BUSINESS DIAGNOSIS
CONTRIBUTION OF THE FINANCIAL STATEMENTS >>
PROVIDES AN ADDED VALUE ON THE FINANCIAL HEALTH OF THE COMPANY
o) EVALUATION OF THE FINANCIAL AND ACCOUNTING SYSTEM >>
QUALITY AND RELIABLE STRATEGIC INFORMATION REMAINS IN THE MIND OF THE MANAGEMENT, INVESTORS, FINANCIAL INSTITUTIONS, CUSTOMERS, SUPPLIERS AND OTHERS STAKEHOLDERS.
The Objective must be to provide the Company with Essential Information for making clearer Investment Decisions.
[ IMPORTANT CONSIDERATIONS ]
[ * ] IT HELPS IN EVALUATING THE PERFORMANCE OF BUSINESS
The Financial Records reflect the RESULTS OF THE OPERATIONS AS WELL AS THE FINANCIAL POSITION of a Small Business or a Big Corporation. In other words, It will be possible to understand what’s going on with the Business Financially.
This process will help the Company keep track of EXPENSES, GROSS MARGIN, AND A POSSIBLE DEBT, the Management will be able to compare the Current Data with the Previous Accounting Records and allocate the Budget appropriately.
[ * ] IT HELPS TO CREATE BUDGET AND FUTURE PROJECTIONS
The BUDGET AND FUTURE PROJECTIONS are Scenarios that reflect the Financial and Operating Performance of the operation. Its Financial Records play a crucial role.
Business Trends and Forecasts are based on Historical Financial Data, the main focus is on KEEPING THE OPERATIONS PROFITABLE.
The Financial Data is considered reliable and appropriate when provided by WELL STRUCTURED ACCOUNTING PROCESSES.
[ * ] FACILITATES DECISION-MAKING FOR MANAGEMENT
Accounting-Financial System is especially important for Internal users of the Organization.
Internal users may include the people that PLAN, ORGANIZE, AND RUN COMPANIES.
The Management Team needs a Financial and Accounting System in making IMPORTANT DECISIONS – PLANNING, STRUCTURING AND COMPANY'S MANAGEMENT.
Business Decisions may range from deciding to pursue Geographical Expansion, implementation of a New Product Line, Equipments acquisition, and even improving Operational Efficiency.
[ * ] COMMUNICATES PERFORMANCE AND RESULTS
A Financial and Accounting System helps to Communicate Company Results to various users. Investors, Financial Institutons, Suppliers and other Creditors are the primary external users of Accounting Information.
Investors may be deciding to BUY SHARES in the Company, while Banks need to ANALYZE THE RISK IN DECIDING TO LEND and Suppliers need to EVALUATE THE PURCHASES AND PAYMENTS CAPACITY.
It is important for Companies to establish Credibility with these external users through relevant and reliable Financial and Accounting Information.
[ * ] GUIDELINES – FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING INVOLVES THE PREPARATION OF THE FINANCIAL STATEMENTS IN ACCORDANCE WITH THE STANDARDS ESTABLISHED BY THE MARKET.
The Focus of Financial Accounting is to measure the Performance of the Business/ Company as accurately as possible.
While Financial Statements are for external purpose, they may also be for Internal Management use to help in DECISION-MAKING
Accounting Principles and standards, such as BRGAAP, GAAP (Generally Accepted Accounting Principles), IFRS (International Financial Reporting Standards), or ASPE (Accounting Standards for Private Enterprises), are standards that are widely adopted in Financial Accounting.
The Accounting Standards are important because they allow all Stakeholders and Shareholders to easily understand and interpret the reported Financial Statements from year to year.
[ * ] GUIDELINES – MANAGERIAL ACCOUNTING >>
MANAGERIAL ACCOUNTING analyzes the information obtained from Financial Accounting. Its purpose is to prepare reports on the OPERATIONS/ PERFORMANCE of the Business.
MANAGEMENT ACCOUNTING is the method used to assess and record information on Economic Activity/ Result within Companies to be used by Managers for PLANNING, COST-BENEFIT ANALYSIS, BEHAVIOR AND COST VARIATIONS, PERFORMANCE ASSESSMENT AND OPERATIONAL CONTROL. The results obtained serve to assist the Management team in MAKING TACTICAL DECISIONS..... Some examples below:
(o) Planning and Budgeting :
Planning/ Budgeting is used to determine what ITEMS TO MAKE, WHERE AND WHEN TO PRODUCE THEM. Determining the Materials, Labor, and other services required to achieve the desired pn.
In Management Accounting, the Weekly and Monthly Budgets Control the types of Goods Sold, the Amount of Product Inventory and the Price Points required to ensure that companies maintain adequate Margins to cover Expenses and stay solvent.
(o) Performance Evaluation :
It measures/ analyzes the Performance of the various Managers and the various Sections of the Company. Businesses depend on performance assessment metrics to equate their actual Outcomes with estimates made during their Planning and Budgeting processes.
Performance assessment allows the Company to keep track of defective or unprofitable activities, but this critical benchmark is instrumental in allowing the Company to align its Performance with that of its direct Market Competitors.
(o) Operacional Control :
Identifing details of Product work-in-process on the Shop Floor and what it is stage up to the Completion. It helps Line Manager analysis in order to find Bottlenecks and ensure a uniform Production Flow.
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