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Unit 5 P1 and P2
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Rahatur RoufUnit 5: Task 1 - P1/P2
P1: Describe the purpose of accounting for an organisation
Purpose of Accounting
For this activity, I will be describing the purpose of accounting and why it is important for City
Westminster College. Accounts are when organisations record their financial transactions over a
period. This period could be every week, every month, or every year. This varies throughout al
organisations.
Record Transactions
Making sure that the transactional records are accurate and up to date is a very important thing to
do in CWC as they may need to use in the future. So, keeping it correct is useful for organisations. For
example, if CWC makes a purchase of new Business Studies Text Books for the business department,
the college will receive a receipt for that transaction where it says how much has been taken from
the bank account. If for some reason the seller contacts the college saying that they have not paid for
the book, CWC can show that person the proof that they did pay and not pay again. CWC will need
record what money goes in and out as they will need to know what amounts of money are coming
and going. If CWC does not record their transactions, they can get in trouble as they may not know if
they are paying their bills or tax, they may get in trouble by HMRC.
Monitoring Activity
Monitoring the activity of transactions is a very important thing to do as CWC will need to know how
much they are receiving and how much they need to pay. For example, the expenses they need to
pay every month, payments, rent and other finance. They will need to know when and how much
they need to pay. If they do not monitor, CWC may not know when they should make payments and
when they need to take money. Monitoring also means to keep an eye on the bank account. They
need to know how much they have left and how much they need not pay out.
Control
Controlling combines both recording and monitoring transactions. This is where CWC will need to
control when to make payments and when not to. If they do not control, they will not know when
money leaves and may lose money on unnecessary things.
Management of the business
When managing and organisation, the manager will need to control many things like financial
transactions and staff. Focusing on accounts, the manager will control the money that goes in and
the money that goes out. In CWC, this is the role of the financial management team. They will control
this. If this is not controlled, CWC will not know what money is going out and what is coming in. They
may miss a payment deadline and this can cause them trouble.
Measurements of financial performance
Measuring the financial performance is something of importance that must be done by all
organisations, including CWC. Without management, many things cannot be done, as a manager has
authority to get things done, those that are not manager must do what the manager says so that
everything is professional and efficient. CWC will also have someone that will manage the finance in
the college. They will need to manage the gross profit, net profit, the value that may be owed to a
business, and the value that may be used by a business to the college.
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