Unit 5 Business Accouting Assignment 1

1122 Words5 Pages
Unit 5 Business accounting PASS 1 What is accounting? The objective of accounting is to give information to different individuals, the individuals utilize the information in order to make financial decisions, and in other words accounting is the act of providing information about a company financial performance. The purpose of accounting is to produce financial information of an organisation they do this through the financial transactions which are actions by a business that involve money either going into or out of a business, could be making a sale or paying a bill. It is important for ASDA to create and maintain accurate financial records and to know about the different users of financial information. Every business has to meet internal and external reporting requirements to show its financial health and to meet legal and other requirements financial health means that will have enough cash at any one point in time to be able to meet demand for short-term cash outflows. One of the reasons why businesses like ASDA keep accurate records is, assessing its financial position, Asda assess their financial position every year so they know if they are making efficient use of resources to provide the necessary financial return to achieve a profit or a suffered loss. Keeping accurate accounts helps ASDA to know if there is any product which is not making any profit so they can stop selling in order to make more profit and less lost. ASDA uses figures from the profit/loss account and balance sheet to work out appropriate ratio such as acid test ratio which shows the liquidity of the business. Other reason is that accurate accounts allow ASDA financial team to compare its financial performance with previous year, it is really important because this can show business its future prospects and forecast cash flow and will show them profit and loss. Good records provide the

More about Unit 5 Business Accouting Assignment 1

Open Document