Importance of Basic Accounting and Financial Skills

Question: Write a literature review Importance of Basic Accounting and Financial Skills and Knowledge in Private Restaurants in UK Lead to Business Independence. Answer: Introduction A society comprises various forms of norms and thoughts that highlight the living standard of individual on various forms. Knowledge of basic accounting and financial skills are very much required to open any kind of business whether it is large private form or the SME business. Restaurants business is one of the booming businesses UK as the acceptance level of services among the consumers is enhanced and achieved effectively (Elliott and Hanna, 2008). As observed in the restaurants business, competition level is high besides opening of new business knowledge of accounting and financial skill will help to develop the promoter to understand the financial feasibility of the business. Role of both accounting and financial skills the businessman to know the exact financial health of the business and its rivals existed in the market. As UK restaurants business is one of the most competitive market place to be in (Epstein, 2009). However, accounting skills will give an opportunity to build a long term relationship between the promoter and the market. These themes will help the promoter to make the decision based actual data and accounting methods which will give an insight for the opening of new restaurants in the UK. Although literature review presents these themes in a variety of contexts, this paper will therefore, primarily focus on their application various accounting theories and financial skills concepts to which will help in opening of new restaurants business in UK (Fridson and Alvarez, 2011). Particularly, to have greater understanding on the financial skills and knowledge towards opening of a new business is required to understand whether the business would be profitable or not. As noted by Gu and Chen (2009), there have been various accounting principles which will helps to make the basic journals to the ledge to the balance sheet. Some of the major principles are base on the real, nominal and personal. Apart from that, there have been numerous other methods and skills which will lead to business independence. In order to evaluate the private restaurants business requires basic accounting knowledge on the part of restaurants manager in performing the management of business in a very much effective and efficient manner (Ingram and Albright, 2009). As far as the , research concern SME restaurants business in IK are very much indicates that, the significant level of recognition and demands are there which requires manager for basic accounting and financial skills in the running the restaurants business. The particular chapter will focus on the establishing the foundation of academic knowledge related to accounting and financial skills. With the help of these foundations, the researcher will and reader will get an opportunity of enhancing the research topic in more detailed manner and understand the critical perspective as well (MariĆ¡ et al. 2011). Applications of various theories and model will add literature to the research topic so that, in later chapters, it can be utilized for better analysis of the results. The research will also give enough scope to evaluate the level of accounting skills and financial management within the small hospitality owners in UK. Conceptual framework Conceptual framework helps in categorizing the lust of key theories that can help in better understanding of the topic. Role of accounting and financial knowledge helps in decision making process of the manager within the private restaurants business of UK. Conceptual Framework (Source: Created by author) From the above diagram, accounting knowledge is very useful tool which helps the manager improve the management system of the restaurant business or any other SME business (Penman and Penman, 2009). The researcher will try to focus on the relationship between the importances of accounting and financial skills knowledge in maintain the management of the privet restaurants business of UK so that area of study can be researched and analysed more deeply. Concept of Accounting and financial skills As noted by Arshad (2012), accounting and financial skills is one of the most important knowledge to survive in any contemporary business scenario to manage their financial system. One of the major skills which can be help to gain solves the problems and adapt well to frequent changes. Accounting and finance skills helps in numerical computation of the research. Accounting cycle here describe the steps involve in accounting for all of the business activities during the accounting period (Amihud and Mendelson, 2010). Accounting cycle process begins with analyzing transactions. The SME looks at the source documents which describe the transactions and events occurred during the time of business. The transaction documents could be the hard copy or the electronic format. After analyzing the transactions, companies looks to journalize the tractions which has been occurred in a debt and credit format by applying the double entry system of accounting. Double entry system means the each trans action must be recorded at least two accounts that debts must be equal to the credits (www.csun.edu, 2015). Accounting cycle (Source: Jorion, 2008, pp-72) After journalising the transactions, the third step is to post the information into the ledger. A ledger is simply part of collection of all counts where the entire accounts are shown in T format (Foster and Stutzer, 2009). In order to verify the companys debt and credits , a trail balance is formed. A trail balance shows the list of debt and all of credit accounts balances at one point of time. This trail balance is also known as the unadjusted trail balance because its made before adjusting the entries. As discussed by Schlingemann et al. (2009), the fifth step of the accounting cycle is to adjust the transactions happenings during the time of making the final accounts. Lastly, the financial statements must be prepared in very specific order. The financial statements cover all aspect of the financial statements such as income statements, owners equity, balance sheets and cash flows. However, some of the companies complete one more step in the accounting cycle which is step 10 for reversing the entries which is actually optional (Lee et al. 2011). These entries help in reducing the step of journal entry b which will help to reduce the longer version of journal entries. Managing Business skills needed in small and medium size businesses enterprise While assessing the business skills for managing the business requires accounting skills which will, create a positive impact on the business. SME are very much known for their lacks of professional accounting methods while maintain the day books for their respective organisations (Carlson et al. 2008). Apart from that, SME are also very much avoids the technological advancement and implementation of the technology within the growing business which ideally is needed to be followed is the purpose of internal accounting. Management of SMEs in the current contemporary business accounts helps in the managing the pre-requisite of the manager of these small and medium enterprise (Amihud and Mendelson, 2010). Managing accounts is not an easy task for any organization whether it is small or large but with upgrade management skills and capacity to gather the formations and technology base would help to over the situations. On the other hand, as discussed by La Porta et al. (2009), accounting skills is one of the major languages of the business. It helps the stakeholders to analsye what exactly happening with the business. Accounting skills provides informations to wide ranges of interest groups which ultimately leads to business independence. Knowledge of fundamental accountings skills for SMEs give the advantages of maintains the probability of success became high. Hence, every small and medium enterprise needed to manage the fundamentals skills of accosting to achieve the goals of the business. Management accounting research tends to focus on the SMEs (Easley and OHara, 2009). management accounting research has focused on SMEs which suggest that, firms are lacking of qualified form of internal accounting capabilities because of lack investment and interest by SMEs in these areas. Management accounting of the SMEs are needed to maintain framework within the management system of the company which will foresee the future expansion of the SMEs business. For instance, SMEs like Bottega and Quay restaurants hires only those financial managers who are qualified CPA. The candidates muts be experience in accounting knowledge, debt and credit along with bank reconciliations statements must be present within the managers that would be able to create the proper way of handling the daily book keeping within the SME. Factors affecting the accounting knowledge and financial skills within the SMEs One of the major factors that influence the SMEs is management problems within the SMEs. The accounting problem are started with record keeping, use of record keeping, use of informations, cash control and cost controller (MariĆ¡ et al. 2011). Another major factor is marketing which is helps in small business, advertising and promotion appear hit the list of major factors that creates problems for the companies. Other management problems found include long range planning , inventory , personnel selection and supervisions and debt control are the factors are creates major problems within the SMEs (Amihud and Mendelson, 2010). The problems are mainly in terms of accounting skills people responsible for the management of financial aspects within the business. Apart from the above, other major problems are as given below: Major factor affecting the SMEs accounting system (Source: Easley and OHara, 2009, pp-1554) In order to resolve these issues, expertise in the field of the accounting and finance is required to overcome the situations. It is essential in managing own operations to accomplishes the planned which will give an overall effectiveness in managing the accounting operations. Normally it is expected that presence of external parties would enhance the process for assessing the financial management decisions (Lee et al. 2011). However, it would be great, if chance of managing the more advanced practices will result into higher form of preparation of accounts. The low intake of accounting as one of the major contingent factors in an SME adopting the new according practices which also may be the result of the background of the owner and manager (Schlingemann et al. 2009). These accounting practices would help the SMEs to creates best and efficient way to handle their management system by analysing the transactions cost of goods sold and purchase for the business. SME restaurant like Bottega uses double entry bookkeeping system in order to manage their book keeping system. Lastly, large restaurant chain like McDonalds and Subways are very much uses follow the AASB norms in order to bring transparency within the financial statements. Accounting skills and financial knowledge developed within the SMEs Book keeping in SMEs: Most of the Small and Medium enterprise like return business owners are very much afraid of the book keeping and accounting (Penman and Penman, 2009). Bookkeeping and accounting has two major objectives, one to keep track of income and expenses which helps to improve the chances of making profit and collect the financial information necessary for filing various tax returns (Ipfw.edu, 2015). Financial Analysis: As opined by, Gu and Chen (2009), SMEs are being closing up the business down base of the entrepreneur are not able to calculate the opportunity and hidden threats that are big enough to destroy the business of the company. With help of accrual basis of accounting and following the format of the IFRs would increase the given clear picture of the company performance (Ingram and Albright, 2009). Apart from that, credit management would gives within the accounting management would help to guarantees the actual trade receivables and trade payables will give an actual remedy for the taking actions for the current business. For instance, private restaurants like Bottega and Attica uses GAAP norms in order to assess manager their book keeping. Apart from that, Quay a medium range restaurants uses IFRS norms in order to maintain their financial statements. Conclusion From the above discussions, it has been observed that, the particular chapter and the researcher was able together the knowledge and details of the accounting skills financial skills in managing the SME or large business. Accounting skills is considered as the one of the major parameter useful to determine the choice of the selection of the method of maintaining the financial statements. The literature review has been given enough scope to understand theories of the literature review which will give an insight of the accounting skills and the knowledge quick will help to gain the knowledge for the SMEs owner within the company. Apart from that, the stud has also clear that owner are living nightmare to manage the bookkeeping and information for the completing their financial statements of year ended. Some of the major factors such as, lack of accounting knowledge method and lack of expertise areas are creating problems for the company. Reference list Books Elliott, J. and Hanna, J. D. (2008) Repeated Accounting Write-offs and the Information Content of Earnings Journal of Accounting Research 34, 135-155. Epstein, L. (2009) Reading Financial Reports For Dummies, 7th ed. Bedford, London: Thomson Learning. Fridson, M. S. and Alvarez, F. (2011) Financial Statement Analysis: A Practitioner's Guide, 6th ed. New York: Physica-Verlag. Gu, Z. and Chen, T. (2009) Analysts Treatment of Nonrecurring Items in Street Earnings. Journal of Accounting and Economics 38, 129 170. Ingram, R. W. and Albright, T. L. (2009) Financial Accounting: Information for Decisions - Page 142 4th ed. Harlow: Prentice Hall Companion. 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