1.0 Introduction
Accounting Users is divided to two, which is internal users ( people within the organisation ) and external users ( people outside the organisation ) .Internal users is including Directors of operations and Management.Next, external users is including investors, clients, employees, creditors, authorities organisation, and providers. Example of determination by internal users is to analyse profitableness by merchandise and operating unit. The research show in accounting survey online is accessed by to analyse the profitableness by merchandises and operational units ( Anon, neodymium ) . Examples of determination by external users is to hold a gross revenues or purchase minutess with entities. The research show in accounting survey online is accessed by to hold gross revenues or purchase minutess with the entity ( Anon, neodymium ) .
Five different users for Continental Limited Financial Statements are Managers of the company, Employees of the company, Shareholders or proprietors of the company, providers or creditors, client or debitors. Next, the five regulative features of fiscal statements is relevancy, comparison, comprehensibility, truth, dependability.
Undertaking 2 until undertaking 3 is to demo the workings about the income statements and balance sheet.
2.0 Five different users and their demands for Continental Limited fiscal statements
Five different users for Continental Limited Financial Statements are Managers of the company, Employees of the company, Shareholders or proprietors of the company, providers or creditors, client or debitors. It will demo in 2.1 until 2.1.4.
2.1 Directors of the Comapany
Directors of the company, the proprietor of the company, these people are appointed to oversee the day-to-day activities of the company. Maintain control of the manner organisations do things, while taking, actuating and steering people. They need to cognize the fiscal status of the company ‘s accounting information, as it is now and expected in the hereafter, so that they can efficaciously pull off the concern, and to take effectual control and planning determinations.
2.1.1 Employees of the Company
Employees of the company, these people are employed by the company conducts its concern activities. They need accounting information on the fiscal place of the company, because their future calling, their rewards, the size of the salary income depends on it.
2.1.2Shareholders or proprietor of the Company
Stockholders or proprietor of the company, as a successful corporate stockholders, the company ‘s foreman or spouse can be an enviable place. They need accounting information to measure how the company ‘s direction to efficaciously execute its direction maps, how the profitableness of the operation and direction of the company ‘s operations and net income, they may retreat into payment from the concern.
2.1.3 Suppliers or Creditors
Suppliers or creditors, a creditor of a legal nature, the proviso of goods, services or capital loan debitor entity, a company or a individual. They need the company ‘s ability to refund its debt, in order to guarantee that they collect from the company ‘s accounting information.
2.1.4 Customers or Debtors
Customers or debitors, these are the people to purchase the services or goods of the company recognition. They need the company ‘s ability to refund its debt, in order to guarantee that they collect from the company ‘s accounting information.
2.1.5 Five Features of utile fiscal statements
The five regulative features of fiscal statements is relevancy, comparison, comprehensibility, truth, dependability. It will demo in 2.1.6 until 2.1.10.
2.1.6 Relevance
Relevance. Relevance means that the fiscal statements should be a major concern companies. Relevance to act upon a decision-making capacity of the undertaking. The fiscal information contained in the fiscal statements, should hold an impact on the commercial endeavor operating policy and decision-making.
2.1.7 Comparison
Comparability. Comparable entities, every bit good as the fiscal statements of each entity should be comparable. Fiscal histories on the footing of accounting constructs, should be the last twelvemonth history and comparable companies account. The fiscal statements must besides be in the fiscal statements of other entities in the same industry. Users must be able to compare the fiscal statements of an entity over clip to place tendencies in its fiscal place and public presentation. The Howtobeacapa online is accessed by Users must be able to compare the fiscal statement of an entity through clip in order to place tendencies in its fiscal place and public presentation ( Anon, 2012 ) .
2.1.8 Comprehensibility
Comprehensibility. Comprehensibility of the information contained in the fiscal statements is easy to understand its users. Is of import to observe that intelligibility is dependent on the user ‘s ability to analyse or read the fiscal statements. The user should hold the cognition and accomplishments to understand the information contained in the fiscal statements. The comprehensibility demands, fiscal and accounting information must be easy to understand. In add-on, it should be the point of position of apprehension and apprehension, it is flexible and can be understood non merely corporate directors and stockholders, every bit good as the general populace. The Bukisa Online is accessed by comprehensibility requires that fiscal accounting information must ease understanding. & A ; Acirc ; Furthermore, it should be apprehensible and comprehendible to the point that it can be flexible and be understood by non merely concern executives and shareholders but every bit good as the general populace ( Bukisa, neodymium )
2.1.9 Dependability
Dependability refers to the grade of assurance informations user trueness and genuineness of the fiscal and accounting information. If it reflects the substance of dealing to show dependably and genuinely what has already happened. Reliability is impersonal, the belongingss of prejudice and mistake and complete fiscal information. It is prudent and realistic where there is any uncertainness. Cautious or conservative construct, besides straight impact the dependability of fiscal information.
2.1.10 Accuracy
Accuracy. Financial accounts to supply accurate fiscal information to the user to make up one’s mind because of inaccurate information will take to inaccurate consequences generated by users.
2.2 The income statements of Continental limited for the internal usage
The workings of income statements will demo in 2.2.1.
2.2.1 Income statements of Continental limited for twelvemonth stoping 31 Dec 2010 for internal usage by company and managers and direction
Closing stock must be recorded at cost or net gross revenues value which one is lower. Since cost RM65000 & A ; lt ; net gross revenues value RM70000, the cost RM65000 should be shuting stock value put in the trading history of income statements and under the current assets in balance sheet.
In the below is the working of inquiry B:
___________________________Cash account__________________________________
RM RM
Gross saless ( Difference ) 5000 Purchase 4000
Stationery 700
Electricity 300
________ _________
5000___ 5000_
Gross saless in trading history of income statement= RM360000 from TB + RM5000= RM365000
Purchase in merchandising history of income statement= RM200000 from TB + RM4000= RM204000
Stationery as disbursal put in P/L history of income statement= RM 700
Electricity and H2O in P/L history of income statement= RM7000 from TB + RM300= RM7300
Working of inquiry degree Celsiuss:
Gross saless committee as disbursal put in P/L history of income statement= RM18000 paid from TB + RM1500 accrued at the terminal of the year= RM19500
Then, accrued gross revenues committee RM1500 is recorded under the current liability in balance sheet.
Office Salaries as disbursal put in P/L history of income statement= RM28000 paid from TB- RM2000 prepaid at the terminal of the year= RM26000
Then, prepaid office wage RM2000 is recorded under the current plus in balance sheet
Working of inquiry vitamin D:
____________________ Debtor account_________________________________
RM RM
Balance b/d 75000 Bad Debts 5000
Balance c/d 70000
________ _________
75000__ 75000
Balance b/d 7000
( Debtor put under current plus in balance sheet )
Bad debts account___________________________
RM RM
Debtor 5000 P/L history 5000
( Bad debts as disbursals put in P/L history )
Provision for bad debts shuting balance= 10 % X Debtor shuting balance RM70000= RM7000
__________________Provision for bad debts account____________________________
RM RM
31 Dec 2010 Closing balance c/d 7000 1 Jan 2010 Opening balance b/d 5000
Increase difference 2000
_______ ______
7000 7000
1 Jan 2011 Balance b/d 7000
Working of inquiry vitamin E and degree Fahrenheit:
Vehicles account__________________________________
RM RM
Balance b/d 300000 Vehicles disposal a/c 50000
Balance c/d 250000
________ ______
300000 300000
Balance b/d 250000
_________________Provision for depreciation on vehicle account__________________
RM RM
Vehicle disposal history 12500 1 Jan 2010 Opening Balance b/d 60000
( Cost sold RM50000 x 5 % ten 5 old ages Depreciation as disbursal put in P/L
from 1 Jan 2005 to 1 Jan 2010 ) history 12500
( Vehicles shuting balance
RM 250000 x 5 % )
31 Dec 2010 Balance c/d 60000 ______
72500 72500
1 Jan 2011 Balance b/d 60000
Vehicle disposal account____________________________
RM RM
Vehicle cost sold 50000 Provision for depreciation on
Vehicles sold 12500
Returns from disposal of
Vehicle 35000
Difference for loss on
Disposal of vehicle 2500
________ ______
50000 50000
Provision for depreciation on premises account_________________
RM RM
Balance c/d 54000 1 Jan 2010 Opening Balance b/d40000
Depreciation as disbursals put in
P/L history 14000
( Premises cost RM350000 x 4 % )
_________ ______
54000 54000
Balance b/d 54000
Working for note ( g ) of inquiry:
Taxation charge RM15300 is deducted from net net income at the underside of income statements. It is besides recorded as accumulated revenue enhancement RM15300 under the current liability in balance sheet.
Working for note ( H ) of inquiry:
Proposed divided to be deducted from net net income at the underside of income statement= 25 ten RM500000 portion capital from TB= RM10000
Then, the proposed divided RM10000 is recorded under current liability in balance sheet.
Income statements of Continental Limited for twelvemonth stoping 31 Dec 2010 for internal usage
RM RM RM
Gross saless 365000
Less Return inward 10000
Net gross revenues 355000
Less Cost of gross revenues:
Opening stock 50000
+Purchase 204000
-Return outwards 15000
+Carriage inwards 5000 194000
Less Closing Stock 65000 179000
Gross Net income 176000
Add Income: _5000_
Devidend received 181000
Less Expenses:
Stationery 700
Office electricity and H2O 7300
Office salaries 26000
Gross saless committee 19500
Bad debts 5000
Addition in proviso for bad debts 2000
RM RM
Loss on disposal of vehicle 2500
Depreciation on vehicles 12500
Depreciation on premises 14000
Vehicle disbursals 12000
Interest charges 3000 104500
Net net income 76500
Less revenue enhancement charge ( 15300 )
Less Proposed dividend ( 10000 )
Net income for the twelvemonth 51200
Add Retained net incomes brought frontward 100000
Retained net incomes carried frontward 151200
2.2.2The balance sheet of Continental limited for the internal usage
The working will demo in 2.2.3.
2.2.3 Balance sheet of Continental limited for twelvemonth stoping 31 Dec 2010 for internal usage by company and managers and direction
Balance sheet of Continental Limited as at 31 Dec 2010 for internal usage
RM RM
Fixed assets/ Non-current assets
Office premises at cost 350000
( – ) Provision for depreciation on premises ( 154000 ) 296000
Vehicles at cost 250000
( – ) Provision for depreciation on vehicles ( 60000 ) 190000
100000
Long-run investing 586000
Current assets
Closing stock 65000
Debtors 70000
( – ) Provision for bad debts ( 70000 ) 63000
Bank 42000
Prepaid office wage 2000 172000
758000
Issued shared capital
Share capital 500000
Add Reserve
Retained net incomes carried frontward 151200
Shareholders & A ; acirc ; ˆ™ equity 651200
Add Long-run liabilities/Non-current liabilities
Loan 55000
Add Current liabilities
Creditors 25000
Accrued gross revenues committee 1500
Accrued revenue enhancement 15300
Proposed divided 10000 51800
758000
2.3 Income statements of Continental Limited for external coverage or publication
The working will demo in 2.3.1
2.3.1 Income statements of Continental Limited for twelvemonth stoping 31 Dec 2010 in the accepted for external coverage or publication.
Distribution costs Administrative disbursals
RM RM
Stationery 700
Office electricity and H2O 7300
Office salaries 26000
Gross saless committee 19500
Bad debts 5000
Addition in proviso for bad debts 2000
Loss on disposal of vehicle 2500
Depreciation on vehicles 12500
Depreciation on premises 14000
Vehicle disbursals 12000
Entire _______ ________
53500_ 48000
Income statement of Continental Limited for twelvemonth stoping 31 Dec 2010 for external coverage
RM RM
Employee turnover 355000
Cost of gross revenues ( 179000 )
Gross net income 176000
Distribution costs 53500
Administritive disbursals 48000
( 101500 )
Operating net income 74500
Dividend received 5000
79500
Interest charges ( 3000 )
Net income on ordinary activities before revenue enhancement 76500
Taxation charge ( 15300 )
Net income on ordinary activities after revenue enhancement for the twelvemonth 61200
Proposed dividend ( 10000 )
Retained net income for the twelvemonth 51200
Retained net income brought frontward 100000
Retained net income carried frontward 151200
Balance sheet of Continental Limited for the twelvemonth stoping 31 Dec 2010 for external coverage
RM RM RM
Fixed Assetss
Tangible Assetss:
Premisess 296000
Vehicles 190000
486000
Investing:
Long term investing 100000
586000
Current Assetss
Stock 65000
Debtors 63000
Prepaid office wage 2000
130000
Cash at bank 42000
172000
Less Creditors: Sums Falling Due Within One Year
Creditors 25000
Accrued gross revenues committee 1500
Accrued revenue enhancement 15300
Proposed dividend 10000 ( 51800 )
Net Current Assets 120200
Entire Assets Less Current Liabilities 706200
Less Creditors: Sums Falling Due After More Than One Year
Loan ( 55000 )
651200
Capital and Militias
Called up portion capital 500000
Net income and Loss history 151200
651200
2.4 Calculate the appropriate accounting ratios for twelvemonth stoping 31 Dec 2010 compare them with the industry norm provided to measure the profitableness and liquidness of Continental Limited.
The working computation will demo in 2.4.1.
2.4.1 Table of ration Calculation
Ration with formula Ration computation for Industry
Year 2010 norm
Percentage of cross 176000 / 355000 x 100 & A ; gt ; 30 %
Net income on gross revenues = 49.57 %
=Gross net income /Net
Net income x 100
Percentage of 74500 / 355000 x 100 & A ; gt ; 18 %
Operating net income on = 20.99 %
Gross saless
= Operating / Internet
Net income x 100
Tax return on capital ( 76500+3000 ) / 706200 & A ; gt ; 9 %
Employed x 100 % = 11.26 %
Current ratio 172000 / 51800 = 3.32: 1 & A ; gt ; 2: 1
=Current assets /
Current liabilities
Stock turnover period 365 yearss / stock turnover & A ; gt ; days90
= 365 yearss / stock in times = 365 / 3.11=
Turnover =117.36 yearss
Debtors collection 63000 / 355000 ten 365 yearss & A ; gt ; 45 yearss
Period = 64.7 yearss
= Debtor ratio ten
365 yearss
Creditor payment 25000 / 189000 ten 365 yearss & A ; gt ; 60 yearss
Period = 48.28 yearss
= creditor ratio ten
365 yearss
working for ( vitamin E )
Stock turnover = cost of gross revenues / mean stock value
= cost of gross revenues / ( opening stock + shuting stock ) / 2
= 179000 / ( 50000 + 65000 ) / 2
= 179000 / 57500
= 3.11 times
Working enemy ( degree Fahrenheit )
( Debtor / net recognition gross revenues ) x 365 yearss
= [ 63000 / ( 365000-10000 ) ] x 365 yearss
= ( 63000 / 355000 ) x 365 yearss
= 64.7 yearss
Working for ( g )
( Creditor / net recognition purchase ) x 365 yearss
= ( 25000 / 189000 ) x 365 yearss
= 48.28 yearss
Profitableness of Continental Limited
Percentage of gross net income on gross revenues in the ratio computation for twelvemonth 2010 which is 49.57 % higher per centum than the industry mean 30 % . In this manner can demo that, the gross net income on gross revenues in ratio computation for twelvemonth 2010 is more effectual and efficient than the industry norm, because it can command its purchase cost by doing the purchase at lower cost from provider and efficient in commanding its production cost by the effectual usage of stuffs and labor to cut down its production cost instead than industry norm.
Percentage of operating net income on gross revenues in the ration computation for twelvemonth 2010 is 20.99 % which more than industry norm that is 18 % . From the ratio comparing, the higher disbursals to gross revenues ration indicates that company is uneffective in its outgo control doing higher disbursals incurred to cut down its cyberspace net income earning. Conversely, the industry norm ratio is lower disbursal to gross revenues ratio indicates that company is effectual in costs control doing lower disbursal to incurred to increase its net net income earning.
Tax return on capital employed ( ROCE ) in the industry norm is 9 % and the ROCE in the ratio computation for twelvemonth 2010 is 11.26 where is higher than the industry norm per centums. In this ratio computation for twelvemonth 2010 showed that the higher return on capital employed indicates higher net net income generated from the capital employed in production and concern activities to increase the production and gross revenues volume every bit good as to increase the net net income earning. Besides that, the lower of the industry norm is the lower return on capital employed for uneffective usage of capital employed in production and concern activities to cut down production and gross revenues volume every bit good as to cut down net net income earning.
Liquid of Continental Limited
( d. ) The comparing between the ratio for twelvemonth stoping 31 December 2010 and the industry norms which the former is higher than the latter. Because, the current ratio of the twelvemonth stoping 31 December 2010 is 3: .32:1 higher than industry norm which is 2 ; 1.
( vitamin E ) The stock turnover period for the stoping 31 December 2010 is 117.36 yearss which more than the industry norm because it merely 90 yearss. Obviously, the longer stock turnover period indicates slow stock turnover in concern where goods purchased are kept in stock for long clip and so easy taken out for resale so that the stock is accumulate to bind up money, doing short term job.
( degree Fahrenheit ) The computation ratio for the twelvemonth terminal 31 December 2010 is 64.7 yearss which longer than the industry norm which is 45 yearss merely. From the ratio comparing, the longer debitor aggregation period for twelvemonth terminal 31 December 2010 indicate that company has given longer recognition clip to let debitor owning, doing longer clip taken by company to roll up money easy from debitors, so that larger debitor balance is accumulated to bind up money, conveying to shortage of money for paying back liabilities and confronting short term fiscal job.
( g ) The consequence ratio for twelvemonth terminal 31 December 2010 is 48.28 yearss is shorten than the industry norm which is 60 yearss. Therefore, the shorter creditor payment period indicate that company has obtained shorter recognition clip for having and paying to creditors so that company needs to pay creditor in clip, doing smaller creditor accumulated and short term fiscal job for deficit of money to pay back creditor.
Decision
In decision, I have learn the five different users are Managers of the company, employees of the company, stockholders or proprietor of the company, providers or creditors and clients or debitors. After that, I besides learnt the working on how to fix the income statement and balance sheet.
Furthermore, when I am making this assignment, I m confronting the job of some of the inquiry does non cognize how to make it. Because I does non hold any foundation in Accounting earlier. That clip, I am really disquieted and afraid this capable Principles of Accounting. But, fortunately, our talk Mr Chow, put a batch of attempt and patient learning us how to make the assignment, allow us understand this topic. So that, I can understand and have the thought about how to make my assignment.
