Financial Problems

Honghao Lu

February 7 2016

Chapter 1- Introduction to Accounting

Question 1: How does the business maintain its financial records? Who does the accounting for the business? What accounting or record system is used?

Business Owner: Keep recording every single income and output in the company and be sure to make everything be legal. The accountant will do the accounting things. Everything would be recorded on the book and then upload into the computer data.

Business Owner answer converted to text-book language: The collection, processing and reporting of data used to make business decisions are critical. Both internal and external users use the accounting information, analysis completed and reports generated. They would use the managerial accounting, income statement, balance sheet, owners equity, cash flow statements, and

Recommendation: Make sure to record every data by some modern technology such as computers and do not only let the accountants do the accounting for you, but also let everyone who engaged into your business understands some concepts of accounting to make some correct business decisions.

Question 2: Who periodically review and analyzes the accounting records? What reports are generated? How are they used to manage the business?

Business Owner: Managers and the superiors will periodically review and analyzes the accounting records. Those reports include all the income and output that has been used in the past time. They are used to record everything and make sure everything be legal.

Business Owner answer converted to text-book language: The internal users include managers, officers, internal auditors, sales staff, budget officers, controllers and employees would periodically review and analyzes the accounting records. The businesses assets, liabilities and owners equity as the last day of an accounting period are generated. They are used to produce the various business analysis and make business decisions.

Recommendation: Everyone in the company should know some knowledge to face some emergency situations. Especially for managers and officers, they should review and analyzes the records every month or even every week because the accounting reports periodically record the profit and deficit that the company made. Those are really important for the owners to control the company’s economy.

Question 3: How well do you understand the financial reports generated by your accounting system? How well do you utilize the information to make business decisions?

Business Owner: I understand that the financial reports clearly record my company’s profit they made in the past. The information that I have will lead me to think more about its back meaning so that I can make decisions.

Business Owner answer converted to text-book language: Accounting is an informative system that aims to identify, record, ad communication reliable and comparable information about business activities, it helps assess and exploit business opportunities, products, investments, and social and community responsibilities.

Recommendation: Financial reports can clearly state the profit and deficit that this company made in the past. The financial reports sometimes could help people to decide to make the investment or not. So, the owners should keep making the financial reports be clearly and enough for checking and estimating the investments. It really helps a lot in the company and investments.

Question 4: What information would you like to obtain from your financial accounting system; besides how much income you are producing?

Business Owner: I would like to obtain how much I got and the problems that we faced in the past. I would like to obtain the tax and the cost of producing, too.

Business Owner answer converted to text-book language: The owner has to learn the businesses revenues and expense, net profit, or net loss and tax.

Recommendation: Pay more attention on the profits and cost of producing the products. Utilize a month end closing period to produce financial statements to revise procedures and processes to improve. Because each different products would have different effects in the different period time. There are also some substitutions for each products. So, monthly checking businesses revenues and expanse would help owners to check the products status so that they know how to produce or improve.

Question 5: Have you had any formal instruction or training as to how to record your business transactions, understand the information, and or review and analyze the data?

Business Owner: No, actually I have not been taught this officially.

Business Owner answer converted to text-book language: The collection, processing and reporting of data used to make business decisions are critical. A series of internal reports generated to provide information to internal users to review, analyze, and decide actions required to improve the financial reports of owners equity. These are the standard financial reports a business uses to record information, measure the business, analyze information, and communicate financial information about the business.

Recommendation: As a business owner, you should at least understand some basic knowledge of the finance because it can help you to be easier to control the company. Those basic information are really necessary to be learned. Those standard financial records could make the decisions be critical and provide information to review and analyze. So, the company owners should learn more about business transactions, understand the information, and or review and analyze the data to take over of their companies well.

Question 6: Is your financial information detailed and organized enough to give adequate management information? How do you utilize this information?

Business Owner: Actually not. My information is not detailed and organized enough to easily give adequate information. Most of the time, I have to understand it by my own and unscramble it word by word so that I will not miss any helpful information.

Business Owner answer converted to text-book language: The profit and loss statement and balance sheet and other financial report can then be produced using the ledger accounts listed on the trial balance. Accountant will utilize this report to make adjusting journal entries after tax year end.

Recommendation: Detailed and organized information are really necessary for a business owner. Those information would help business owner to make correct decisions immediately to avoid some unnecessary loss. Business owners should hire more and excellent accountants to record financial information detailed and organized enough to give adequate management information. Owners also need some analysts to analyze the generated information for adjusting data and making correct decisions.

Question 7: What is a business plan ?

Business Owner: Business plan is a plan that managers and superiors made for the future developments. A good business plan would help a company a lot.

Business Owner answer converted to text-book language: A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.

Recommendation: Business owner should pay more attention on business plan because a good business plan would lead the company onto the healthy and easy way of the future. Most of the time, a good business plan would help the business owners make good decisions and set a specific future goal for chasing.