Finance and Accounting 1. What is the main purpose of accounting? The main purpose of accounting is “to provide information that can be used in making economic decisions” (Stice et al. 2004, p. 8). Its role is to service the needs of the organization by providing quantitative information (Stice et al…
4). There are of course several accounting specialties and each of them is important in their own characteristics (Bonner et al. 2006). 2. Case of Halfords A. Identify the main accounting books that can be used by Halfords to records transactions. Halfords is a company that buys and sells bicycles. The main financial statements that can be used by organizations to record is financial condition, especially business organizations are the balance sheet, income statement, and the statement of cash flows (Stice et al. 2004). The balance sheet “reports, as of a certain point in time, the resources of a company (the assets), the obligations (the liabilities), and the net differences between its assets and liabilities, which represents the equity of its owners” (Stice et al. 2004, p. 10). The balance sheet addresses two fundaments information: what it owns and what it owes (Stice et al. 2004). The income statement “reports, for a certain interval, the net assets generated through business operations (revenues), the net assets consumed (expenses) and the difference, which is called net income” (Stice et al. 2004, p. 10). ...
2004, p. 11). Stice et al. (2004, p. 11) pointed out that the “statement of cash flows is the most objective of the financial statements because it is somewhat insulated from the accounting estimates and judgment needed to prepare a balance sheet and an income statement.” Meanwhile, “accounting statements and judgments are outline in the notes to the financial statements” (Stice et al. 2004, p. 11). “The notes contain supplemental information as well as information about items not included in the financial statements” (Stice et al. 2004, p. 11). Stice et al. (2004, p. 11) pointed out that “each financial statement routinely carries the following warning at the bottom of the statements: ‘The notes to the financial statements are integral part of this statement.” B. Describe the usual transactions recorded by this company The usual transactions recorded by a company engaged in buying and selling a merchandise like in the buying and selling of bicycles in which Halfords is engaged cover buying the merchandise to sell, maintaining and monitoring the inventory of the merchandise, recording assets and liabilities, recording sales and revenues, payments for overheads like the rent for the store space and the city services involved, and payment of taxes. 3. In a press release, Halfords explained that its income statement for 2011 will show a loss. A. What is the meaning of this loss? Statements of loss are determined by the assumptions adopted in the financial statement. It is important to stress that losses are profit are based on the firm of operations as recorded by the accountants serving the firm. For instance, it may happen that the Halfords would be reflecting a loss but because the bicycles that are sold were purchased from a manufacturing firm ...
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