Accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Limitation of Internal Control

 

 

 

Internal Controls are systems or can be known as company policies that are set by most companies or businesses that are meant to be followed by all the employees and staff. Now this Internal Controls has its advantages and disadvantages and how this internal controls may directly and indirectly cause lots of limitations. As a hypermarket, Tesco has set up several internal controls to ensure that the business progresses smoothly on daily basis in order to gain constant profits. Somehow due to several circumstances these controls may have its limitations.

 

One of the internal controls set up by Tesco Malaysia is the segregation of duties between the staff and its employees. Tesco Malaysia consist of two major retail lines which are Tesco Hypermarkets and Tesco Extra and there are many organizations being set up to ensure that the business runs smoothly without major fall downs. There are many tasks divided equally between the staff such as Area Manager, Divisional Manager, Branch Manager, Store Manager, Cashiers, and many more. The problem with this internal control is that it may contribute to major issues as all the staff varies from different attitude, personality and characters. For example, there are cases where there are staffs who don’t report to duties on time, some of the staff’s don’t perform their job properly and even some of them perform unethical actions such as thievery. If the staffs and employees are not efficient and responsible, then the Tesco business may be in jeopardy as the organization of the business is not properly handled

 

Besides that, security guards are one of the major internal controls set up by Tesco to ensure safety of the customers and the business. The problem with these security guards is that some of them are not well trained to be in the field. Most of them are first timers and furthermore have no experience being a security guard. In addition to that, the security guards are also not that young and are not physically fit which can directly cause an impact in the business. For example, when there are thievery issues, those guards will not be able to protect the safety of the business and its customers as they are not professionally trained.

 

On top of that, there are also internal controls that are set when it comes to the cash counter. Cash counters at all Tesco branches are divided into two which are the express counters and the normal counters. Express counters are only meant for customers who purchase 10 goods and below and anything more than that will have to be paid at the normal counters. The problem with this internal control is that, there are insufficient staff to be in all counters especially during the peak period where all the queues are long and most of the staff only concentrate in operating the express counters to ease their burdens. Aside from that, the requirements needed to be a cashier at Tesco is too minimum which causes a repercussion to Tesco when it comes to the total daily sales cash collected. Most of them have a very low knowledge of Mathematics as all them solely depend on the Electronic Pos System (Epos) which are used in all of the cash counters. For example, if the Epos system is not functioning suddenly, the employees in the cashier will not be able to perform their sales for simple transactions using the mental calculations when giving back customers change and will most probably have to use calculators for simple transactions. This practice in the business may lead to a decrease in daily sales and yearly profits.

 

Another internal control implemented in Tesco Hypermarkets are its rental of shop lots to other franchise companies and small businesses. When we look into this aspect, all the parties that are utilizing the shop lots in Tesco hypermarkets and currently renting and are under Tesco’s jurisdiction and are liable to them. The limitations here are when some of them fail to pay their rent to Tesco which is indirectly causing the business to run at lost as the profits generated from the hypermarket business would have to be covered for overhead costs like accrued rents. For example, if the owners of the shop lots do not pay their rents, Tesco would still have to bear their utilities and maintenance charges as these overhead costs are not bared by them individually like owners of shop lots in the shopping mall.

 

Lastly, storage of all financial and accounting data is also one of the internal controls in Tesco’s business. The storage of accounting and financial records are very vital for Tesco’s business and the limitation that occur here is the misuse of these information by some of Tesco’s employees and staff  which may cause all private and confidential information as stated above to be leaked to the public and other companies.

 

 

 

Five ways through which Tesco helps the community in which it operates

 

 

 

 

 

 

Tesco has been gaining the societies trust in their business which has caused its business to emerge as one of Malaysia’s most favorite hypermarket. As a token of appreciation for the societies support, we as part of the senior management team would suggest many ways to contribute towards the community in which the hypermarket operates.

 

Firstly, I would suggest that Tesco provide more jobs vacancies to the local citizens rather than giving it to the foreign workers. Tesco could also start a small training school to train up fresh graduates like what they have done with the fresh graduates from UTAR in 2010. Through this way, it can create more job opportunities for the younger fresh graduates which can contribute more towards the productivity compared to foreign workers as graduates have more capabilities in handling the job. Likewise, if they start a training ground for the graduates, then it will also help them to be exposed to the working environment at the same time apply their knowledge against the way hypermarket business is conducted.

 

In addition to that, Tesco should also sell more healthy products for those who are in need of them like the elders and sickly people. Through this way, Tesco can actually indirectly send a message to the community to maintain a healthy lifestyle with quality and healthy foods in which Tesco may seek advisory from the professional nutritionist.

 

Moreover, Malaysia produces many of the food, beverage and household items locally. Therefore Tesco should also show their support by taking their supply for their hypermarkets through local suppliers. This is because, as a hypermarket in Malaysia, Tesco should support local made products like what many Malaysians do as they are high in quality, cheap and has international accreditation. Through this way, Tesco could actually attract more customers to their hypermarkets as it’s actually following the taste and preferences of the local citizens.

 

Aside from that, Tesco also should have efficient and accurate records when it comes to their inventory control. By having efficient and accurate records, Tesco can reduce their wastage of their food products and materials which will be an advantage to the community. This is because, it is forecasted that by the year 2050 the global population would grow from 7 billion to 9 billion and demand for agricultural product to also increase by 70%. In current days, around a third of the world’s food is lost and wasted which is approximately 1.3 billion tonnes of food each year. Through this method, Tesco must implement waste management through the above said method to ensure constant supply of products and materials to Tesco which can be further be bought by the community.

(“unep.org”)

 

Another suggestion would be Tesco to start implementing the sale of plastic bags from every Saturday to alternate days in a week. This is because, nearly 4 billion trees and chopped off per year for the use to manufacture many products which includes plastic bags. If this catastrophe keeps going on than the number of trees would reduce rapidly which may lead to limited trees in this country and without trees the environment could be majorly affected. Through this method, Tesco can reduce the usage of plastic bags as most of their customers would rather bring their own green bags which indirectly contributes towards sustaining the green environment and furthermore help the community to live in a conducive and clean environment.

(“ecology.com”)

 

 

 

 

Five Accounting concepts used in preparing consistent and accurate Financial Statement

 

 

 

 

 

Tesco is a private listed company in Malaysia and also around the globe. As part of a big organization like this, Tesco would have to publish financial reports yearly to the required organization such as Bursa Malaysia. When preparing these financial reports, it’s vital for Tesco to follow the Accounting concepts to ensure the objectivity and consistency of their financial information.

 

 

One of the utmost important Accounting concepts provided in the financial statements of Tesco Hypermarket is completeness. Completeness is defined as all information that showed in the financial reports should be complete. Completeness also relates to all transactions occurred during the period that has to be recorded in their financial statements. The completeness of the financial information is vital for financial decision making needs of the users such as shareholders. Accountants can also evaluate accurately the longevity of a business, financial forecasts and the overall business performance with complete financial information.

 

 

Another vital Accounting concept that has to be followed when preparing this financial statements is relevance. A relevant accounting info must consist of predictive value and confirmatory value at the same time. Relevance play an important role as all business stakeholders can only rely on these information whenever investing in this company. Besides that, it also has to be relevant and according to the standards set by the International Accounting Standards.

 

 

 Third characteristic of accounting concepts followed by the public listed company is comparability. Comparability requires consistency. Treatment of transactions must be consistent throughout an entity and over a different accounting period and then only financial information are comparable. Comparability is important as internal or external users of financial information need to analyse the performance and stability of financial position of the company in the current year compared to the previous year. The comparability of the financial information also allows users to compare and identify the trends in performance and financial position of other public limited companies.

 

 

Furthermore, understandability is also the important characteristic that’s requires attention when preparing financial statements. Understandability is described as the information in financial statements should be easily understandable by users. All transactions of the company must be recorded in the manner that can be understood by all the financial information users, so they can study and analyse the information easily. Thus, users of financial information also will be able to follow the company's accounting information. This characteristic is crucial as it determines the consistency in financial report of the company.

 

 

Last but not least, following the Accrual Basis Concept can also come in handy when preparing the financial statements. Accrual Basis Concept ensures that all the transaction that has taken place in the business is recorded despite the presence of cash when the transaction has taken place. Through this concept, it can ensure that the Business has performed all major transactions which can further ensure whether the profits and earned are equal to the information showed in the financial statements.