It is essential for the success of any business that it has good

financial control and record keeping. Lack of effective control,

planning and recording can ultimately lead to poor financial results.

Owners and managers need to be able to recognise the indications of

potential difficulties and take remedial action when required. The

unit considers the current regulations governing financial reporting,

the formats of financial statements and the purpose of these

statements for different users. Learners will use records to complete

financial statements. They will consider various categories of

business income and expenditure and use cash flow forecasts,

monitoring and adjusting for the effective management of cash flow.

They will measure financial performance using a profit and loss

account and balance sheet and analyse the profitability, liquidity and

efficiency of a business through the application of ratio analysis.

Scenario or context:

You are the Accountant for a large multinational Engineering

corporation. A new Board of Directors have recently been appointed but

they have a limited understanding of financial accounting. They have

tasked you, as the Accountant, to compile three specific reports for

them. These reports must amongst others explain to them all aspects of

financial accounting and present them with a number of financial

statements based on information they have given you. Some of the

information is incomplete and it requires you to use all your

financial skills in order to complete them. In order to complete this

successfully you have to complete the three tasks below.

Task 1 (LO1: 1.1,1.2,1.3,1.4 and 3.1; M3) Report 1

You must write a report to the Board of Directors explaining to them

the importance of Financial Accounting and Reporting to the company

emphasising the following:

• An introduction into what Financial Accounting and Reporting is.

• Describe the different users of financial statements and their needs

and explain how the information needs of different user groups vary

• Explain the legal and regulatory influences on financial statements

• Assess the implications for users

• Explain how different laws/regulations are dealt with by accounting

and reporting standards