Abstract
The company’s accounting data are a base for the analysis of its business performance. As provided by the legislation, the company can choose whether the accountancy is maintained in a single-entry or in a double-entry system. Exploiting the financial analysis formulas, an economic performance analysis could be easily enough performed by the enterprises keeping their accounts in accordance with the accrual principle. If the accounting registers are kept in a single-entry system, data provided in the financial reports cannot be used to perform the analysis employing the formulas of the financial analysis. Currently, in Latvia, the single-entry accounting systems are commonly used by the farming enterprises. These businesses often apply for various funding, hence the analysis of diverse indicators is required, though it cannot be performed using the existing financial report data. The paper aims to identify the differences between a single-entry and a double-entry accounting systems, to explore opportunities to modify and to adjust the formulas calculating the financial indicators, so they can be used in a single-entry accounting system. As a result of the research, there has been developed a methodology that allows relating the cash-based accounting indicators with the accrual-based accounting indicators. Consequently, the appropriate information could be obtained for the economic performance analysis by the companies using the single-entry accounting system. Applied research methods: the monographic or descriptive research method as well as the synthesis method, the modelling and the document analysis method.
Highlights
Financial analysts have reviewed the issues of financial analysis providing examples of different sectors
The paper aims to explore the differences between a single-entry and a double-entry accounting systems and to discover opportunities to modify and to adjust the formulas calculating financial indicators, so they can be used in a single-entry accounting system
As the result of the research, valuable formulas are obtained that could be used for the analysis of financial indicators applying them to the accounts that are maintained in the single-entry system
Summary
Financial analysts have reviewed the issues of financial analysis providing examples of different sectors. In order to timely detect the threat of insolvency and to respond to a possible problem, each entrepreneur shall follow the variations in the company's financial indicators and shall be able to make informed financial decisions in a timely manner. The paper aims to explore the differences between a single-entry and a double-entry accounting systems and to discover opportunities to modify and to adjust the formulas calculating financial indicators, so they can be used in a single-entry accounting system. Hypothesis: Adjustment of data of single-entry accounting system makes it possible to obtain valuable information necessary to perform the economic analysis based on the general methods of analysis. The Law “On Accounting” stipulates that all companies that are registered in the Republic of Latvia, regardless of their form of the economic operations, shall keep the accounting registers using the double-entry system. The law envisages that, in accordance with the Cabinet Regulations, the accounting registers could be kept using a single-entry system by individual merchants, individual enterprises, farming and fishing enterprises the turnover (income) of which from the economic transactions during the previous accounting year does not exceed EUR 300 000, and other natural persons who perform economic activities
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