This will help you achieve the Pass merit and distinction for this Unit 5 of business accounting. This is just there to help you please do not copy it but you can read it and write your own, this will help you achieve it very easily
P1 Purpose of accounting
Accounting is the most important category because it involves recording the financial
transaction for example Trading Profit and Loss, Balanced sheet, Cash flow and the Ratios
for example of the business like Wilkinson this are the things that will keep in tract of the
business activities. Accounting keeps this record accurate and up to date and for Wilkinson
this is important. It keeps the record for transaction. Accounting is also shows money
coming into the business and going out of the business for Wilkinson and this is presented in
the cash flow, trading profit and loss account and the balanced sheet. The account needs to
be accurate and up to date so that the correct taxes are paid to the government, because
there is an Auditor that comes and check the accounts work for a business and will also
check that the tax are paid correctly IN order for Wilkinson to do that they will need the
accounts so that it is important for Wilkinson. Accounting also allows Managers of Wilkinson
to monitor the business activities for example the profit level year by year and accounting
allows the managers to identify the trends of the Wilkinson business so that they know that
the if they are making more or less profit as last year or is it going down so that accounts
will allow business like Wilkinson to see the trends it is growing or falling. This will also allow
the managers to keep control of expenses and the cost for Wilkinson. For example of the
net profit margin ratio is smaller the gross profit margin ratio and this will so that the
business is having problems on their expenses and the expenses of Wilkinson might be that
rent, bills, wages and salaries of the employees and the loan replacement if they have taken
one. Accounting also allows the managers to coordinate all business resources. Accounting
will also measure the financial performances using the key indicator e.g. Gross profit, net
profit, working capital, Net assets, Capital employed, Depreciation and the net book value.
Shareholders are also interested in the accounts of a business because they wanted to know
if the business is making enough profit or not. Employees would also like to see the
accounts of the business because they also wanted to know if their business is at risk or not
for the employees of Wilkinson would also get the minimum wage. The customers are also
interested in seeing the accounts because they wanted to see the sales figure for Wilkinson
so that the customer knows how much should they be spending on shopping and which is
the best supermarket for shopping and this helps the customers to make the comparisons.
Accounting can also keep in track all the information for the past years and this will tell the
business if they made more profit then the last year or is it making that they are making less
profit then last year. This will also keep the historical data and this is also more important
for the business. Paying the taxes on time is also important because this will also keep as a
expenditure of the business like Wilkinson. Overall the purpose of accounting have many
advantages to the business like Wilkinson so that the businesses like Wilkinson they would
have do accounting for the business because of the reasons I have detailed below.
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