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Aisha Ali
It is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. It reveals profit or loss for a given period, and the value and nature of a firm's assets, liabilities and owner's equity.
someone whose job is to provide financial reports about a company’s profits, debts, cash flow etc. so that investors, banks, etc. can measure the company’s performance:
Financial accountants draw up the profit and loss account, balance sheet and cash flow, statement for the company as a whole.
my business
The business i decided to do on is a corner shop (kiosk)
The five purposes of accounting
record transactions
A business must record all of the money that is coming into the business(from sales) and all the money going out, such as expenses. if my corner shop business fails to do this they might fail in trouble with KRA since they wont have record the transactions correctly their tax payment pay be wrong.
Monitoring activity
records will be updated on a regular basis and therefore provide a good indication of how my corner shop business is doing in terms of sales, receiving payments and paying expenses, by doing so i would get to see if money going out seemed to be on the increase while sales were dropping off.
Control
if accurate records of transactions are maintained and activity closely monitored, then actions can be taken to control the balance between money flowing in and out of the business. for example in my business the corner shop, if the appeared that expenses were creeping up but sales staying the same, then i will have to look for ways to control or cut costs
management of the business
a manager is someone who is responsible for planning, controlling and monitoring of resources. management of a business involves careful co ordination of resources including staff, materials, stocks and money. the manger must ensure there are sufficient funds to pay wages, order new stock and pay bills to meet other demands for cash outflows balancing with the money coming in from sales
Measurement of financial performance
without financial records it would be impossible to know of the business is making profit and loss or whether the business owned debts. Businesses accounting looks at money coming into and out of a business.
key features of financial performance include:
gross profit
net profit
value owed to the business
value owed by the business
External
Internal
Revenue - The income generated from sale of goods or services, or any other use of capital or assets, associated with the main operations of a business before any costs or expenses are deducted.
Expenditure - Payment of cash or cash-equivalent for goods or services, or a charge against available funds in settlement of an obligation as evidenced by an invoice, receipt, voucher, or other such document
Difference between revenue expenditure and capital expenditure
capital expenditure - this is used to buy capital items, which are assets that will stay in the business for a long period of time. capital items(machinery and vehicles) are fixed assets and intangible assets.
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revenue expenditure - is the spending of items on a day to day or regular basis. these are the expenses incurred by a business that are shown on the profit and loss account for example purchase of stock.
Revenue income - is the money that comes into the business from performing day to day functions selling goods or providing a service.
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capital income - Wealth in the form of money or assets, taken as a sign of the financial strength of an individual, organization, or nation, and assumed to be available for development or investment.
The business i will be forcusing on bareburn;
revenue expenditure- an example of how braeburn uses revenue expenditure is when purchasing of stocks from suppliers and also staff costs sinmce they have to pay the teachers (employees)
revenue income
since its the money that comes from the business performimg day to day functions an example is sales which will help braeburn know if they are making profit or a loss .
braeburn get revenue income through allowing other clubs and events to rent out the space in school
revenue income
since its the money that comes from the business performimg day to day functions an example is sales which will help braeburn know if they are making profit or a loss .
braeburn get revenue income through allowing other clubs and events to rent out the space in school
capital expenditure
braeburn uses capital expenditure by buying the land that they use to build the schoool in and also by purchasing buses for transport of students in the school
they also use capital expenditure to register a trademark to create brand loyalty.
capital income
braeburn uses capital income to invest and expanding to other countries.
They also use capital income to buy things that will stay in the busines for sometime for example vehicles equipments this are called fixed assest