Unit 11 - Accounting Concepts / P1 & P2

Unit 11 - Accounting Concepts / P1 & P2

1. Accounting Record Requirements Of At Least 3 Different Stakeholders For A Specific Organisation

   • J Sainsbury Plc (public limited company)
     • Shareholders
       • For example, shareholders of the J Sainsbury plc could require access to financial data to decide to invest more money into the business (buy shares) or get rid of them faster as they can by selling them to other persons. If the annual reports like statement of cash flows and statement of financial position will show 'bad figures', there is a high chances that shareholders will sell their shares.
     • Managers
       • For example, managers of the J Sainsbury plc could require access to financial data to assess sales income data.
     • Employees
       • For example, employees of the J Sainsbury plc could require access to accounting records to check their salary and income tax details.

2. Reasons For Keeping Accounting Records In Business Organisations

   • To record transactions.
     • Businesses record transactions for certain number of reasons: to provide a permanent record of all financial transactions from which financial accounts and management reports can be prepared; to provide a means of controlling business assets and ensure there is sufficient information for decisions to be made; to give information to suppliers and loan providers when business are seeking for financial help; to provide owners who are not directly involved in the business with appropriate financial information & to comply with statutory regulations and requirements, provide the government with information used in economic planning, and act as the basis for tax authorities to calculate business tax.
   • To provide information internally and externally & communicate.
     • Businesses require financial information in format that is readable, understandable and usable to anyone who has a need to access it (stakeholders).
   • To monitor, manage and measure business performance & make appropriate decisions.
     • By keeping good accounting records, it could help to plan in advance for tax payments and other liabilities.
     • Keeping good accounting records helps business organisations to prepare management accounts which will help to find out how business is performing and will help to find out if the business is making profit or loss.
     • Keeping good accounting records helps businesses to manage their growth by using extracted information from their accounting records. (If businesses are not keeping good accounting records it will lead to difficulties to make good decisions.)
   • It is a legal obligation to keep and prepare them each year.
     • It is HMRC's requirement and by keeping good accounting records you will stay within the law and there will not be any chance that company will be sued by government for not following the requirements.