ASSIGNMENT

STUDENT ID: DBMNKR585619

UNIT: FUNDAMENTAL OF ACCOUNTING

UNIT CODE: DAC 100

1. Explain the main components of a set of published financial statements.

The main components of financial statements are as follow:
(a) Statement of financial position:
Statement of financial position is also known as the balance sheet, presents the financial
position of an entity at a given date.
It is comprised of the following three elements:
 Assets: Anything a business owns or controls (cash, inventory, plant and machinery).
 Liabilities: Anything a business owes to someone. (e.g, creditors, bank loans etc).
 Equity: What a business owes to its owners. This represents the amount of capital
that remains in the business after its assets are used to pay off its outstanding
liabilities.
Equity therefore, represents the differences between the assets and liabilities.
(b) Income statement:
Income statement is also known as the profits and loss statement. It reports the
company’s financial performance in terms of the profits or loss over a specified period.
Income statement is composing of the following two elements:
 Income: What the business has earned over a period. (e.g sales revenue, dividend
income.
 Expenses: The cost incurred by the business over a period. (e.g salaries and wages,
depreciation, rental charges etc).
(c) Cash flow statement:
Cash flow statement presents the movement in cash and bank balances over a period.
The movement in cash flow is classified into the following segments:
 Operating activities: Represents the cash flow from primary activities of a
business.
 Investing activities: Represents cash flow from the purchase and sale of assets other
than inventories (e.g purchase of factory plants).
 Financing activities: Represents cash flow generated or spent on raising and
repaying share capital and debt together with the payments of interest and dividends.
(d) Statement of changes in Equity:
Statement of changes in Equity also known as the statement of Retained Earning It details
the movement in owners’ equity over a period.
The movement in owners’ equity is derived from the following components:
 Net profit or loss during the period as reported in the income statement.
 Share capital issued or repaid during the period.
 Dividend payments
 Gains or losses recognized directly in equity (e.g revaluation surpluses)
 Effects of a change in accounting policy or correction of accounting error.

2. Wema industries have been operating on a manual accounting system for the
last five years since its inception. The management now proposes that its time that
they transit to a computerized accounting information system. The ICT manager
has approached you to write a report that she will able to the management on the
key factors that they have to consider before introducing the new computerized
accounting system.

 Flexibility: A computerized accounting system must be flexible in respect of data

entry, retrieval of data and generating designs of reports.
The user should be able to run the software on a variety of computer environments and
machines that is on any configuration of computers and available operating systems.
 Cost of installation and maintenance:
It is a must to consider that the cost of the accounting software, its relevant hardware and
the maintenance, cost of addition of modules, training of staff, updating of versions and
data recovery in case of data failure are negotiable and within the ability of the
organization to afford it.
 Size of the organization:
An accounting system must be according to the size of the organization (e.g volume of
the business transactions, multi-user requirements).
 Easy of adaptation and training needs:
Some accounting software is user-friendly and requires a simple training to the users.
However, some other complex software packages linked to other information systems
require intensive training on a continuous basis.
 Expected level of secrecy ( software and data):
Security features of accounting system software are also important. Software should
ensure that it prevents unauthorized access and manipulation of data.
 Exporting/ importing Data facility:
The software should allow easy data transfer option for flexible reporting such as transfer
of information directly from the ledger into the spreadsheet software like lotus or Excel.

3. Organizations that adopt to use computerized accounting software

have a strategic competitive advantage. Discuss the statement.

 Automation: Since all the calculations are handled by software, computerized

accounting eliminates many of the mundane and time-consuming process associated
with manual accounting.
 Accuracy: This accounting system is designed to be accurate to the minutest detail.
Once the data is entered into the system, all the calculations including additions and
subtractions are done automatically by software.
 Data access: Using accounting software it becomes much easier for different
individuals to access accounting data outside of the office securely.
 Reliability: Because the calculations are so accurate, the financial statements
prepared by computers are highly reliable.
 Scalable: when the company grows, the amount of accounting necessary not only
increases but become more complex. With computerized accounting, everything is
kept straightforward because shifting through data using software is easier than
shifting through a bunch of papers.
 Speed: Using accounting software, the entire process of preparing accounts becomes
faster.
Furthermore, statement and reports can be generated instantly at the click of a button.
 Security: The latest data can be saved and stored in offsite locations so it is safe
from natural and man-made disasters like earthquakes, fire, flood and terrorist attacks.
In case of a disaster the system can be quickly restored on other computer.
 Cost-Effective: Since using computerized accounting is more efficient than paper-
based accounting, than naturally work will be done faster and time will be saved.
 Visuals: Viewing your accounts using a computer allows you to take advantage of
the option to view your data in different formats.

CONCLUSION: Computerized accounting represents a technological advancement

in the field of business accounting.