Accounting and Finance in AS Diena

Категория реферата: Рефераты по бухгалтерскому учету и аудиту
Теги реферата: конспект занятия, готовые рефераты
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Accounting system

Accounting system in AS Diena is fully kept on software and all the transactions are done automatically. The main software accounting program used is Mac Hansa. When the record is made, the account is closed automatically, and the balance is sent to the next stage, i.e., Profit of
Loss Account, Balance Sheet, Cash Flow Statement etc. Printed information of accounting actions is kept in the company’s archive. As AS Diena is a very large company, the chief accountant could not tell exactly how many transactions were recorded per year, but the approximate number is about
50,000. The most common transactions are those in connection to cash and bank accounts.

Annual reports

The Annual report is prepared according to legislation of Latvia
Republic and the laws “About Accounting” and “About Annual Reports of the
Company”. The main principles used in accounting are the consistency concept (methods of valuation of assets and calculation of revenues and expenses are kept constant from one year to another) and the prudence concept (e.g., stock is valued taking the lowest from prime cost and market value). Cash flow statement is prepared by using indirect method.

As per legislation of Latvia Republic, all the company’s books are closed at the end of the financial year (in this case at December 31 each year), when the Annual Report has to be made. This report is handed over to auditors and to financial inspection. Usually, the inspected Annual Report is available for users in about three months after the end of the financial year. In addition, a smaller report for internal use of the company is prepared at the end of each month. This report is handed over to the management of the company.

As all the reports are made automatically by means of software accounting program, the problems occur only when transactions are recorded.
The main difficulties outlined by the chief accountant of AS Diena were settling accounts with debtors and creditors and recording expenditures and revenues of the company. Difficulties also appear when making records for financial and tax accounting.

As per Balance Sheet at December 31, 1997, the highest value of the company’s assets is taken by debtors which in total amount to 1,780,777, i.e., 35.42 % of the total assets. The biggest amount of debts is observed with regard to bought goods and subscriptions. Each debtor is examined individually by the management of the company, and those admitted as bad are included in provision for bad debts for 100% of the debited amount.
Quite impressive are also figures observed as creditors. Short-term creditors amount to 2,619,142 that is 52% of the total passives of the company.

As it was pointed out by the chief accountant of AS Diena, cash is regarded as the most important asset of the company because of its liquidity. If the company runs out of cash, it can easily go bankrupt.
The highest level of revenues is observed from sales of newspapers. The highest expenses are salaries, purchase of paper and depreciation of fixed assets.

Analyses used in Annual Report

The annual report of AS Diena includes analysis of the current situation and changes during the year 1997.

There was LVL 5.27 million of total assets in the balance sheet at the end of 1997; of those fixed assets were 30.1%. Current assets were LVL 3.51 mil; of those debtors comprised of 50.7 %. The most important fact is that trade debtors have increased by 40.5 % in 1997. The reason behind it is the increase in net turnover. Unfortunately, previous trade partners systematically ignore terms of repayment.

27.6 % of all capital plus liabilities was equity. According to Arvils
A?eradens, the equity has grown to LVL 1.4 millions, which is 2.3 times more than year before (Annual Report, 1997, p. 5). This was only due to profit for 1997; share capital and reserves were not altered.

Changes in the profit and loss account were analyzed mostly in the president’s report. The first item mentioned is the increase in net turnover. According to Arvils A?eradens, the net turnover of the whole concern has increased by 29 per cent reaching LVL 9.5 million, and such a situation is conventional for the company during last years. The main reason for that is staff’s excellent accomplishment of their job (Annual
Report, 1997, p. 5).

Consequently, also the profit after taxes has been increased to LVL
813 thousand. It is 16 times more than in 1996 (Annual Report, 1997, p. 5), and there are three crucial factors which determine such a tremendous change. The first factor is the more efficient use of resources in 1997. As mentioned above, net income has increased by 29 per cent, but manufacturing cost of goods sold has increased only by 15% in the same time. These calculations were made based on the Profit or Loss statement. (Annual
Report, 1997, p. 7) Next, there was a considerable growth in other operating income. Finally, there was a rapid decrease in effective tax ratio and reduction in interest payable.

Key ratios

Calculating the key ratios, average values were used because profit was made during the year. There is also an assumption that profit is the same each day during the year. All the ratios and necessary data are given in Table 1.

ROA

This ratio does not depend on the capital structure of the firm (The
Profitability, Financing, and Growth of the Firm, p. 26). Profit before interest and taxation should be used in order to separate ROA from the company’s financial policy. The ratio is 28.83 per cent (Table 1) which is more than the same ratio for AS Preses Nams, thus telling about better business performance.

ROE

The difference from the previous ratio is that ROE shows the return from the owners’ point of view; however, here the minority interest is also regarded as equity. Thus the profit after taxes (with minority interest added back) has to be applied. In AS Diena’s case ROE is 69.83 % (table 1).
The reason why there is so large difference comparing to AS Preses Nams
(17.91%) is explained under D / E ratio section.

COD

Average cost of debt in 1997 for AS Diena was 2.15 per cent and being
3 times less than for AS Preses Nams (Table 1) shows how debt structure affects COD. AS Diena has higher proportion of non-interest bearing debt, thus, its COD is lower.

D / E

D / E describes the financial policy of firm. It is 2.53 in AS Diena’s case (Table 1) which shows that concern finances its operations two and half times more using debt than its own equity. Here an important notice should be made: LVL 655.7 th (Annual Report, 1997, p. 23) are subscription fees for the next year which calculating D/E and COD are regarded as debt.
The fact that for AS Preses Nams D / E = 0.52 explains why there is much sharper difference for ROE than ROA. Equity is less important source of financing for AS Diena, so the difference in ROE occurs.

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