MFR.KCE.W1. PART A
Accounting is a dynamic discipline which has changed considerably over time. It will continue to evolve, especially as business becomes increasingly global in nature. This trend towards globalisation is raising issues such as the international nature of cross-border transactions, accountability of organisations and (national) regulatory authorities, and to which countries organisations owe their tax liabilities. Thus, the international harmonisation of accounting practices is also an area that is the subject of a great deal of topical debate.
When preparing accounting and finance information, it is of paramount importance to identify the user groups (stakeholders) and the type of accounting and finance statements that need to be prepared, plus the different roles of financial accounting, management accounting and financial management, in terms of their use to business.
Alternative user groups (other stakeholders) and their varying needs are discussed further in your text (Atrill and McLaney, 2013). In some cases, however, the owners of organisations may not want other parties to know more than the minimum that they have to divulge about what is happening within their organisation. One of the issues that we shall consider in Week 3 is how best to interpret accounting information that is publicly available and the potential problems faced when undertaking this type of analysis.
Meeting alternative users� (other stakeholders�) needs can be a difficult task for accountants. As your text explains, information needs to be provided in a timely fashion, and technological advances have made real-time information a viable option in some circumstances. The information should also be relevant to the users� needs, which means that management accounting and financial management information is often produced using very different rules from those that apply in the financial accounting arena.
Reference: Atrill, P. & McLaney, E. (2013) Accounting and finance for non-specialists. 8th Ed. Harlow, UK: Pearson Publishing.
Part A
- Complete the following table by putting a tick in the appropriate box:
| Non-current asset | Non-current liability | Current asset | Current liability | |
| A tax bill due to the Revenue Authorities by the business in 6 months’ time | √ | |||
| Amounts owed to a business by its customers (debtors or receivables) | √ | |||
| A bank loan made to the business and repayable in 20 years’ time | √ | |||
| Stocks of finished goods (inventories) | √ | |||
| A freehold factory owned by the business | √ | |||
| The bank overdraft of the business | √ |
- Reorganise the following into a simple statement of financial position
| Cr | |
| Amounts owed by a business to its suppliers | 65,000 |
| Lorry/Truck (net book value) | |
| Freehold factory | |
| 10-year bank loan | 45,000 |
| Amount owed to the business by its customers | 40,000 |
| Bank balance (overdrawn) | |
| Owner’s equity (capital introduced plus retained profits) | |
| Stocks of unsold goods (inventories) | 10,000 |
| Answer | DR | CR |
| Amts owed by a business to its suppliers | 65,000 | |
| Lorry | 12,000 | |
| Freehold factory | 250,000 | |
| 10 year bank loan | 45,000 | |
| Amount owed to the business by customers | 16,000 | |
| Bank Balance Overdraft | 40,000 | |
| Owners equity | 138,000 | |
| Stocks | 10,000 | |
| Total | 288000 | 288000 |
Owners equity is equal to $138,000
