Introduction to Accounting - AAS1 Essay Example | Topics and Well Written Essays - 1000 words

Introduction to Accounting - AAS1 - Essay Example There is a significant relationship exist between revenue and expense. The company incurs expenses to generate revenue so, the matching principle states that all the expenses that were incurred in a period to generate revenue should be subtracted from the revenue of the same period for the purpose of computation of the net income (Nikolai, et al., 2010). Going Concern Concept Going concern is also a key concept accounting that assumes that the company will continue its operation for a foreseeable future. This important assumption is made because the amount of time, the company will continue its business cannot be predicted (Carl, 2011). IAS 1 states that if the company has serious threats to going concern they must be adequately disclosed in the financial statements and if the management concludes that the entity is not going concern the financial statements should not be prepared on going concern assumption. Business Rates In the previous year the company paid total amount of ?9,600 on account of business rates, in the two equal installments of ?4,800 each. Now if the rates for the bills are higher by 5% in the current year, the total amount of the bill will be ?10,080 (9,600*1.05) making it ?5,040 each installment. First installment has already been paid and the second installment is due in December 2012. The business is liable to pay this amount, so it should be recorded as current liability in the balance sheet and an equal amount of expense shall be recorded in the income statement according to the matching principle. Following journal entry will be required to record this transaction on accrual basis; Description Debit Credit Profit & Loss Account 5,040 Rates payable 5,040 Credit Sales If the credit sales are made, the transaction will be recorded on accrual. The business is entitled to record the sales even if the payment will be relieved next year. In case of credit sale following entry is required. Description Debit Credit Account Receivable XXX Revenu e XXX If 120 days credit is allowed there are certain chances that the business will be able to obtain more revenue. However, this is not good for the business to have that extended credit limits. In this situation it is reasonable to offer discounts to the customers to encourage them to make early payments. With this discount policy the company will be able to generate more business as well as there are chances of quick recovery from the customers. Stock Valuation Stock is one of the most valuable assets of the business. Its value is determined with the guidelines provided by IAS 2 Inventories, which prescribes that the inventories should be measures at lower of cost or net realizable value (NRV) (IASB, 2011). In this case the original value of the stock was ?25,000 and due to the flood there was a major damage to it. Now the company believes that it will be able to obtain only ?8,000 from the same stock items. The value of the inventory should be reduced to ?8,000 and a loss of ?1 7,000 should be charged to profit and loss account. Following journal entry shall record the effect of this incident; Description Debit Credit Profit & Loss Account 17,000 Inventories 17,000 Depreciation Depreciation is a method of allocating cost of the tangible long term asset over its useful life. IAS 16 Property, Plant & Equipments requires that every asset should be depreciated over its useful life, so depreciating every asset is essential in order to meet the requirement of the international accounting standards. IAS 16

Internal Analysis and SWOT Analysis of Southwest airlines Term Paper

Internal Analysis and SWOT Analysis of Southwest airlines - Term Paper Example Southwest Airline started its operation in 1971 in the United States of America, and their aims have been focused on being different from the other airlines and to provide better services at a lower cost. Southwest airline is a healthier and a more composed airline company in the United States which has gained a large amount of revenues even in the hard times of recession. The weaknesses include the absence of Southwest airline in the international market and the unavailability of the business class seat arrangements. The strengths of the company overpowers its weaknesses therefore, the company is far ahead of its competitors in the competition race. It is recommended to the Board of Directors and the CEO that Southwest Airline has the leading market share in the competition but it cannot solely compete on the basis of low cost but it has to develop some further core competencies in order to compete in the market. The airline firm must always make their employees productive and fuel hedging should be avoided. Introduction: Southwest Airline began its operation in 1971 in the United States of America, and their aims have been focused on being different from the other airlines and to provide better services at a lower cost (Southwest Airline, 2012). This report is a proposal to the Board of Directors and CEO of the Southwest Airline which focuses on the internal analysis of the Southwest Airline. The paper would accomplish the task of analyzing the performance of the company and synthesizing the int ernal analysis with the external analysis of the Southwest Airline. Finally, the paper provides the results and findings about the company’s overall SWOT analysis and provides recommendations to the responsible authorities about Southwest Airlines performance. Strengths Rating Southwest airline is the low-cost carrier operating in the United States 5 The company remains higher ranked airline in terms of customer satisfaction 4 The airline hires the best people, best people for the best job 4 It was the first airline to introduce online ticket 5 Southwest has over 550 Boeing aircrafts which reduces training cost 4 Fuel hedge contract helps in managing the fuel cost effectively 4 Total 26 Weaknesses Rating The absence of Southwest airline in the international market 5 The seating arrangements are not classified for the business class 3 The aircrafts could not carry a large amount of freight 3 The airline tickets are directly available through the internet without intermediary 3 The flexibility in the fare is limited 3 Total 17 Results and Analysis: Southwest airline is a healthier and a more composed airline company in the United States which has gained a large amount of revenues even in the hard times of recession. The airline has innovated many processes as online ticketing and airfreight delivery and has been operating domestically in 42 states but however the company has not achieved its greater heights because of showing resistance in expanding the business internationally. Apart from that, the Southwest airline is considered to be the leading airline in terms of revenues and customer satisfaction (Lauer, 2010). Resource-based view framework: This is a management technique which is used to determine the competitive advantage of a company. In order to achieve success, a company must have operations and resources which should be distinctive from its competitors. In the first step, resources of Southwest airline should be identified in order to understa nd the core competencies of the company (Gittell, 2003). Tangible Resources: Southwest airline consists of 550 Boeing aircrafts which are operated in 97 destinations domestically. The company has a large amount of expert managers and technicians which are considered to be their assets. The company has a total assets worth of $18 Billion (Southwest Airlin