Generally Accepted Accounting Principles

Published: 2021-07-22 00:35:07
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Crawford, whose contribution in stimulating and her suggestions and encouragement, helped me to coordinate my project. I would like to thank God for giving me strength, wisdom and knowledge to meet the requirements for completing this Internal Assessment. Also, I would like to thank my family for their support and encouragement during this assignment. Lasco Consumer Division is one of the largest distributors of consumer products in Jamaica with over 250 consumer products. These products are both locally manufactured and imported and are distributed under the Lasco brand, Lasure brand is for personal care and household products.
The division is equipped with strong and dedicated sales and marketing, customer service, promotion and merchandising teams; as well as a specialized delivery force to meet the needs of both retail customers and consumers. Lasco strive to provide quality caribbean food products to customers worldwide. These products are distributed locally and internationally, through appointed distributors. This project is designed to thoroughly research a legal form of business. The project involved the relevant information that will show the general understanding of how such a firm operates.
The contents of the research seeks to give a comprehensive round up of all the areas of the business, however, specific attention was focused on the accounting and financing of Lasco Distributors Limited. The aim of this research is to concentrate on the systematization of Lasco Distributors Limited. The focus is on the Business Accounting and Finances. The objectives of the business are to provide affordable food to the citizens of Jamaica, create values for their customers by providing quality goods and services, while making huge amounts of profit .
This research was done in the context grasping the business aspects of the business environment, including theoretical knowledge of these aspects from a practical standpoint of owning business. This project objective is looking at the company’s Accounting and Financing. The areas which will be covered are: The business source of finance Criteria for seeking finance Use of accounting information Accounting procedures and measures Financial statement and analysis Major concepts In order to acquire precise and relevant information needed to complete this project the primary mean of collecting data involved the use of questionnaire.
The questionnaire consisted of twenty questions, both open and closed ended questions. The questionnaire was very simple to use and all the questions were relevant for what the researcher needed to effectively compile the project, hence, the method effective and widespread. A total of three questionnaires were issued randomly. Secondary means of data collection involved the use of textbooks, newspapers and magazines. This method of data collection also played an important role in the effective compilation of my project.
The textbook used in the data collection process, contained the general information that. The information that the newspapers contained was vital for effective completion of the research. The published accounts of the firm were found in these means of data collection. These two sources used in the data collection process were sufficient to complete my research. The researcher during the research faced few problems such as: limited amount to have a thorough research on the topic, due to the fact the researcher time had to be balanced out with other internal assessments.
Also, the business was distant from the researcher residence, wasn’t able to acquire enough resources during the timespan of this project. Lasco Distributors Limited is a public limited company, that is to say that the business is privately owned by shareholders and its shares are listed on the Jamaica Stock Exchange and these shares are freely transferable of the company are published on a yearly basis in the form of annual reports and are open to public scrutiny. This means that the business has little privacy in its operation.
An economic system is the framework design to allocate the scarce resources of a country. The resources of Jamaica are allocated through a mixed economic system; in this system there is some private and some public ownership of its economic resources. In this type of economic system, Lasco Distributors Limited is forced to produce a wide range of quality food and house hold supplies at an affordable price to the Jamaican consumers, in order to effectively compete on the local market. In this type of economy the company also forces restrictions and laws, which may affect its operation.
Lasco Distributors Limited and all other businesses are faced with the problem of financing business activities. The company has the need to finance its working capital and it’s the day to day finance, needed to pay bills and expenses and to build up stocks. Businesses also need to finance investments such as special projects and expansions and new branches. Lasco Distributor Limited finance the needed to increase the firm’s capital assets when the company undertakes expansion, the company on occasion pay for research and development of new products.
In general companies have a variety of sources which it can finance from; these sources are normally internal or external sources. The internal sources of finance include retained profit (is profit after tax that has not been returned to owners), working capital and sale of asset. External sources include share capital, loan capital such as mortgage; and debentures also bank overdraft and trade credit. The diagram below shows the company sources of finances. Lasco finances its businesses activities through stockholders equity and profits retained.
As a limited company Lasco issues shares, the capital raised from this venture is used to finance business activities. If a company is trading profitability some of these profits will be taken in by the government as corporate tax and some is nearly always paid out to shareholders this is known as dividends. If any profits remain; this retained in the business and become a source of finance for future activities this is known as capital reserve, which can also be used to redeem shares. The profit retained by Lasco is its first source of finance.
Lasco financial services limited, incorporated in 2004, is licensed by the Bank of Jamaica to operate a Cambio, and are in the business of buying and selling of foreign exchange, also another source of finance. Accounting act as system, which process business data so that stakeholders can be provided with means understanding how well an organization is performing. As it’s with Lasco’s accounting information is particular important to the company financial decision makings. The company makes choices that are in its best financial interest.
In recording accounting information Lasco’s use Profit and Loss account Statement of Cash flows and Statement of changes in stockholders’ equity. When Lasco Distributers Limited is about to seek finance it has certain criteria for selecting the source of financing these include; cost, use of funds and its financial situation. The cost criterion deals with choosing sources which are less expensive both in terms of interest and interest payments administrative costs. When undertaking heavy capital expenditure the company normal funds this by the use of long term sources which is normally an external source.
The company’s accounting information is used by various groups and the company financial statements have to be published. The users of the company financial statements include owners, employees, tax authority, competitors, management and government. The need for the company financial information by the different groups are different where employees use it when discussing wage bargains, managers when recording, analyzing and controlling the company operations, owners for assessing performance, tax authorities to show proof of income, competitors for analyzing the company stability and performance, and the government for statistics on companies.
The company when recording its financial information it has several accounting concepts which it has to follow in order for the business to reflect a true and fair view of its financial position. These concepts are the accruals concept, consistency concept, separate entity, money terms and historical cost. The accruals concept that costs and revenues should be matched with the period in which they occur. The consistency concept states that when one decision has been made about the treatment of a transaction it should not be change.
A business is a legal person in its own right and has a separate identity from that of the owners is what is outlined by the separate entity concept. Money terms indicates that when business transactions are being recorded it should be recorded in a monetary value while historical cost stipulates that all assets are valued according to their original cost rather than what they currently worth. Financial statements are formal records of the financial activities of a business.
A limited company set of financial statements includes a balance sheet (a summary at a point in time of business assets, liabilities and capital), income statement (shows the a business income after expenses and tax from operating profit), cash flow statement (shows a company sources and uses of cash in a trading period) and notes which explained the figures in the other financial statements. The financial statements of the company are structured in a particular manner and must certain key elements which they must consist. Each financial statement has its own purpose as stated above where a brief description of their purpose where given.
The balance of the company should contain the following: the company assets, its liabilities and the company equities. The balance sheet should have the company name on it the date for which it had been prepared for and the currency which it being expressed in. The assets should be listed first then followed by the liabilities then equities. The income and cash flow statement should enlist the revenues, the gains, expenses, profits or losses and the comprehensive income. They should also give the company name, the date for which it is prepared for and the currency which it is expressed in.
Ratio analysis is done by comparing and assessing a company performance by means of accounting data. The net profit margin as a profitability ratio assesses how successful the management of a business has been at earning profits for the business. The ratio compares the business net profits for the business. The ratio compares the business net profits for the business net profit with its sales. Gross Profit Margin (%) = Gross Profit x 919, 941 x 100 = 25% ` Sales Turnover 3, 714, 328 Lasco Distributors Limited gross margin is low; this gross profit is only twenty-five percent (25%) of its sales turnover.
This is indicated by figure 1 in the appendices, where it explains that sales is sixty four percent (80%) and gross profit is twenty (20%) given a ratio of 4:1, therefore for every ($4. 00) of sales one dollar ($1. 00) goes to gross profit. This isn’t a good sign since it will yield a good net profit margin as indicated by figure 2 where the sales is eighty four percent (93%) and net profit is sixteen percent (7%), showing that there is a ratio of 31:1, therefore the company the company makes one dollar profit from every thirty-one dollars.
The profitability ratio compares the profit of the business with sales, assets and capital employed. The gross profit margin is a good indicator of how effectively managers have added value to the cost of goods sold. Current Ratio (%) = Current Assets x 2,700,215 x 100 = 232. 5% ` Current Liabilities 1161283 Liquidity ratio assesses a business ability to pay its short-term debts. Current ratio, as a current ratio compared to current assets with current liabilities.
Current ratio of Courts is 2:1 and the company high current ratio suggests that the company is able to pay off its creditors two times. This is show in figure 3 in the appendices where it indicates that of the total current assets and current liabilities, current assets total sixty nine percent (69%) while current liabilities total of thirty one percent (31%). This isn’t a good ratio because a business current asset should be at least two times its current liabilities and the company ratio is 2:1.
Lasco Group of Companies of Jamaica Limited is a food, financial, household and personal care and pharmaceutical company based in Kingston, Jamaica. Its pharmaceutical division represents world’s leading pharmaceutical companies; while the financial service division provides national and international services. It was founded in 1988 by its CEO and chairman, the Honourable Lascelles Chin. In 2004, the company established a factory in Plymouth, England to manufacture products for the West Indian community in the United Kingdom, but less than two years later withdrew from manufacturing in the United Kingdom.
The change being referred to is a switch in 1965 to all locally manufactured furniture in the company’s effort to assist in the development of the domestic furniture manufacturing industry. Lasco Distributors Limited is a public listed company incorporated and resides in Jamaica. With other distributors in countries such as United States of America, United Kingdom, Middle East, Canada and Central & South Africa. The principal activities of Lasco Distributors Limited consist of the retailing and the hire purchase financing of food and personal supplies.
It could be concluded that Lasco Distributors Limited has various sources of finance and has criteria for choosing the source of funds. It could also be concluded that the company follow some of the major accounting concepts and a lot of different groups of people uses the company accounting information for various reasons. Lasco seem to have a lot of expenses due to the amount of products they offer and new products as well leaving them with little profit. The researcher would like to recommend that the company continue to using the accounting concepts it’s using now and adopt other principles was well as conventions.
The recommends that Lasco Distributors Limited increase on the availability of internal sources of fund so has to reduce the cost associated with borrowing, also to choose products well. Based on the facts they offer a vast amount of things which the cost of production is expensive and there is little amount of profit made. Minimise the amount of different products offered to the public if not this may run the firm into bankruptcy if merchandise isn’t managed well.

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