Notesale: Turn your study into money

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Conor Cunningham P1

Task 3:
(a) Your client Joan Thompson has now received the financial statements and
information which you have prepared :
 Final Accounts
 Cash Flow Forecast
 Ratio Analysis
She has asked you for a brief explanation of the purpose of each statement
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You should keep in mind the following purposes of accounting:
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To record business transactions
To monitor business activity
To control business operations
To manage the business
To measure financial performance

You must relate your descriptions to the accounting tasks you have completed for
Joan Thompson’s business
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0 Introduction
This report was requested by Joan Thompson at Grand Event Designs
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The purpose of accounting will also be investigated
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2
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This information is then used
to make strategic decisions about how to manage the business and decide how money is to
be used within the business
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The main purpose of financial accounting is to prepare financial
reports that provide information about a firm's performance to external parties such as
investors, creditors, and tax authorities
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The results shown in financial statements can vary somewhat, depending on
the framework used
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The accountant may generate additional reports for special purposes, such as determining
the profit on sale of a product, or the revenues generated from a particular sales region
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So, the purpose of accounting centers on the collection and reporting of financial
information
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It represents a
period of time
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For example, rent and rates
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2) The general purpose of the financial statements is to provide information about the
results of operations, financial position, and cash flows of an organization
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By looking at this statement, Joan is able to see
the financial position of her party planning business and can help her with decision
making
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Ratio analysis is an effective way to compare one business with another
in the same industry
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4) Financial forecasts assist in managing business finances
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By drawing up this statement, Joan is able to set targets
for her business, it helps with strategic planning and it gives her business a sense of
strategic direction
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This helps Joan
with decision making and strategic planning for the following business year
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0 Conclusions
All business and economically informed decision making are based on sound analysis of
financial statements are a product of accounting information systems
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Investors - both current and future – base their investment analysis on
accounting information
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5
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accountantnextdoor
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udemy

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