ACCOUNTING PURPOSE ASSIGNMENT HELP

TASK 1ACCOUNTING PURPOSE: WRITE A BRIEF PARAGRAPH DESCRIBING AND EXPLAINING THE PURPOSE OF ACCOUNTING

The basic purpose of accounting includes the activities like data collection as well as recording, monitoring of the data, business control and management.Thus, the purpose of accounting centers on the collection and subsequent reporting of financial information. These all activities are done with the end objective of sound economic decision making within the scope of an organization. One of the major tasks which are done by the financial accounting is preparing financial reports which help in providing information regarding the performance of a company to the internal as well as external stakeholders of the company which include investors, creditors and tax authorities. In the accounting process, post the gathering of financial information in the pre specified accounting records, the same are compiled into various financial statements. The financial statements include the following documents:

• Balance sheet
• Disclosures that accompany the financial statements
• Income statement
• Statement of cash flows
• Statement of retained earnings

The purpose of accounting practices also includes the task of ensuring that the statements of financesare prepared and recorded under certain sets of rules which are termed as accounting frameworks. The most widely used accounting frameworks are International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). In view of the fact that the accounting results and records which are presented in the financial statements can be somewhat different on the basis of the framework that has been used for preparation of the same, it is important that the accounting team of the firm decides and makes use of the framework which suits the requirement of the recipient of the financial statements. It is also the purpose the accounting activities to develop and prepare supplementaryfinancial reports for specific purposes, such as determining the profit on sale of a product, or the revenues generated from a particular sales region. These are usually considered to be managerial reports, rather than the financial reports issued to outsiders.

TASK 2 CAPITAL AND REVENUE: DESCRIBE EACH ELEMENT OF CAPITAL AND REVENUE, GIVING EXAMPLES OF EACH; EXPLAIN THE DIFFERENCES BETWEEN THEM.

Capital expenditure can be defined as the money which is used for buying items which can be classified under fixed assets or intangible assets. Some types of items which are classified under fixed assets include lands, machinery, building and belong to the capital expenditure.  On the other hand, the revenue expenditure is the amount of money which is utilized for daily capital of business workings. Some of the cost line items which can be classified under revenue expenditure include: costs of premises, administrative costs, cost of employee salary, purchases cost, finance cost etc.Although there is a lot of similarity between these two types of expendituresas features of business management, there are fundamental differences between these. Although the revenue as well as capital expenditure are concerned with making monetary spending for ensuring that the business is growing and surviving, the most basic difference between them depends on the intent with which the expense is being madeas well as where the money goes. Revenue expenditure is more often associated with day-to-day costs the company accrues through its life cycle. This primarily deals with costs for things which are short-term in nature and do not serve a long purpose for developing the company in the future. A good example for this can be repairs of the various machineries of the plant. Alternatively, capital expenditures are made for assets which are definitely long-term in nature. This can be for buying new softwareor new machineries for making the company more efficient in its daily operations.The money which is spent for revenue expenditure is usually done for immediate needs and short-term purposesthat may or may not serve any long term goals and has no impact on the lifetime of any asset. Capital expenditure is money usually spent on long term goals or incremental assets. Hence it can be said thatcapital expenditure, unlike revenue, is more of a long term investment and not a cost.

TASK 3 FINANCIAL DOCUMENTS:WRITE A DESCRIPTION OF WHAT ARE THE MORE IMPORTANT FINANCIAL DOCUMENTS GENERATED BY A TYPICAL BUSINESS.

Following are the most important financial documents which are usually generated by a typical business:

1. Income statement: One of the most important financial statementsfor any of the companies is the income statement which shows the capability of the business for generating a profit. In view of the fact that the information mentioned in this type of financial statement is done in relatively current currencies, the same has a higher level of accuracy. But this statement fails to mention the amount of assets and liabilities which are required for profitgeneration. Also the numbers from this type of statement does not essentially equate to the business’s cash flows. If cash basis of accounting is usedthe accuracy of this tends to be lower than usual. Hence it is not recommended to only consider the income statement in isolation for understanding financial health of the company.
2. Balance sheet:In spite of the fact that balance sheet does not give much idea regarding the outcomes of business operationsand few of the listed numbers are done on the basis of the historical costs, which renders the report less informative, the importance of the same increases significantly in case it is paired with the income statement. In view of the fact that it reveals the investment required for supporting sales and profits shown on the income statement, the importance of this type of financial document is also high.
3. Statement of cash flows: This is also one of the most important financial statement in view of the fact that it focuses exclusively on changes in inflows and outflows of cash. This report presents a clearerunderstanding regarding the cash flows of the company's compared to the income statement. This also does not present skewed results likeincome statement, particularlyin case the accruals are mandated under the accrual basis of accounting.