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First of all, I would like to thank almighty Allah, for being with me at every time, and improving my knowledge in this field to complete this informative report.
I sincerely like to thank###l, for finding time for the interview from their busy schedule and sharing all the relevant information about financial accounting in peekaboo.
End I would also like to thank, all my friends in ### business school, for helping me to get great ideas, and sharing general information for producing the report.
The main purpose of this report is to identify and explain the context and purpose of the financial reporting. Additionally the report will also comprise a clear information about the characteristics of financial information.
Moreover, the report consist the steps taken in an accounting cycle and double entry with the relevant examples of selected organization.
Nevertheless, this report enables the viewers to understand and recognize the purpose of financial reporting and accounting environment successfully.
Peek-a-Boo is a private limited company which buys and sells toys to its customers. The owner of the business is Mr. Thoha Hussain, Mr. mumthaz Hussain, and Mr. Ahmed Arif. Peekaboo was existed in the market in the year of 2012.
Peekaboo sells world class, quality branded original toys and radio controlled products. It sells the toys not only within the shop. Peekaboo has also provided an online service, to make it easier for the customers to purchase toys from them.
Peekaboo financial year starts from 1st January and end with 31st December. They also used to record journals in computerized system using quick book software. Moreover, the main stakeholders of peekaboo are shareholder and MIRA.
Financial reports are the documents and records that put together to track and review of how much money that the business is making or not.
The main purpose of this financial reporting is to deliver this information to the lenders and shareowners of the business. In peekaboo toy store, financial report is used to compare with its previous years and other shops in order to make decision for the future.
Mainly they want to know whether their business is on the write hand.
Owners need accounting information to know the financial performance of the business. Moreover, they also need to know the financial position of the business.
For example, in peekaboo owners use to know the current position of its assets against liability. (Fazal, 2015)
In peekaboo managers use it for planning, decision making and profitability reporting. They used to determine the level of success achieved and can be achieved from the operations. (Fazal, 2015)
Investors are the potential source of finance to business.
Investors require information if the business promise a favorable return on their investment and how long investment can stay profitable considering connected factors. (Fazal, 2015)
Creditors wanted to be sure if the money will get paid and whether offering additional credit to the business wise.
Employees want to assess how much profit business made and how much can be distributed to employees in terms of bonus and premium.
Customers have interest in knowing if the entity can provide them on continued basis without any interruption.
Government want know if the tax has been calculated appropriately they require information which is collected through accounting
- Tax Authorities:
To determine the credibility of the tax return filed on behalf of the company. Peekaboo always has to send their accounting information to MIRA, to identify that the actual tax is paid.
It requires the financial information to be relevant to the decision making needs of the user.
It requires the accountants and auditors to focus on financial information which is expected to affect the decision of the user.
- Faithful representation:
It requires the financial information to be true and fair and free from misstatement.
It require the financial information to be comparable across period and across companies.
In peekaboo mainly financial reports are used to compare with its previous year and other shops like retail shops.
It require the financial information to be understandable by users with reasonable knowledge of business and economic activity.
It require disclosure of financial information not to be excessively delayed.
It require the information to communicate the underlying economic of the company business.
Accounting cycle is a step by step process of recording, classification and summarization of economic transaction of a business. It generates useful information in the form financial statement including income statement, balance sheet, cash flow statement and statement of changes in equity.
(jan i. , 2013)
1-occurance of transaction:
Example: when something is sold in the shop or in online. Sales receipts and invoice are some of the source document used in peekaboo.
2-analyze of transaction
Based on the occurrence of transaction it analyze on which account does it effect and by how much.
3- Recording of transaction
Example: sold a remote control car for Rf. 250
Dr. Cash 250
Cr. Sales 250
4- Posting to ledger accounts:
Each amount in the journal is transferred to the appropriate ledger accounts.
In the cash book sales is recorded in the debit side of the book as Rf.250. And in sales ledger account cash is recorded in the credit side of the account as Rf.250
5- Preparation of trial balance:
A list of all the account and their balances is prepared to ensure the accuracy of the recording and posting process by making sure the sum of debit balance equals to sum of credit balance.
6- Adjustment of balances
The accountants will examine if there is an error in trial balance and update it before the preparation of financial statement.
7- Preparation of financial statement
The financial statements are prepared from the account balances determine after adjusting the entries.
Financial statement can be use internally and externally, under financial statement, income statement, cash flow statement, balance sheet and statement of changes in equity are prepared.
8- Closing temporary accounts
After the end of each financial year, all accounts balances are transferred to retain earnings account and all the temporary accounts are closed.
Peekaboo is an expanding company which sells toys both online and shop. So they do have different transactions.
Peekaboo’s financial accounts and information is prepared and manage by another company which is mainly formed to manage the accountings of the other company, therefore overall peekaboo does not face any problems in making financial information, and they do manage all the accounts clearly.
Fazal, H. (2015). pkPAK Accountants. Retrieved from www.pakaccountants.com: http://pakaccountatns.com/courses/financialaccounting/users/
Hussain, I. S. (2015, 4 8). finnancial information.
jan, i. (2013). accounting explained. Retrieved from www.accountingexplained.com: http://accounting explained.com/financialcycle/
jan, o. (2011). accounting explained . Retrieved from www.accountingexplained.com: http://accounting explaind.com/financial/principle/qualitative-characterisetics
sons, J. w. (2015). dummies.com. Retrieved from www.dummies.com: http://www.dummies.com/how-to/content/the-purpose-of-financial-reporting.html
Fairooz Ahmed (47461)