C1: Purpose Of Accounting

Question 1

What is accounting?

Answer 1

Accounting is the process of recording financial transactions pertaining to a business

Question 2

What does the process of accounting include?

Answer 2

Summarising, analysing, and reporting these transactions to oversight agencies, regulators, and tax collection entities.

Question 3

What is the purpose of accounting for an Organisation?

Answer 3

• record transactions- e.g invoices you send out, record all expenditures and bills your going to pay out of you business.
• Management of Business- enables you to plan for the future, enables to to monitor your performance and progress, enables you to control what your staff are doing and try to set them target to make them work more effectively.

Question 4

What is the purpose of accounting to a organisation?

Answer 4

• Compliance- allows you to comply with legislation. Conpliance may help you to prevent fraud or it will ensure that you dont do anything illegal or fall foul of any refulations which could get you organisation in trouble.
• Measuring performance- you can review the performance and think about strategies that you can implement to perform enhance the business overall

Question 5

What is the purpose of accounting for an organisation?

Answer 5

• Control- accounting is a form of control, it enables you to prevent that fall from taking place in the first place, it also enables you to make sure that your trade receivables and trade payables are kept track off that’s obviously people you pay and people you owe money to. It gives you a form of control which is useful because your business could suffer from liquidity problems if it was to have poor forms of financial control

Question 6

Measuring performance

Answer 6

Without financial records you wont be able to see if the business is making a profit or if money is owed of it it was in debt to others.

Question 7

Key indicators of financial performance

Answer 7

• Gross Profit- the amount of profit left after the costs of producing the good or service id 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- amount of money owed to the business from sales that have not yet been paid for.
• value owed by the business- the amount of money the business owes to others for goods or services purchased but not yet paid for.