Principles of accounting and purpose of financial information Essay

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Table of contents

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1.0Introduction 2

2.0Accounting environment 2,3

3.0intent of fiscal information 3

4.0features of fiscal information 4

5.0Accounting rhythm and dual entry 5,6,7

6.0Decision 8

7.0Mention 8

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1.0 Introduction

Litus Maldives Pvt Ltd was established in 2012. The first nucleus concern of the company was logistics. Velaa private island resort was the first client of the litus Pvt Ltd. During the development of the velaa private island resort undertaking, Litus Maldives Pvt Ltd handled 100s of containers at zero demurrage. After being successful in logistic, the direction decided to come in into the bike industry. The nucleus concern named Litus entered into the bike franchise in order to offer client with different and more major automotive trade names under one roof. Today the concern stands as biggest bike provider in the Maldives with 18 different trade names of bike. As the company entered freshly to the industry where there are strong challengers already existed, the selling section of the company was forced to work at maximal velocity. For that, one of the initial stairss undertaken was to advance the concern in the societal media. Second, litus started undertaking patrons for different events. Hopefully, these actions made their name recognizable amongst its rivals.

2.0 Accountingenvironment

Presently, there are good qualified comptrollers employed in the concern. The histories are managed by package called speedy books. The accounting procedure is divided into 3 different undertakings. One of them is responsible for informations feeding. Another individual controls and manages the speedy books. The Third individual is responsible for bank direction and does collectible histories.

2.1 Users of accounting of information

1. Internal users

i‚·Employees

Income statement are prepared at the terminal of every twelvemonth to guarantee that litus is executing at a net income or a loss. So that it would be helpful for the employees to find the profitableness of the concern and therefore to guarantee their occupation security and the wage degree.

i‚·Management and proprietors

Equally long as there is adequate information available about the company’s fiscal position, it would be helpful for the direction to take future actions if needed. 3

2. External users

i‚·Tax governments

As litus pays GST and BPT quarterly, the information about the entire purchases and gross revenues made in every four months are provided to the revenue enhancement authorization to place input and end product revenue enhancement.

i‚·Creditors

Cash flow statements and the information about bank balances are ever prepared and available for the loaners. So that they would cognize that the company has adequate hard currency to pay back.

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3.0 intent of the fiscal information

i‚· Accounting information is of import for litus as it gives operation consequences, for case gross revenues, operation disbursals, net income and loss for a peculiar period which evaluates the company’ income public presentation of the concern.

i‚· It besides helps to pull investors. As the company is acquiring ready to take a long term loan from habib bank Lit, fiscal information will be critical for the investor to find payback period for the investing.

i‚· Harmonizing to the fiscal information, clients besides can find the sustainability of the concern. They would hold warrant about the handiness of the bikes in the hereafter.

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4.0 Features of the fiscal information

i‚·Dependability

Information in the Litus Maldives Pvt Ltd is really dependable and all the investors can depend it to be materially accurate because litus Maldives apply appropriate fiscal information. Furthermore dependable information is the cardinal factor for determination devising. For these grounds litus believes that the information they prepare are dependable.

i‚·comparison

As the histories are prepared in IAS format, litus made it easy to compare the fiscal information with other large challengers. Furthermore litus keeps fiscal information on a regular basis at the terminal of every twelvemonth which besides would do comparison concern public presentation from twelvemonth to twelvemonth easily.

i‚·Faithful

Litus do non hold any purpose to stand for manipulated and corrupted fiscal information to any 3rd party to derive involvement. Therefore, the information prepared is accurate and honest.

i‚·Timeless

The histories and information are recorded every bit shortly as it has to be. From the clip a dealing occurs the three staffs that are responsible for accounting procedure begins their plants. In four old ages history, litus have ne’er gone through a job due to a delayed recording of a dealing. 5

5.0 Accounting Cycle Steps

1. Identifying and analysing concern minutess

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Not all the minutess are entered into the accounting system but all those events that affect the concern entity will be included in the procedure of accounting rhythm. Example: a short term loan by the proprietor of the Litus does non hold any consequence to the entity, so will non be entered.

2. Recording in the diaries

It is recorded in the diary entries utilizing the dual entry clerking system. So one will be recognition and the other will be debited. Largely they are gross revenues and purchases grosss of litus cars. 6

3. Posting to the leger

It is used to aggregation of histories that shows the alterations made to each histories as a consequence of past minutess of litus and their current balances.

4. Unadjusted test balance

This is prepared to prove the equity of the debits and credits. In order to look into it up all the debit and recognition balances are added, these should tally. If they are non equal it indicates there is an mistake such as dual poster or failure to enter a dealing.

5. Adjusting entries

If debit and recognition do non aline, seting entries are provided on accrual footing. Normally some disbursals are incurred at the terminal of the accounting period but may non enter in the diaries. There might be payment for bike is gained but non entered in the system. The intent of fixing is to update histories before adding it to the fiscal statement.

6. Adjusted test balance

Adjusted test balance is prepared to do certain that seting entries are made before the readying of fiscal statement. This measure makes easy for litus to fix fiscal statement. 7

7. Fiscal Statements

When all the histories are ready and debits and credits are equal, fiscal statements are prepared. It is the end merchandise of the numeration system.

8. Shutting Entries

All the impermanent histories such as income statement histories are closed to fix the system for the following accounting period. Besides, these histories are measured sporadically. Some of the illustrations are income, disbursals and backdown histories.

9. Post -closing test balance

This is the last measure, and it is prepared to prove the equity of debits and credits after shuting entries are made. Since all the impermanent histories are already closed at the point, the post-closing test balance contains existent histories merely. 8

6.0 Decision

In drumhead, the concern gives importance about maintaining accounting information. Every dealing that occurred in the concern is clearly recorded. From the above information, there is besides an indicant that in order to do accounting procedure clear, They have divided the undertakings among three different professional comptrollers which means that they have an organized system of doing and entering fiscal information.

7.0 Mention

1. ACC AF3

2. Interview with Gross saless executive of litus, Ahmed zahir

3. Introduction to accounting 3rd edition

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