Final Accounts
Advantages Disadvantages
Provides you with financial information of the When you prepare your final accounts, it lets the
company’s performance (profit/loss) of the government know how profitable you are which
business so you can analyse how successful means you have to pay tax and the government
the business has been in that trading period works out your tax bill.
and have resources been used efficiently.
Can make comparisons between different If you are a plc/ltd you have to publish your final
years and see if the business is performing accounts and this means competitors will have
better or worse. access to the financial performance of your
business. If the business either performs good or
bad the threat of takeover may arise.
Helps control the company’s finances -> Is a record of past data and tells you what
identifies how and where money is being happened lat year and market conditions may
spent and how income is produced. have changed for better/worse so therefore the
accounts may not be appropriate to current
conditions and decision making. E.g. a new
competitor enters he market and this leads to a
fall in sales, this would not be recorded until the
end of the current trading period, and would be
too late to take action about this.
It can help with financial decision making as by Takes time and cost money to prepare them ->
analysing you final accounts, you can calculate they have to be officially signed off by an
what you can afford to spend. accountant and has an impact on business
resources.
Finally, if applying for a loan, they can be used Window Dressing-> The business can
by the bank to show you are able to re-pay the manipulate the accounts and make the business
loan -> Prove your credit worthiness. look like its doing better/worse than it actually is
therefore the details aren’t accurate and gives a
false impression of the company.
Advantages Disadvantages
Provides you with financial information of the When you prepare your final accounts, it lets the
company’s performance (profit/loss) of the government know how profitable you are which
business so you can analyse how successful means you have to pay tax and the government
the business has been in that trading period works out your tax bill.
and have resources been used efficiently.
Can make comparisons between different If you are a plc/ltd you have to publish your final
years and see if the business is performing accounts and this means competitors will have
better or worse. access to the financial performance of your
business. If the business either performs good or
bad the threat of takeover may arise.
Helps control the company’s finances -> Is a record of past data and tells you what
identifies how and where money is being happened lat year and market conditions may
spent and how income is produced. have changed for better/worse so therefore the
accounts may not be appropriate to current
conditions and decision making. E.g. a new
competitor enters he market and this leads to a
fall in sales, this would not be recorded until the
end of the current trading period, and would be
too late to take action about this.
It can help with financial decision making as by Takes time and cost money to prepare them ->
analysing you final accounts, you can calculate they have to be officially signed off by an
what you can afford to spend. accountant and has an impact on business
resources.
Finally, if applying for a loan, they can be used Window Dressing-> The business can
by the bank to show you are able to re-pay the manipulate the accounts and make the business
loan -> Prove your credit worthiness. look like its doing better/worse than it actually is
therefore the details aren’t accurate and gives a
false impression of the company.
