In every organisation, there are set pf policies and procedures that is govern the company activities for the purpose of achieving the organisation’s goal. In auditing company, there are accounting policies that is used to prepare financial report, these include consolidated sheet and inventories. It is very important to follow these policies because it assist the stakeholders to analyse and review the transaction in a required time and manner (Freedman).
Periodicity:which is also known as time assumption, it is the specific period of time that is settled by the accountant for the aim of knowing the financial health of the company. This may be yearly, monthly or quarterly financial statements (Accounting coach). This concept is very useful in the company because it help to determine the financial position of the organisation in the market, how the company is performing and moving of company liquidity. Many company follow yearly, whether fiscal or calendar year. In addition to that, the management of the organisation will know the Gross Profit and the sakes they have made.
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In children care, accountants prepare financial statements yearly according to the financial statement provided. They close the report in 31 of December in 2012 and open in next day, hence closed in again December 31, 2013 (Appendix A).
In James Fleming, they prepare their report in a six month period of time which is according the financial statement they prepare, it shows that they close their statement according to the fiscal year whereas their year is ended in 30 of June 2013 (Appendix B).
Going concern: is the concept that determines the future performance of the company by having all assets and resources required to use for long term in the business. The company need to have enough amount of cash to plan the future of the business. The going concern measures how many years that the business will last, thus this concept assist the organisation to predict and plan for their future. This concept have many significances to be followed in the company so as to run the business smoothly, otherwise the company may not able to handle the business in the nearby the future. This view is supported by “If a company is not a going concern, it means the company has gone bankrupt.” (Investopedia)
In balance sheet of James Fleming, the going concern may be predicted according to the current year transactions so as to survive at least the coming twelve months. Having long term assets is preferable in the organisation. These may include building, equipment’s, in-tangible assets and plants.
In Children Care, which is charity organisation, they receive large number of fixed assets from the contributors, donors and funds. These assets are machines, furniture as well as tangible assets. Going on concern has made both of the above company to make decision and to plan for future development of the company.
Business Entity/ Economic Entity: is the state whereas the property of the owner or of the shareholder is separated with that of the business. It is very important to be in line with this concept so as to avoid the confusion. For instance, assuming that James is the owner of the James Fleming limited liability partnership, so the expenses of James should not include in the expenses of the organisation. It is also important to the owner because he/she can determine the cash flow that the business undergo.
In some points, if the business and the shareholders property is not separated, it might be occurs of some problems which may affect the business operations (accounting verse).
Monetary unit: is the currency that is used to calculate the value of cash that is used by a particular business in the certain country, example of a well-known currency includes euro (€), pound (£), dollar ($) and yen (¥) The principle of this unit states that “transactions and events must be able to be measured in some type of monetary unit in order to be recorded. The monetary units must also be stable” (My account course). This means that the monetary unit in balance sheet and financial should be the same for the easier calculations compared to different currencies which may makes the accountant to take a lot of time to convert from one currency to another.
Always on Time
Marked to Standard
A company monetary unit of the organization is depend upon the country. It helps in calculating its financial records according to the currency of the country according to the balance sheet of children care and James Fleming, the currency that used for the daily transaction in these two companies is in term of pound.
To conclude, those are the basic concepts of accounting that is used in the Charity organisation which is Children Care and James Fleming.
Accounts is a recording of the financial transactions that is performed by business organisation (business dictionary). The main purposes of accounting is to get the financial information based on the performance, financial position and the flowing of money in and out. So far there are four main statement that is included in the financial statement and these are income statement, cash flow statement, statement of retained earnings and balance sheet. Financial statement is gathered in the set of rules which is known as General Accepted Accounting Principles (GAAP). Every organisation must have the accounting department for the supervision of the company transactions since Finance is the heart of business.
There are some similarities and differences in the final accounts of profit and no profit organisations, which are James Fleming and Children Care.
In the final account of the two organisations, they have similar period of time of closing a financial statement.They both do their final account annually where by James Fleming conducts their final account on 30 June to next year the same date, and the charity organisation their final account is on 31 December to the coming December of the next year. For instance, in both financial reports, there are two columns which show the figures of two different years which is 2012 and 2013.
Currency plays a major roles in the financial statement. Having similar currency in all transactions easier to calculate and getting the actual and correct data. According to the financial statement provided, it shows that they both used British pound which is the national currency of the United Kingdom with a symbol of (£).
This accounting concept is usually occur in profit organisation because this may determine by the separation of stockholder equity and the company accounts. In James Fleming partnership organisation, and in non-profit organisation Children Care, it shows that the personal properties is excluded in the business financial accounts.
In planning the future, there must be number of long term assets in the company in order to survive and operate smoothly. An organisation with a long live asset tend to survive more, rather than the one with a short termed assets. In the James Fleming final account, there are large number of assets, non- current assets like property, plant and equipment, intangible assets, goodwill ,investments, interests in joint ventures, retirement benefit assets, current assets include trade and other receivable, cash and cash equivalents while the financial statement of Children Care shows that there are few number of assets, which may include fixed assets, tangible assets, investments and associates only which is mainly come from the contribution.
The purpose of profit organisation is to make profit, James Fleming have partnership owners, therefore the profit they get, they distribute to themselves. For instance in the consolidated income statement for the year ended 30 June 2013, it shows there is ‘profit available for the division among the members’ in year 2012 the figure was 672million pounds and ne next year, the amount increased to 680 million pounds while in Children Care, there is no distribution of profit because the charity aim is to help the community.
So far, in the financial report of profit organisation, there must number of equity. In James Fleming company, there are amount of equity that is member’s reserves 590 million pounds minusnon-controllinginterests which is 17, which makes the total equity to be 573million pounds in 2012 and612 million pounds in 2013 whereby amount of members reserved was 623 million pounds minus 16 non-controlling interest while in non-profit organisation which is Children Care, they don’t have the capital instead they have total of incoming resources like incoming revenues from generated funds, voluntary income, donations and gifts, donation of net assets from Merlin, legacies, retail income, investment income, incoming resources from charitable activities, institutions grants, gifts in kind, overseas programme income and other income which gives total incoming resources and considered to be the nest assets in profit organisation. There are some restricted and some are not. The summation of the total incoming of unrestricted funds is 93,599,000 pounds, restricted amount is 248,995,000 pounds.
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To conclude, those are how final accounts differ and similar of profit and non-profit organisation.