Inkwell Ltd Intro Essay
Inkwell Ltd Intro
Inkwell Ltd like every other company will need to use accounting in their business. Inkwell are a printer cartridge company who recycle old ones, but then re-manufactures them to give them back to their customers. They are well known for high quality products, with a 100% guarantee product. Obviously they will need a good accounting system to be able to maximise profits, like every other company.
With Inkwell working on a just in time system and being a company boasting in the quality of their products, it is essential that they have good relationships with their external stakeholders. Due to working a JIT system, Inkwell will need to maintain a good relationship with suppliers, because if one supplier is late or delays or has reduced quality goods, Inkwells production and be slowed or disrupted very easily. This stall in production can then have a knock on effect to the customers, because the quality of Inkwells cartridges may be reduced.
Accounting systems will be affected by the organisational structure, because if a company has a complex structure, it may be very hard and time consuming to get things approved for accounting (investment etc.) which can cause the business to lose out. Also, again the JIT procedure/system can affect the accounting department, because Inkwell will need to make sure the suppliers are paid on time so no disruption to JIT will take place. Business transactions will need to all be done correctly and noted, so they can be placed into the purchase ledger etc. correctly.
Accounting plays a vital and pivotal role in the success of every company. The purpose of accounting is to be able to make decisions on where to invest money into the company and which areas to focus on to make costs as low as possible, to be able to maximise profits for the company. This is done by using financial data within in the company to be able to create reports about the company to show the financial position and strength of a company. Also, these reports can show which areas of the company needs investment, improvement or focus. This will have effects on other parts of the company, because the accounting department and decide where and what amount of money etc. can and will be allocated to different parts of the company. This will then have an effect on these parts of the company, because if the accounting side do not allocate enough resources to other parts of the company, then the company itself may not operate to its full potential.
There are many external regulations that affect the accounting practice, such as HMRC regulations which can affect payroll/PAYE, VAT and customs. Also, there can be local authority regulations which can affect planning permission and health and safety, and H&S being more and more worldwide. There are also minimum wage laws and safe disposal regulations which can link into these. This can affect accounting systems and the users, because you will need to abide by these regulations/laws so you do not incur fines etc.. For example, if the VAT rates change, the sales people at the company will need to make sure that when they are preparing for the sale, they take into account the new VAT rate. Payroll will need to be monitored, due to PAYE regulations. Inkwell will need to ensure that they pay everyone for the correct amount of hours they work, as they pay employees per hour. Inkwell are not doing this as yet, as they do not have a clocking in and out system, and the hours are written down by the employee, which relies a lot on trusting the employee.
Business will use Income statements, cash flows and statement of financial position for many reasons. Cash flows for example will be used so that a rough value of how much cash is available in the business, which can influence whether or not payments will be have to be delayed or debts chased up quicker. Income statements and financial positions can be used to work out various formulas to work out how well a business is operating, and where the business can improve. For example, some costs in parts of the business which are high compared to elsewhere/other businesses could be cut.