In pass 1 I will describe the purpose of accounting for organisations giving a real life business example for each description.
Recording transaction: This is keeping records of income and expenditure. For example a business must record all of the money coming into the business and all of the money going out, such as expenses. If a business fails to do this it will find itself forgetting to pay bills. If the business does not record its transactions correctly it cannot report its financial performance accurately and therefore tax payments may be wrong. For example Warburton’s will record their transactions so they can keep a close track of all of their transactions and they know where their money is coming from along with where it’s going to.
Monitoring activity: Is checking records for patterns, problems and issues. Records will be updated on a daily basis and therefore provide a good indication of how the business is doing in terms of sales, receiving payments and paying expenses. The owner would soon realise if money going out seemed to be on the increase while sales were dropping off. Monitoring activity should also involve keeping an eye on the bank balance to ensure there are sufficient funds to meet day to day expenses.
Control: Is looking at ways to solve problems. For example if it appeared that a bakery’s expenses were creeping up but sales staying the same then the manager will look for ways to control or cut costs. If accurate records of transactions are maintained and