ATHINA BUILDING SUPPLIES LTD.

Analysis of Financial Accounts



Analysis of Financial Accounts

Understanding Role

The role in analysing financial accounting problem or issues is very critical. It needs comprehensive understanding and knowledge of the procedures and methods of financial accounting. The financial accountant's are supposed to record cash and other transactions, prepare financial statements and apply technical accounting rules to transactions. It is also the duty of the financial accountant or analyst to analyse the statements and sort out the discrepancies. The nature of discrepancies can vary from misreporting of figure to non recording of items. The impact of these discrepancies also varies and depends upon the level and nature of discrepancy. The financial analyst is also responsible in analysing the financial statements of previous years and if finds any issue or discrepancy then financial analyst has to fix it within the framework of financial accounting procedures issued by the respective authorities (Rachlin et.al, 1996, pp. 455).

Entity and its Environment

Athina Building Supplies Limited is known as a retail and commercial building supply dealer. The key factors which impact this type of business are the location, market size, customers and revenue recognizing methods. The location is important because if the store is located near to the population then more customers are expected to come because of it convenient location. The market size is related to the sales figure because if the market size is high then the store administration will have more customers which in turn empower the store administration to give lower credit limit to customers. The revenue recognition method also varies from industry to industry. In this business, the revenues are recognized at the time of exchange. It is a very important factor because it affects the available cash position. If the portion of sales made on credit term is more than the sales made on cash basis then the company is expected to witness the issue of working capital. (Weygandt et.al, 2003, pp. 817).

Constraints

The constraint of the Athina is to remain in profits after paying 25 percent of net income (excluding of non-recurring items) to respective bodies. The company also has to make additional payments of $500,000 in each of the next three years. The company was recently the part of the national chain of stores but now the local investors have purchased it which will definitely arise issue as the policies and contracts are expected to alter and revoked (Weygandt et.al, 2003, pp. 817).

Financial Accounting Problems

The company was not depreciating the assets from last several years. Therefore, the prior financial statements can be considered as not accurate or giving little false information. The amount of depreciation is used to deduct from income statement therefore, the net amount of income statements was not true and income statements of previous year were indicating wrong financial position of the company. The non incorporation of depreciation also creates problem in recording cash because the amount of depreciation is used to be added back in the statement of cash ...