Financial Accounting Assignment Sample

Explore the Purpose of Financial Reporting, Stakeholder Significance, and Impact of Financial Information's Qualitative Features on Usability in Decision-Making

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Introduction Of Financial Accounting Assignment

Investors are still authorized to hold onto their shares, though. In order to enhance their ability to serve, respectfully request shareholders who currently hold their own interests in their original packaging to stop holding them and update their financial institution details and email addresses with the appropriate depository participant. As of April 1, 2019, SEBI forbade the actual delivery of shares of Milestone Ltd that are publicly traded and demanded that all transactions be made using the Demit (Milestonegloballimited.com, 2023). A moderately new field, the regulatory approach, is accepting varied forms within and exceeding the OECD. However, several roads are rolling in the demand of parallel goals. Several OECD countries lacked legislative guidelines; now, practically all possess them. The character of the organization has remained the same throughout the fiscal year. However, this business sold off its commercial activity of offering translation as well as localization services throughout the year under review.

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Main body discussions

a) Purpose of financial reporting and importance of stakeholders

The "core" financial data of the balance sheet, statement of earnings, and summary of cash flows are the ones most frequently utilized for presenting financial details to stakeholders both inside and outside the company. Nevertheless, it can also take on a variety of different shapes, depending on the target audience's demands for understanding (Baker, 2018). Securities and Exchange Commission (SEC), which additionally includes the company's discussion and analysis (MD&A), supplement schedules, and detailed comments on the statements of earnings. Any monetary information that the leadership team desires is to provide for those within the organization, such as in-depth reports on revenue trends, and important performance indicators (KPIs), can be included in financial monitoring.

Although most accounting data is retroactive in nature it may correspondingly be employed to foreknow future achievement and viability by shareholders, business companions, and even customers and providers. For example, based on the expansion of the organization's deals, wholesalers may utilize the financial statements of a business to decide when to begin a commercial relationship. Whether an enterprise is endeavouring to obtain funds through loans, acquisition from screened parties, or formal demands its financial chronology becomes especially compulsory (Brooks and Oikonomou, 2018). Financial portrayals are used by other communities to consider an association's operations and steadfastness.

The individuals who do save for pension may not be doing almost enough to sustain themselves during their golden years. About 25% of the people, who are not retired, pursuant to a Federal Reserve communication from 2020, haven't started saving for retirement. Moreover, to build wealth, combat inflation, plus save for pensions and other monetary goals, everyone must invest. Individuals should invest, but everyone has a distinct economic approach that best suits their financial goals and personal objectives (Cañibano, 2018). Creditors play an important role since they contribute the capital required for the maintenance and expansion of firms. Lacking creditors, firms would be dependent only on their own, frequently finite resources. Businesses might borrow money from creditors to fund processes, diversify their good offerings, or invest in cutting-edge technologies.

In order to shape the well-being of industries and society, governance is crucial. A moderately new field, policy regarding principles is taking different conditions within and exceeding the OECD. Regardless, several streets are advancing in the approach of identical pursuits (Roychowdhury et al. 2019). A growing variety of people are intrigued by utilizing regulatory policies to address major social problems including distributive justice and environmentally friendly growth.

b) Impact of financial information's qualitative features on the usability of financial statements

The application of monetary data is improved by improving qualitative qualities. However, neither cannot they make up for the shortage of applicability or appropriate diagnosis, nor does the lack of them render the data insignificant. The activity in question was established by the corporation with the authorization of its shareholder base on February 8, 2020. They aid in selecting two distinct accounting options for a single business that is both equally pertinent truthful, and faithful. For purposes of communicating with the company's shareholders, financial results are released (Saud et al. 2020). Therefore, it is of the highest implication that this insistence be presented in a manner that makes them Spartan for stockholders to understand and decrypt. Although they allow it to be more unadorned for customers and business executives to use economic reports to make knowledgeable decisions, the qualitative particulars of the computation data are compulsory.

Accounting-related knowledge must be up to date in order to keep up with other types of data. As an example, if given the price at which it was bought, the salvage value, the age of retirement method, and the intended use life of $1,000 worth of machines owned by a firm, a financial specialist should be able to come up with the same solution. Consequently, accounting information becomes significant if it can help with the evaluation of prior occurrences, forecast upcoming occurrences, or take action to solve potential future mishaps. In one instance, creditors may take the business's financial performance during an excellent period into account when choosing whether to postpone or raise the total amount of credit given to a corporation. The degree to which knowledge may be duplicated given a comparable set of assumptions and untruths is known as authenticity.

Corporate annual reports nowadays are frequently replete with statistical information. It is highly important to include data that the average consumer of earnings statements can understand. Leading businesses typically use a lot of sophistication in order and elaborate wording in their yearly financial statements as a means of masking their subpar performance. The comparison is made based on the frequency that accounting standards and rules that have been obeyed throughout time (Maglio et al. 2018). By adopting comparative statements of operations that use the same bookkeeping standards and procedures for each period of accounting, users may make educated conclusions about the trends and achievements of the business over time. Availability refers to how simple it is to understand knowledge.

c) Discussion of various components of financial statements

Profit and loss statement provided information regarding the financial year 2022 and 2021 performance that evaluated opportunity findings for growth or deficit in profitability. Possibility evaluation has provided information regarding 0.33 in the financial year 2021 and 66.77 in the financial year 2022 (Bruhn et al. 2018). Growth of profitability could be considered as positive because of excessive volume has been presented in net profit along with that total income of Milestone Limited has been increased to 1821.5 from 1318.79. The percentage of growth has been identified as around 30% which could be considered as a positive approach that has been taken by leadership for the growth of organizational financial benefit.

The financial year 2022 and 2021 performance was disclosed in the profit and loss statement, which assessed any opportunities for profitability growth or decline. Information from the possibility evaluation was given for 0.33 in the fiscal year 2021 and 66.77 in the fiscal year 2022. Because excessive volume has been seen in net profit and milestone Limited's total revenue has risen to 1821.5 from 1318.79, growth in profitability may be viewed favourably. Around 30% of growth has been noted, which could be viewed as a sign that leadership is taking proactive measures to increase organisational financial gain.

Balance sheet has presented information regarding my stone Limited total asset and liabilities changes in both financial years that evaluate negative change in total assets due to 82.26 in the financial year 2022 and 101.42 in the financial year 2021. Total liabilities identification as provided information regarding 1150.45 in the financial year 2021 that has been changed to 965.37 provide information regarding the financial deficit that has been consumed due to excessive liabilities used as financial resources (Grohmann et al. 2018). Assets and liabilities at the moment whereas current liabilities have increased owing to excessive debt consumption as a result of financial resources and current asset volume has decreased as a result of financial strength, provided information on continuous progression of company activity has been detected in the profit and loss statement. After the pandemic, there was a lack of optimization in the organization.

The balance sheet details the total assets and liabilities of Milestone Limited for both fiscal years, evaluating a negative change in total assets as a result of 82.26 in the fiscal year 2022 and 101.42 in the fiscal year 2021. Total liabilities were identified as providing information about 1150.45 in the fiscal year 2021, but 965.37 is now used to offer information about the financial deficit that has been created as a result of using too many liabilities as financial resources (Chen et al. 2018). Current asset and liabilities provided information regarding the continuous progression of business activity have been identified in the profit and loss statement whereas current liabilities has been increased due to excessive consumption of debt as financial resources and current asset volume decreased because of financial strength Optimisation absence in an organization after pandemic situation.

d) Financial ratios

Profitability ratio

Milestone Ltd.

Year

Net Profit Ratio

Formula

Amount

Ratio

2022

Net Profit

(Net Profit/Sales)*100

66.77

3.67%

Sales

1821.5

2021

Net Profit

0.33

0.03%

Sales

1318.79

Year

Gross Profit Ratio

Formula

Amount

Ratio

2022

Gross Profit

(Gross Profit/Sales)*100

88.36

4.85%

Sales

1821.5

2021

Gross Profit

32.88

2.49%

Sales

1318.79

Year

ROCE

Formula

Amount

Ratio

2022

EBIT

EBIT / Capital employed = Total asset - Current liabilities

8,702

17.29%

Capital employed = Total asset - Current liabilities

50317

2021

EBIT

8,303

17.64%

Capital employed = Total asset - Current liabilities

47067

Gross profit and net profit of the organization evaluated positive growth in the financial year 2022 due to excessive growth in revenue volume. Due to an excessive development in revenue volume, the organization's gross profit and net profit both experienced positive growth in the fiscal year 2022 (Rikhardsson and Yigitbasioglu, 2018). Another Milestone Limited potential that was assessed by ROCE showed that ROCE had declined since the organization's current acid volume had decreased in the fiscal year 2022 (17.29% of FY 2022 and 17.64% of FY 2021. Another prospect of Milestone Limited evaluated by ROCE, 17.29% of FY 2022 and 17.64% of FY 2021 with indicates ROCE has been decreased due to the current acid volume of the organization reduced in the financial year 2022.

Liquidity ratio

<tdGross profit and net profit of the organization evaluated positive growth in the financial year 2022 due to excessive growth in revenue volume. Due to an excessive development in revenue volume, the organization's gross profit and net profit both experienced positive growth in the fiscal year 2022 (Rikhardsson and Yigitbasioglu, 2018). Another Milestone Limited potential that was assessed by ROCE showed that ROCE had declined since the organization's current acid volume had decreased in the fiscal year 2022 (17.29% of FY 2022 and 17.64% of FY 2021. Another prospect of Milestone Limited evaluated by ROCE, 17.29% of FY 2022 and 17.64% of FY 2021 with indicates ROCE has been decreased due to the current acid volume of the organization reduced in the financial year 2022. Liquidity ratio 343.18

Milestone Ltd.

Year

Current Ratio

Formula

Amount

Ratio

Growth

2022

Current Assets

(Current Assets /Current Liabilities)

224.67

3.67

2.64

Current Liabilities

61.3

2021

Current Assets

350.22

1.02

Current Liabilities

343.18

Year

Quick Ratio

Formula

Amount

Ratio

Growth

2022

Current Assets- Inventories

(Current Assets- Inventories /Current Liabilities)

82.26

1.34

1.05

Current Liabilities

61.3

2021

Current Assets- Inventories

101.42

0.30

Current Liabilities

Milestone Ltd.
Year Net Profit Ratio Formula Amount Ratio
2022 Net Profit (Net Profit/Sales)*100 66.77 3.67%
Sales 1821.5
2021 Net Profit 0.33 0.03%
Sales 1318.79
Year Gross Profit Ratio Formula Amount Ratio
2022 Gross Profit (Gross Profit/Sales)*100 88.36 4.85%
Sales 1821.5
2021 Gross Profit 32.88 2.49%
Sales 1318.79
Year ROCE Formula Amount Ratio
2022 EBIT EBIT / Capital employed = Total asset - Current liabilities 8,702 17.29%
Capital employed = Total asset - Current liabilities 50317
2021 EBIT 8,303 17.64%
Capital employed = Total asset - Current liabilities 47067
Milestone Ltd.
Year Current Ratio Formula Amount Ratio Growth
2022 Current Assets (Current Assets /Current Liabilities) 224.67 3.67 2.64
Current Liabilities 61.3
2021 Current Assets 350.22 1.02
Current Liabilities 343.18
Year Quick Ratio Formula Amount Ratio Growth
2022 Current Assets- Inventories (Current Assets- Inventories /Current Liabilities) 82.26 1.34 1.05
Current Liabilities 61.3
- 2021 Current Assets- Inventories 101.42 0.30
Current Liabilities 343.18

Liquidity ratio has been evaluated consideration of current assets and liabilities which is presented positive growth because of the organizational financial condition has been improved by focusing on improving current assets. Additional information Outsourcing evaluates it considered as of inventory which presents the financial year 2022 milestone Limited increase current asset for betterment of financial stability (Kim and Laskowski, 2018). Quick Ratio identified an organization's ability to the continuation of business operations with sufficient financial resources, whereas the performance of a milestone company indicates the organization's increase ability by reducing the credit time period of debtors.

Efficiency ratio

Milestone Ltd.

Year

Asset Turnover Ratio

Formula

Amount

Ratio

Growth

2022

Sales

(Sales /Total Assets)

1821.5

1.89

0.74

Total Assets

965.37

2021

Sales

1318.79

1.15

Total Assets

1150.45

Year

Inventory Turnover Ratio

Formula

Amount

Ratio

Growth

2022

Cost of Sales

(Cost of Sales /Average Inventory)

947.64

3.81

1.36

Average Inventory

248.8

2021

Cost of Sales

608.92

2.45

Average Inventory

248.8

Inventory and asset turnover ratio evaluate organizational inventory holding period has been decreased that impact positive on Revenue growth. Revenue of the organization has been increasing continuously because of creating demand in the market (Gartenberg et al. 2019). On the other hand growth in asset turnover ratio influence positively on Organisational financial development which means optimization of total assets used to create sufficient growth in revenue and profitability volume.

Conclusion

It could be confident that based on the analysis of milestones Limited inventory holding period has decreased, which has a beneficial impact on revenue growth, according to the organization's inventory and asset turnover ratio. The evaluation of the liquidity ratio took into account current assets and liabilities, and the results showed positive growth because the organization's financial situation has improved as a result of putting more emphasis on current assets because of the growth in market demand, the organization's revenue has been steadily rising. Additional Information Limited analyzes outsourcing as an inventory item for the fiscal year just ended 2022 milestone and raises current assets to improve financial stability. Quick Ratio determined an organization's capacity to maintain business operations with adequate financial resources, whereas the performance of a milestone company showed an increase in organization capacity by shortening the debtors' credit terms. On the other hand, increasing the asset turnover ratio has a beneficial impact on the financial development of the organization since it optimizes the use of all assets to generate a necessary increase in revenue and profitability.

References

Baker, S.R., 2018. Debt and the response to household income shocks: Validation and application of linked financial account data. Journal of Political Economy, 126(4), pp.1504-1557.

Brooks, C. and Oikonomou, I., 2018. The effects of environmental, social and governance disclosures and performance on firm value: A review of the literature in accounting and finance. The British Accounting Review, 50(1), pp.1-15.

Bruhn, M., Karlan, D. and Schoar, A., 2018. The impact of consulting services on small and medium enterprises: Evidence from a randomized trial in Mexico. Journal of Political Economy, 126(2), pp.635-687.

Cañibano, L., 2018. Accounting and intangibles: Contabilidad e intangibles. Revista de Contabilidad-Spanish Accounting Review, 21(1), pp.1-6.

Chen, C.W., Collins, D.W., Kravet, T.D. and Mergenthaler, R.D., 2018. Financial statement comparability and the efficiency of acquisition decisions. Contemporary Accounting Research, 35(1), pp.164-202.

Chen, C.W., Collins, D.W., Kravet, T.D. and Mergenthaler, R.D., 2018. Financial statement comparability and the efficiency of acquisition decisions. Contemporary Accounting Research, 35(1), pp.164-202.

Gartenberg, C., Prat, A. and Serafeim, G., 2019. Corporate purpose and financial performance. Organization Science, 30(1), pp.1-18.

Grohmann, A., Klühs, T. and Menkhoff, L., 2018. Does financial literacy improve financial inclusion? Cross country evidence. World Development, 111, pp.84-96.

Hopwood, A.G., 2019. Accounting and organisation change. In Management Control Theory (pp. 357-368). Routledge.

Kim, H.M. and Laskowski, M., 2018. Toward an ontology?driven blockchain design for supply?chain provenance. Intelligent Systems in Accounting, Finance and Management, 25(1), pp.18-27.

Maglio, R., Rapone, V. and Rey, A., 2018. Capitalisation of operating lease and its impact on firm’s financial ratios: Evidence from Italian listed companies. Corporate Ownership & Control, 15(3-1), pp.152-162.

Rikhardsson, P. and Yigitbasioglu, O., 2018. Business intelligence & analytics in management accounting research: Status and future focus. International Journal of Accounting Information Systems, 29, pp.37-58.

Roychowdhury, S., Shroff, N. and Verdi, R.S., 2019. The effects of financial reporting and disclosure on corporate investment: A review. Journal of Accounting and Economics, 68(2-3), p.101246.

Saud, S., Chen, S. and Haseeb, A., 2020. The role of financial development and globalization in the environment: accounting ecological footprint indicators for selected one-belt-one-road initiative countries. Journal of Cleaner Production, 250, p.119518.

Website

Milestonegloballimited.com, 2023, Annual report. Available at: http://www.milestonegloballimited.com/wp-content/uploads/2022/08/Annual-Report-2022.pdf [20th May, 2022]

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