BUDGET & ACCOUNTS
The operations of a business are controlled by setting standards
of expected performance, eg, expected sales volumes/prices, and
the expected costs and usage of resources in the achievement of
those sales; and then by comparing those standards with the actual
sales and the actual costs of those sales.
The directors and managers of a business are responsible to the
shareholders or partners for the administration of the business
and its resources. They account for their stewardship by providing
financial statements that set out the overall profit made by the
business over a period, and how it was utilised (ie, profit-and-loss);
and the resources held by the business at the end of profit-making
period (ie. balance sheet).
Financial statements by the proprietors/partners are prepared for:
Current shareholders, who are concerned that the most effective use
is made of their investment.
Potential investors who require information to make investment
decisions that will give them the best result from invested capital.
Creditors who wish to know if the business will be able o pay for
goods or services supplied.
Banks who need to be satisfied that loans and overdrafts can be
recovered.
Government agencies, eg, the Department of Trade, and the Inland
Revenue.
Any company incorporated under the Companies Acts has certain
statutory obligations to keep accounting records that are sufficient
to show and explain the company's transactions. The records must
disclose with reasonable accuracy at any time the financial position
of the company at that time. The records must enable a balance sheet
and a profit-and-loss account to be prepared to give a true and fair
view of the company's state of affairs and its profit and loss.
The accounting records must, especially, contain:
- Day-to-day entries and details of all sums of money received and expended.
- A record of the assets (resources) and the liabilities (debts); and
- Where the company's business involves dealing in goods, the following statements:
- statements of all stock, and, except in the case of retail trade, statements of all goods sold and purchased showing the goods, buyers, and sellers in sufficient detail to enable identification of them.
- a statement of stock held by the company at the end of the financial year.
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