Question

In a pizza shop, what do you think the responsibilities of Financial Accounting (FI) and Management Accounting (CO) are? Explain the key accounting processes as they relate to the Pizza shop?

Answer 1

Financial accounting serves the following functions such as producing general purpose financial statements and producing information used by management of business entity for decision making, planning and performance evaluation.

Management accounting helps the business in advising strategic planning and business planning.

With refering to above point, in this case of pizza shop the responsibilities of Financial accounting and Management accounting will be as follows:

1. It helps the management to document all financial transactions of business and determine how well the pizza shop is performing.

2.The management accountant can explain the financial consequences of any business decisions as they are the one who is keep tracking on it.

3. It helps the owners in monitor spending and financial control.

4. Management accountant helps to conduct internal business audits which helps tremendously in analysing the cash flows, inventory management and forecasting future expenses accordingly on shop.

The key accounting processes of the pizza shop should be known by owner as it will help him in many ways such as follows:

1. The owner will be able to know certain accounting terminologies such as cost of goods sold, labour costs,etc which helps the management to take appropriate decision of cash and resource management.

2.The major players involved in the accounting process of pizza shop is you, your accountant,your system of maintaining the data,your front end and back end staff.

3. To set accounting goals which will improve tax reporting, manage your expenses,have better control of cash flow and plan for growth.

4. To choose appropriate accounting methods whether cash accounting or accrual accounting.

5. Review the accounting cycle in frequent time period for better true and fair view of financial statements.