to provide them with information that will help them analyze key areas such as viability and profitability among others. In most cases, a number of owners or shareholder have increased or reduced their investment interest based on financial information provided. It is therefore necessary that the owners are served with valuable financial information to determine key course of action regarding the future. * External users * Creditors * Tax authorities * Investors * Customers * Regulatory authorities External users just like internal users must be informed through the use of financial information. This is because, external user are engaged in a number of transactions or business activities with these organizations. Creditors – Creditors are part of day to day operation of any organization. Creditors such as suppliers of both goods and services must ascertain various positions of companies such as credit worthiness. Credit worthiness of a business organization can only be ascertained by analyzing its statement of financial position (balance sheet) and income statements. Based on such information, a creditor will be able to determine the kind credit facility to offer the organization. Tax authorities – Tax obligation lies with all business organizations. However; in most cases, tax authorities need to conduct a verification process on the credibility of returns filled by various organizations. To ascertain the credibility of filled returns, tax authorities often take a keen look at the financial statements which communicate the revenue and expenditures of the organization. These authorities are therefore vital users of the financial information provide. Investors – Investors have a lot of considerations to make to before making any investment decisions. For wise investment, investors must consider vital areas such as feasibility of investing in accompany. From the word go, all investors aim at making good returns. It is therefore necessary to apply good analysis of the financial information provided to ascertain stability of the company how possible is a positive return from kind of investments (Khan & Jain 2007, pp. 17-21). The main reason as to why investors find financial information necessary is the fact that they want to be sure of reasonable return before making any commitment. Customers – Every organizatio...