The Principles of Accounting

Question One

Role of accountant and accounting in business

Accountant plays a critical role in the financial functions of any business. In this sense, the accountant roles are related to collecting, recording, analyzing and presenting financial data of the firm. Thus, accountant holds an administrative role which depends on the size of the organization. In the small and medium businesses, an accountant collects financial data, record and generates a detailed report (Kaplan and Atkinson, 2015). On the other hand, accountants in larger firms, an accountant acts as the financial adviser and interpreter of financial information. Further, the accountant may represent the firm when dealing with parties outside the business. In a nut cell, accounting in a business helps in maintaining financial and accounting support of the organization. Therefore, the accounting department in the organization prepares accounts of all financial activities. The major accounts include payables, receivables, inventory, payroll, and assets account. In conclusion, the expectations of an accountant are to oversee managerial and financial functions of the business. In this case, the predictability of the business performance can make with a high level of certainty, hence, sound decisions.

Question Three

Common Size Income Statement

According to the common size income statement, revenue from ticket contributes the highest percentage of 52% of the total revenue. The prepaid premium which is part of revenue contributes the smallest percentage of 5% of the total revenue. The income statement is the difference between generated revenue and expenses incurred within a given financial period. Thus, to increase the percentage of net income, the business may reduce the level of expenses as well as increasing generated income (Saunders and Cornett, 2014). Using the loan to finance daily operations of Trap introduces an interest expense account in the income statement. Further, in the balance sheet, loan introduces liability account such as creditors account. In a nut cell, this transaction will increase liability in the balance sheet and expenses in the income statement. Debt to Equity ratio will be equal to 0.8583 = (51,500/60,000). The ratios represent an amount debt that is used to finance assets of the organization relative to the value of shareholders.

References

Kaplan, R. S., & Atkinson, A. A. (2015).    Advanced management accounting . PHI Learning. 

Saunders, A., & Cornett, M. M. (2014).    Financial institutions management . McGraw-Hill Education,