Question

a) ‘Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business and it also refers to the process of summarizing, analyzing and reporting these transactions to oversight agencies and tax collection entities.’ Discuss the Significance of Accounting and also explain the Scope of Accounting.

b) Prepare an Income statement and Balance sheet of Potus Corporation as at 30.06.19

Particulars Amount($’000)

Sales 37,436

Cash 4,895

Cost of Goods sold 26,980

Accounts Payable 7,156

Accounts Receivable 5,714

Selling & Admin expenses 3,624

Inventory 8,517

Research & Development expense 1,982

Plant & Machinery 7,154

Interest Expense 450

Long term liability 20,105

Land 981

Income tax expense 1,100

Answer 1

a) To run a business you need data, records, reports, analysis, accurate information about assets, debts, liabilities, profits; and that is why Accounting is Importance for any business activities.

The accounting information is very important for the management or the decision making the body of an organization.

Management cannot make the decision without reasonable information for backing it up.

The main object of Accounting is to record financial transactions systematically in the books of accounts and to find out the profit-loss and financial position of a business.

Ascertainment of profit-loss and financial position, interpretation and analysis of accounts and statements, development of accounting system, a collection of statistical and economic data, formulation of financial principles and financial planning and controlling results as per plan, etc. are the main functions of Accounting.

In the modem age, Accounting is directly related to financial management.

Due to entity concept and management, joint-stock Company, developed means of communication and international business, etc. scopes of business have so much expanded that the management is to depend on various accounting data and information for taking various decisions.

Accounting prevents the misuse of assets, increases production and profit, controls costs and helps increase the efficiency of the overall management.

The role of management is very important in the overall development of a business organization.

The functions of management are planning, organizing, collecting business elements, motivating, coordinating, controlling and budgeting, etc. Successful completion of these functions of management depends on an efficient accounting system.

Scope of Accounting in personal life;

The financial transactions which occur in the individual life of a person are recorded properly in the books of accounts with a view to ascertaining receipts-payments and assets-liabilities.

Scope of Accounting in business life;

The prime objective of a business is to earn a profit. Financial transactions of a business concern are recorded in the books of accounts to ascertain operating results and financial position.

Besides accounts of financial transactions’ of a business concern are kept properly to fulfill other objects also.

Scope of accounting is immense and is alo extended to Professional service, Non trading organisations and also government offices.Professionals like doctors, engineers, advocates, actors, actresses earn by their professions.

b) ​​​​​​​THANK YOU.

INCOME STATEMENT AND BALANCE SHEET OF POTUS CORPORATION AS ON 30.6.19 Balance Sheet Income Statement Liabilities Amount (in 000'$) Assets Amount (in 000'$) 37,436 37,436 Amount (in 000'$) Particulars Sales Long term liability Accounts payable 20,105 Land 7,156 Plant and machinery Inventory Accounts receivable Cash 981 7,154 8,517 5,714 26,980 3,624 1,982 COGS Selling and Admin exp Research exp 4,895 Interest exp 450 1,100 34,136 Income tax exp 27,261 Net Income 3,300 TOTAL 27,261 TOTAL