Summative Coursework Assignment Essay Example | Topics and Well Written Essays - 4000 words

Summative Coursework Assignment - Essay Example Generally Accepted Accounting Principles (GAAP) is dealing with various accounting principles and guidelines for undertaking the implementation of accounting practices. But on the other hand, financial accounting is also important for evaluating the profitability of the business entity. Accounting is a system used by the business entity to measure its financial performance. There are several branches of accounting are available, but among them both management and financial accounting is relevant. The main emphasis in management accounting is to establish the relationship between cause and effect of a particular activity. More over, it is multi disciplinary in nature, because it is a combination of several disciplines like financial accounting, cost accounting, statistics, etc. In this case, the net profit of the company is goes on increasing, but at the same time, the cash in hand is decreasing to certain extend. Cash is a critical asset, which plays an important role in business. Cash flow statement is a statement showing the change in cash position from one period to another. Because it is possible to identify the causes of changes in cash balance between the two balance sheet dates. While preparing cash flow statement mainly it is essential to consider both actual cash flows and notional cash flows. Cash Flow Statement For the year ended 2002 Particulars Amount (in m) Cash used in operation. Issue of shares. Cash generated Add: Opening cash balance Cash balance at the end (1) 6 5 4 9 Calculation of Cash from operation Particulars Amount (in m) Net profit Add: provision for taxation. Funds from operation. Add: decrease in debtors. Less: decrease in creditors. Cash used in operation. 4 6 10 8 18 (19) (1) Adjusted Profit and Loss Account Particulars Amount (in m) Particulars Amount (in m) Provision for taxation. Depreciation of FA (balancing figure) Closing balance 6 14 (6) Opening balance Funds from operation. 4 10 14 14 Workings:- Here, there is no disposal of assets takes place in the year 2001 and 2002, therefore the difference between the value of assets in both years are considered as the amount of depreciation, such as- [166_152] = 14m. Propose Dividend Account Particulars Amount (in m) Particulars Amount (in m) Cash (dividend paid) Closing balance 7 9 Opening balance. Balance transferred to Profit and loss account. 7 9 16 16 While preparing the cash flow statement of a business organization, it is possible to understand about the causes of changes in the cash flow position of a business unit. Through which, it is possible to identify that the reduction of cash balance inspite of increase in income or for increase of cash balance in spite of decrease in income. This statement consists of opening cash balance and all sources of cash and all applications of cash and ends with the closing balance of cash. More over, here the changes in current assets and current liabilities are adjusted in the amount of cash from operation. It is necessary for a firm to keep adequate amount of cash in hand for making immediate payments. The major responsibility of the financial manager is to plan cash and maintain adequate cash balance. A cash flow statement is considered as a summarized cash account. In addition to this,