Lecture notes
Lecture Notes
- Institution
- University Of Southampton (UOS)
Introduction to Accounting and Finance all notes
[Show more]
Seller
Follow
Content preview
MANAGEMENT 1046 - INTRODUCTION TOACCOUNTING AND FINANCE (SEMINAR)
SEMINAR 1
Question 1
Melanie spent much of her childhood learning cookie-making from her grandmother.
They passed many happy hours mastering every type of cookie imaginable and later
creating new recipes that were both healthy and delicious. Now at the start of her
first year in university, Melanie is investigating various possibilities of starting her
own business as part of the entrepreneurship program in which she is enrolled. After
a series of brainstorming with family and friends, Melanie decides to go forward with
the idea of operating a cookie-making school, which will showcase her famous
green-tea cookie creation. She will start on a part-time basis and offer her services in
people’s homes. She will offer individual lesson and group session. She also decides
to include children in her target market. She chooses ‘Matcha Creations’ as the
name of her new business. But there are some important issues that need your
suggestions:
What form of organization do you recommend to Melanie for her business
(sole trader, partnership or limited company)? Discuss the benefit and
weaknesses of each form and the reasons for suggestion?
Sole Trader
Melanie would be in full control of the business, will receive all of the profits, there is
less administrative responsibilities as there is no need to file accounts at Companies
House (CH). She will still need to prepare accounting information to show any tax
liability.
However, she will be subject to unlimited liability. If likelihood of overtrading is small,
it is possibly more suitable for her.
Partnership
As a sole trade, it is expected that a partnership has more than one business owner
where the profits and liabilities are split between the owners.
Limited company
She gains from limited liability
But she needs to formally incorporate and prepare annual accounts for her
shareholders.
,Will Melanie need accounting information? If yes, what information will she
need and why? How often will she need this information?
If Melanie decides to become a sole trader, she may hardly feel any great need for
accounting information because annual accounts will not be legally required though
will still need to record income and expenditure for tax purposes. She could choose
to do this herself or employ the skills of an accountant. It would be advised that she
still keeps track of her transactions on a regular basis whether daily or weekly.
Identify specific resources the business needs and how will she fund the
business? How would she record the resources and funds needed for the
business?
Funds / Capital to open the business to buy materials and supplies to be used for
teaching cookery. Transport costs, liability insurance etc… Funding could be
obtained from borrowing money from the bank or family friends or investors.
Should Melanie open a separate bank account for her business? Why or why
not?
Yes and No, depending on the form of the business and her decision. If for the sole
trader, it is probably not necessary but would be advisable as it would make easier to
keep track of business transactions from personal transactions.
Question 2
List the potential users of financial accounting information of the following company
and explain what their needs for information may be:
Tesla Incorporation and Primark
General internal and external users (managers, directors, staff/employees,
regulators, investors, etc…). Specific users could as well be discussed,
profitability/return on investment & research and development for Tesla, profitability
and source of materials for Primark.
, Question 3
Financial accounting reports tend to reflect past events.
How can those reports be any of assistance to user in making a forward-
looking decision?
Accounts are self-evidently a record of the past and were produced in the past.
While accounts may be historical records, this is not to say that the work of
accountants is always backward-looking. A major part of their contribution to
businesses is to develop forecasts and budgets to help underpin corporate strategy
and to plan and control operations. Reporting actual outcomes is done not only to
inform external stakeholders but also to monitor and refine the forward plans and
budgets. So while the profit and loss account is clearly the past, the balance sheet
represents a snapshot in time like the present but the present a short while ago.
In the case of Matcha Creation business above, what kind of past events would
Melanie need to look into in order to make decisions in the future?
Melanie should look at past information such as money invested in the business
expenses incurred and other resources put into the business to assess the business
performance profit or number of clients.
SEMINAR 2
Question 1
Explain the following:
Why would a manufacturing company treat their factory as an asset?
As it is a resource controlled by the entity (owned or under finance lease) as a result
of past events (even if it was purchased today, it’s immediately a past event) from
which future economic benefits are expected to flow to the entity (the product of
goods for sale).
Why would an electronics shop treat an iPhone as an asset of inventory?
Because it has been purchased for the purpose of being resold to a customer which
will generate revenue when sold (assuming that it has not been purchased for staff
use, in which case it would be regarded as equipment or a staff expense depending
on cost and expected useful life).
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller deanyoung. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £5.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
62890 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now
