Presentation of Financial Information - Enron

LO1

P1 purpose and presentation of financial information with respect to various stakeholders

The above table gives a brief understanding of various stakeholders who requires the financial information because of many other purposes.

External Stakeholders

Trade creditors and suppliers: The stability of customer and payment of all the suppliers on the stated due has been ensured. The main purpose is to gain knowledge about other suppliers and products related to organisation. The various transactions are compared by the companies which are existing and to determine the suppliers which are competitive and their contribution with respect to organisation (Groot and Selto, 2013).

Government: The main purpose is to collect perfect taxes on due dates and to give government benefit for improving business. Financial and non-financial assistance has been obtained for developing projects of the government. With the help of financial information, they oversee employees in a sensible way and proper compliance with rules of government and various acts and regulations are usually established by them

Consumers: Knowledge has been gained about cost structure of products which are produced by a company. Even the stability of organisation has been ensured and along with this profitability has been known determined. Corporate Social Responsibility activities are also renowned by the company.

Public: The substantial contribution of an organisation has been determined towards society. The opportunities which are purely linked to an organisation and CSR contribution have been known to a country. The purpose of financial information is to make more conscious about activities which affect the interest of an organization.

Internal Stakeholders

Directors and Managers: various decisions are taken by the managers and directors. Decision-making is purely based on financial information such as new project decision of appreciation and regarding new investment. Operations which are continued and discontinued are accounted by managers. The decision regarding business which has been diversified and which business has to be wind up. The periodical targets and objectives are established by them and generally corruptions and dissimulations are been avoided. The main purpose is to raise the level of productivity with respect to an organization (Granlund, 2011).

Shareholders: They use financial information for determining that investment should be sold, halt or shares should be bought or not for the company. The fair return of the investment has been decided. The going concern of the company is determined and along with this broad knowledge has been obtained about the activities of organization. The main objective is to compare investments and benefits for other industries which are competitive.

Employees: Financial information helps to know about profitability and stability of employer. Concept of remuneration, employment opportunities and retirement benefits of respective organization has been known to employees. Job security has been ensured by the current employer. The clear picture of operation of the organizations has been reviewed by ensuring fairness of wages and salaries according to margin of organisation.

LO2

P2 application of various accounting microeconomic techniques

The various accounting micro-economic techniques are as follows:

• Relevant Cost Analysis
• Cost Behaviour
• Cost Volume Profit
• Flexible Budgeting
• Cost Variances For Direct Labour

Relevant cost analysis: It refers to the cost which is depicted as relevant from the prospective of specific decision and for that if there is presence of any alternative action it is also known differential costs. Opportunity cost gives preference to another alternative as net return should be realized if resources are properly utilised. The opportunity cost is usually very relevant for decision-making but sometimes to quantify and identify is very difficult. Sunk cost is referred to as irrelevant and future cost might be or not relevant. The cost which is relevant to create variation in alternatives is considered (Sunarni, 2013). If sunk cost is included in decision-making then it is a bad choice. The assets of the organizations are capitalized and depreciate over

Cost behaviour: It is giving brief understanding of micro economic behaviour and cost accounting whose special feature is that how the cost is changing with the change in output volume. Production, sales and any other principle activity refers to output volume which is perfect consideration for the company.

There are three types of cost i.e. variable cost, fixed cost and mixed cost. Variable cost has linear relationship with the level of production as it remains constant across the production level with specific relevant range. Materials are referred as best example for variable cost. Fixed cost does not vary from level of productions as fixed cost never changes within specific relevant range. There is decrease in fixed per unit when the production is increased due to similar fixed cost which is spread over more units. The cost which is neither variable nor fixed within specific relevant range then it is termed as mixed cost or semi variable.

Cost volume profit: In this technique, there is proper analysis of total revenue, total profits and total cost which is related to volume of sales and it should be purel.

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