Table of contents

Introduction.......................................................................................................................................................................... 2

Methodology......................................................................................................................................................................... 2

Company background...................................................................................................................................................... 3

Accounting system............................................................................................................................................................ 3

Annual reports..................................................................................................................................................................... 4

Analyses used in Annual Report.............................................................................................................................. 5

Key ratios.................................................................................................................................................................................. 6

Conclusion................................................................................................................................................................................ 8

Reference list....................................................................................................................................................................... 9

Introduction

“Accounting is the language of business”…Indeed, like no man without ability to express his thoughts clearly and understandably can achieve very much in life, no firm can succeed without a good accounting system. Accounting is a necessary tool which not only provides information to the owners about how its money is working, and to the state about how big the taxes are to be fetched, but, the most important, enables the company to control, to plan and to trace all the actions, processes and projects. The purpose of this report is to find out how the accounting is done in a successful company, and how the principles and methods used there differ from the traditional accounting theory. In addition, the analysis of the company’s performance will be worked out using the standard ratios.

The decision to choose AS Diena for the report has been based on several criteria: it is one of the 100 largest companies in Latvia, it has a leading position in its branch of industry, and it is a good example of young and fast-developing Latvian business.

Methodology

The analyses and findings presented in the paper are based on the information received from the interview with the chief accountant of AS Diena Inese Janikovska and from the Annual Report 1997 of the company. The Report mirrors the financial data of AS Diena and its subsidiaries: publishing house Diena Bonnier SIA, advertising agency METRO, Bauskas Dzive SIA, agency Agro Apgads SIA, Kursas laiks SIA, Dzirkstele SIA, Zemgales Zinas SIA. The information about subsidiaries is included in Annual Report in limits of financial year starting from the date of acquisition.

Furthermore, the theoretical side was strengthened with the knowledge gained from the lectures by Elvi Sederlin and Gunnar Lindholm, and from the course textbooks “Business Accounting” and “The Profitability, Financing, and the Growth of the Firm”.

To make the key ratio analysis sensible, a similar size enterprise operating in the same branch of industry was chosen for comparison. For this purpose, the figures from the final accounts of AS Preses Nams were taken from the Lursoft database and used in the analysis.

Company background

The Latvian-Swedish joint-stock company AS Diena was founded in 1992. In 1996 it was transformed into stock corporation. In fact, it is a group of companies with parent company and subsidiaries. The share capital of the company consists of 6000 fully paid ordinary shares, moreover, each share has a nominal value of LVL 10 and its owner possesses one voting right. The shares of AS Diena do not participate in stock exchange, and no deals among the shareholders are allowed. The most important shareholder is a Swedish company “Expressen AB”, which owns 2940 shares, i.e., 49% of share capital and votes. In addition, it can be pointed out that the sales turnover at 1997 constituted almost LVL 9.5 mil, and the average number of employees was 847. The officially registered kinds of activities of AS Diena are as follows:

· publishing

· printing work and related services

· reproducing of computerized materials

· agents dealing with sales of the wide range of goods

· wholesale

The present strategy of the firm is development as a media and media infrastructure company. To conclude, AS Diena now enjoys the benefits of the large market share and solid reputation, and it will undoubtedly try to maintain and to improve the current position.

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

--> ЧИТАТЬ ПОЛНОСТЬЮ <--