PRINCIPLES OF ACCOUNTING



Principles of Accounting

Principles of Accounting

Q1 Analyse the reasons why costs & budgets need to be controlled & explain in detail problems that can arise if they are left unmonitored.



Ans. Budgets are useful to ensure that one has enough money available for all the things one wants to do, and a mechanism for making cost savings .Whether it is balancing the family budget - income angainst expenditure, or financing a building contract, mnay of the fundamentals apply. The penalty for loss is debt with suppliers, shops etc. potentially you would lose your goods and chattels which would be seized .

Interpret the contents of a given profit & loss account & balance sheet & explain in detail how accounting ratios can be used to monitor the financial state of the given organisation

Q2 Analyse the reasons why costs & budgets need to be controlled & explain in detail problems that can arise if they are left unmonitored.

Ans. Many people dismiss budgeting as a waste of time since we can never exactly predict the future. Even the best-prepared budget will normally differ from actual results in very significant ways. Since no budget is ever right, why bother to prepare one? Internally, there are two reasons to prepare a budget: the knowledge gained about the sales and operations of the company during the process of preparing the budget, and the knowledge about the company gained from the analysis performed when the actual results differ from the budget. Even owners and managers who have a good, detailed knowledge of the workings of their business usually learn a lot when preparing a budget, for example, what factors are necessary to predict their sales and expenses. But the biggest benefit of a properly prepared budget is the analysis of differences (variances) between the budgeted ...