Question

a) What is the debit and credit formula for each account type?
b) Describe your understanding of what is involved in the financial statements of an organization's intentions.
c) What are the legal obligations in terms of reporting for a GST registered intentions.
d) What is the purpose of financial forecasting?
e) Describe the purpose and value of a code of ethics.
f) What is accrual accounting and why is it the preferred method for most organizations?

Answer 1

Solution:

a) Debit and Credit formula for each account type

Personal Account - Debit What Comes in Credit what goes out

Real Account - Debit the receiver and credit the giver

Nominal Account - Debit all expenses and losses credit all income and gains.

b) Financials statement includes balance sheet, Statement of profit and loss, Statement of Cash flow statement, Statement of Changes in equity and notes forming explanatory information part of it. These are information which is being shared with the investors for undrstanding what is being done during the financial year.

c) Legal Obligation include the following responsibilities return filling, maintaining proper books of accounts, issuing proper invoices and displaying GST on the same properly, getting the GST audit done etc.

d) Forecasting is a technique that uses historical data as inputs to make informed estimates that are predictive in determining the direction of future trends. Businesses utilize forecasting to determine how to allocate their budgets or plan for anticipated expenses for an upcoming period of time. This is typically based on the projected demand for the goods and services offered. Investors utilize forecasting to determine if events affecting a company, such as sales expectations, will increase or decrease the price of shares in that company. Forecasting also provides an important benchmark for firms, which need a long-term perspective of operations.

e) A code of ethics is a business document outlining professional standards expected of all company workers and representatives. Although it may address internal conduct, it primarily centers on what is expected of employees when engaged in customer-centric activities. It establishes standards by which business representatives are held accountable.

A code of ethics goes beyond legal standards, which employees are required to abide by whether expressed or implied in their roles. Specific items should align with the core values of the business. For instance, the Association of College Unions International identifies caring, innovation and diversity among its core values when prefacing its code of ethics. In sales and service roles, codes might address an expectation that employees operate with confidentiality, transparency and fairness in all client interactions.

f) An accrual concept implles that the transaction are accounted for into the books as and when the actual transaction is incurred. Hence the transaction are accounted for in the books based on when the transaction is incurred and not on cash basis as cash payment or cash receipt does not implies that the transaction is actually incurred. hence the same reflect a true and fair view of the financial statement.