The purpose of this report is to assist Sam De Boni with his investment decision. He recently won a lottery of $10,000 which he wishes to invest in the tourist industry and the skycity entertainment group in terms of financial and statistical data and key accounting ratios. From the financial statements the company has been performing well in the recent past and the trend is expected to persist in the near future.
The research for this report involved a thorough research on NZX Company Research Database website, Statistics New Zealand website, and SkyCity Investor Centre website.
According to the audited financial statements for the skycity entertainment group, the statements are reported in accordance to the Financial Reporting Act 1993, International Standards on Auditing (New Zealand) and International Standards on Auditing. This is a finding based on a report released by PriceWaterhouse coopers, the auditors.
This report is however handicapped by the fact that all the information used to arrive at the conclusions is historical: it’s for 2011 because at the time of production of the report, the 2012 information was unavailable.
As for tourism, it has been the leading foreign exchange earner for Newzealand earning up to 16.8% of the total foreign exchange earnings in 2011 adding $27 million to Newzealands economy daily. The industry is responsible for approximately 9% of Newzealands’ GDP and employs upto 179800 citizens.(key statistics 2011)
The tourism industry is however adversely affected by some reasonable degree of risk and seasonal effect with a steady decline in quarter 1 of each year, quarter 2 being a low peak season and a consistent incline from quarter 3 onwards.
Accounting process: steps
An accounting cycle involves the serial steps repeated or duplicated in every financial reporting period for any financial entity. The process begins with specific transactions and ends with the closing of the books of accounts.
Identify the transaction:
This involves highlighting any events which culminate to accounting transactions. The accountant generates the source document(s). A transaction could include the purchase or sale of an item, the disposal of an asset, a deposit from debtors, a payment to creditors or even an exchange in business property.
Analyse the transaction:
Critically determine the details of the transaction. Such details include the transaction amount, the accounts affected and how they are affected. Here, the effect of a particular financial transaction is either a debit or a credit entry to a particular account which is also identified in this stage of accounting.
Journalizing or recording transactions:
The journal is also called the book of original entry. The transaction is here recorded in the journal, either as a debit or a credit entry in each specific journal. Transactions in the journal are also arranged in a chronological order: ordered as they occurred with the oldest coming first.
Posting each journal entry to the appropriate ledger accounts:
The journal entries made in the previous step are usually transferred as entries to their appropriate T accounts which they impact in the ledger.
Preparing the trial balance:
This is carefully done to confirm and ensure that the debit and credit entries are equal. However, equality of both totals does not guarantee flawless accounting information because errors such as complete reversal of entries or omission of entries will not be revealed by a mismatch in the totals: the trial balance will still balance despite such errors.
Making end of period adjustments
This is done for the accrued and deferred items in the accounting entity. Such entries are sequentially inputted into the journal and posted to the T accounts in the ledger. These are corrections done to all the affected accounts to base the attainment of a correct trial balance.
Preparing adjusted trial balance: This is aimed at capturing the end of period adjustments into the trial balance: the adjustments made above in the previous step are now reflected in the accounting information
Preparing financial statements:
Financial statements include the final statement of financial position, Trading profit and loss accounts, statements of cash flows and such consolidations as may be required by the organization or the governing financial regulatory framework.
Journalizing and posting closing entries:
The balances of the temporary accounts are hereby transferred to the owners’ equity. Such accounts include revenues, expenses and prepayments made by or to the accounting entity. Preparing an after closing trial balance. This aims at ensuring that such accounts are closed with a zero balance to begin the whole cycle again with a zero balance on such accounts. This is aimed at capturing the replica and effects of the adjustments in the closing entries made previously.
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