FINANCIAL ACCOUNTING ANSWERS
Incomplete records are financial records that do not contain all necessary information required for the preparation of financial statements.
(i)Difficulty in establishing accountability and ownership of assets and liabilities.
(ii)Inability to accurately determine the profitability of the business.
(iii)Difficulty in making informed decisions as the records do not provide adequate information.
(i)Lack of knowledge and skills required for record-keeping.
(ii)Cost and time constraints.
(iii)The absence of regulatory requirements mandating complete record-keeping.
The error in this transaction is that consumables should be posted to the consumables account instead of the purchases account. This error will affect the agreement of the trial balance totals.
The error in this transaction is that an invoice amount should be posted to the purchases ledger account instead of the purchases day book. This error will not affect the agreement of the trial balance totals.
The error in this transaction is that returns outwards should be posted to both the personal account and the returns outwards account. This error will not affect the agreement of the trial balance totals.
The error in this transaction is that the cheque payment to Ige was posted on the receipt side of the cash book instead of the payment side, and credited to Ige’s account. This error will affect the agreement of the trial balance totals.
Payment of cheque to Ige entered on the receipt side of the cash book and credited to Ige’s account:
Error: The payment of the cheque to Ige was incorrectly entered on the receipt side of the cash book and credited to Ige’s account.
Effect on trial balance: This error would result in an overstatement of receipts and an incorrect entry in Ige’s account.
Impact on trial balance agreement: The error affects the trial balance totals as it misstates the receipts account and potentially Ige’s account.
(v) Government Agencies/Tax Authorities
(i) Management/Owners: The management or owners of a business are interested in accounting information for various purposes. They rely on financial statements and reports to assess the financial performance of the business, make strategic decisions, evaluate profitability, monitor cash flow, and determine the overall financial health of the company. They need accurate and timely accounting information to effectively manage the business and plan for the future.
(ii) Investors/Shareholders: Investors and shareholders are interested in accounting information to evaluate the financial position and performance of a company. They use financial statements and reports to assess the profitability, liquidity, and solvency of the business. This information helps them make investment decisions, evaluate the company’s growth potential, and assess the value of their investments.
(iii) Lenders/Creditors: Lenders and creditors, such as banks or suppliers, rely on accounting information to assess the creditworthiness and financial stability of a business. They use financial statements, particularly the balance sheet and cash flow statement, to evaluate the company’s ability to repay loans or fulfill its financial obligations. Accurate accounting information helps lenders and creditors determine the level of risk associated with extending credit or lending money.
(iv) Employees/Workers: Employees and workers have an interest in accounting information, especially regarding their compensation and benefits. They rely on accurate accounting records to ensure proper calculation of salaries, wages, bonuses, and benefits. Accounting information also helps employees understand the financial health of the company, which may impact job security and potential growth opportunities.
(v) Government Agencies/Tax Authorities: Government agencies and tax authorities require accounting information to ensure compliance with tax regulations, financial reporting standards, and other legal requirements. They use financial statements, tax returns, and supporting documentation to assess tax liabilities, enforce regulations, and monitor financial transparency. Accurate accounting information is crucial for businesses to fulfill their legal obligations and avoid penalties or legal issues.