Accurate financial records

Write a concise report detailing the purpose and value of keeping accurate financial records. ac-count-ing. The principles and methods involved in keeping a financial record of business transactions and in preparing statements concerning the assets, liabilities and operating results of a business. The purposes of accounts are there not just for the organisations benefit but for the stakeholders as well. Legal requirements also play a major part in the maintenance of companies financial records.

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The government and its subsidiaries are the main people who have an interest in the preservation of the company’s accounts. Most ‘Taxes’ are checked up on annually. Customs and Excise are responsible for the V. A. T. (Value Added Tax – Set at 17. 5% in the U. K) collecting. ALL companies MUST keep V. A. T. records and accounts. It is extremely illegitimate if a company does not pay its V. A. T. Corporation Tax (took from a companies profits) must also be paid to the Inland Revenue as well as National Insurance Contributions and Income Tax. (Source – http://www.inlandrevenue. gov. uk/)

” The Inland Revenue’s Core Purpose is to ensure that everyone understands and receives what they are entitled to and understands and pays what they owe, so that everyone contributes to the UK’s needs. In delivering our core purpose, the Inland Revenue is responsible, under the overall direction of Treasury Ministers, for the efficient administration of direct taxes plus tax credits, child benefit, national insurance contributions and stamp duties together with the collection of student loans and National Minimum Wage enforcement.

” Sole Traders, by law, are not legally required to keep accounts based on its own stock, wages, etc BUT it is required to keep accounts on the taxes listed above (V. A. T. , Corporation Tax, National Insurance Contributions and Income Tax). The same applies to a partnership, i. e. an organisation with Two to Twenty People owning the business. Anymore than 20 people who contribute capital to an organisation are considered as a different ‘type’ of business. They can be divided into two different types of organisations.

The Private (Ltds) and Public (PLCs) Limited companies must keep and publish accurate financial records. The main reason that they publish the records is for stake holders and share holders so that they can see weither their investment is safe in the company and also to see if the company in worthwhile investing within in the first place. Organisations must also keep accounts to ensure that business activities are recorded accurately to ensure that fraud and dishonesty, money laundering and criminal market misconduct such as insider dealing is not taking place.

The F. S. A. (Financial Services Authority) are the main authority to keep a close eye on this sort of account maintenance. (Source – http://www. fsa. gov. uk/what/) Helping to reduce financial crime. Our work focuses on three main types of financial crime: money laundering; fraud and dishonesty; and criminal market misconduct such as insider dealing. On top of that, companies keep accounts to ensure that theft and fraud are not taking place.

For example if a company buys a new Microwave for its staff room, they must keep the account transaction used to pay for the Microwave from the companies Petty Cash Account, BUT what happens if someone takes a liking to the Microwave and decides to take it home and just says that it broke and it was thrown out? That’s where the accounts need to keep a close eye on such situations. For inside use between managers and his/her contemporaries, accounts also play a fundamental role. Companies need to monitor the financial situation of its profits and losses.

This therefore aids indecision making between the executives, managers and heads of departments in processing ideas into increasing their profit/ decreasing their losses. This also joins into weither a business is meeting its objectives or not. Companies can tell by their annual revenue if they have or have not met their objectives. Businesses monitor their objectives carefully and if they think someone is not up to ‘meeting the target’ standard, then they will not hesitate to remove the person from their workforce.

Decisively, organisations need to maintain their financial records to keep their stakeholders informed of their financial position. They also need to determine weither or not the business will be able to meet its economic commitments as they fall due, i. e. the company being able to pay their bills, wages, taxes, etc. In conclusion to all of this, companies will only be able to maintain their invaluable accounts if they have a continually updated supply of invoices, orders, receipts, credit notes, paying in slips, cheques, petty cash vouchers and pay and wage slips.