Accounts CIA

ACCOUNTING CONCEPTS AND

APPLICATIONS “COKE”

BY: AASHISH MISHRA (1820602)

NILKANTH KACHIWALA (1820620)
KOUSHIK VERMA (1820616)
 Table of context

TPOICS PAGE
NUMBER
• Introduction to Industry 2
Profile 3-9
• Accounting Concepts And
Their Applications 9-11
• Accounting Convention and
Its application 12
• Bibliography

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 Introduction to Industry Profile

Coke in India, is one of the country’s leading beverage

companies, offering a range of healthy, safe, high
quality, refreshing beverage options to consumers.
Ever since its re-entry in 1993, the Company has
gone on to establish an unmatched portfolio of
beverages, refreshing consumers with its leading
beverage brands like Coca-Cola, Coca-Cola Zero, Diet
Coke drink. The Company along with its bottling
partners, through a strong network of over 2.6 million
retail outlets, touches the lives of millions of
consumers. Its brands are some of the most preferred
and most sold beverages in the country.

The Coca-Cola system in India has already invested

$2 billion till 2011, since its re-entry into India. The
company will be investing another $5 billion till the
year 2020. The Coca-Cola system in India directly
employs over 25,000 people including those on
contract. The system has created indirect
employment for more than 1,50,000 people in related
industries through its vast procurement, supply and
distribution system. We strive to ensure that our
work environment is safe and inclusive and that
there are plentiful opportunities for our people in
India and across the world.

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Accounting Concepts And Their Applications

Accounting Concepts define the assumptions on which

the financial statements of a business organisation are
prepared. Financial transactions are interpreted in the
light of the concepts, which provide and govern
accounting methods. These accounting concepts lay the
foundation on the basis of which the Accounting
Principles are formulated.
1. Business Entity Concept:
Business Entity concept implies that the business
enterprise is separate from its owner and has its own
individual identity. Business transactions are recorded in
the books of accounts and owner’s transactions in his
personal books of accounts. Without this concept, the
records of multiple firms would be intermingled thereby
making it difficult to determine the financial or taxable
results of a single business.
Application:
Coke parent company is coco-cola and hence is its
owner. Coco-Cola portfolio also includes other brands
like Sprite, Pepsi, Mirinda, and many more. All these
brands maintain their books of accounts individually and
coco-cola books of accounts are prepared separately by
consolidating all its brands’ statements and preparing its
own final one.

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2. Going Concern Concept:
According to this concept, the financial statements of an
enterprise are prepared keeping in mind that the business
will continue in the foreseeable future and not shut down.
It is because of this concept, during and beyond the next
fiscal period a company will complete its current plans,
use its existing assets and continue to meet its financial
obligations.
Application:
As already known coco-cola was established in 1886 and is
still in existence. Seeing at the growth and heights the Coke
brand has reached and is still scaling high, it can be surely
said that it will go on for the upcoming years as well.

3. Accounting Period Concept:

An accounting period is the span of time covered by a set
of financial statements. This period defines the time range
over which business transactions are accumulated in the
financial statements, and is needed by investors so that
they can compare the results of successive time
periods. Generally, the accounting period followed by
the companies is from 1st April to 31st March.

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 Application:

In the case of Coke, it follows the financial year from 1st

January to 31st December. All its financial statements like
Balance sheet, Profit and Loss statement, etc. are
generated for this period only. It has to follow the same
accounting period every year which makes it easier for
them as well as its stakeholders to make a comparison with
its previous years’ financial statements.

4. Cost Concept:
This concept states that the value of the assets is to be
recorded at the amount paid to acquire it rather than its
current market value. The amount paid may be more than
the original value or even less but the actual amount paid
is to be shown.
Application: If a machine is purchased by paying 80, 000
but its actual value is 1, 00, 000, the amount paid, that is,
80, 000 must be shown in the books of accounts. The value
of assets decreases by charging depreciation on that
amount. Same alike Coke company also follows the cost
concept as it helps in managerial decision.

5. Matching Concept:
This concept implies that all the expenses must be
matched with the respective revenues. This is to be done
so that the profits of the firm are not overstated by only
showing revenues and to avoid this, the expenses also

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 need to be matched to show the actual financial position
of the business enterprise. This leads to adjustment of
certain items like prepaid and outstanding expenses,
unearned and accrued income.
Application:
Since the revenues are matched with the expenses, Coke
is able to show its profits clearly. The true position of the
brand is showcased rather than overstating the profits
earned. Please refer the annexure attached which
provides a clear picture on how this concept is followed
in the companies.
https://www.coca-colacompany.com/investors/archives-
annual-other-reports

6. Money Measurement Concept:

As per this concept, only those transactions, which can
be measured in terms of money, are recorded. Since
money is the medium of exchange among the public and
has a standard economic value, this particular concept
states that transactions that can be measured in terms
of money only are recorded. For example, conditions of
the environment cannot be measured in terms of money,
and hence are not shown in the books of accounts of the
business enterprise.
Application:
Coke makes a lot of transactions in a single day.
Transactions includes sales to the dealers and

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 distributors, amount of electrical units consumed in a
particular day, etc. are a few examples where they can be
measured in terms of money and hence are recorded in
its books of accounts.

7. Dual Aspect Concept:

This concept is based on the double entry book keeping
system. The dual aspect here means that every transaction
recorded in the books of accounts has two aspects of Debit
and Credit. If one account is debited, the other has to be
credited. When we do this, the value of our total assets
will be equal to our total liabilities and hence is proved
scientifically too.
Application:
As we go through the balance sheet of Coke disclosed in
the annexure, we will be able to see that total assets is
equal to total liabilities. This is because whenever a
transaction was recorded one account was debited and
the other was credited, thus following the dual aspect
concept.

8. Objective Evidence Concept:

As per this concept, the transactions recorded in the
books of accounts should be supported by verifiable
documents. Only then the auditors will be able to confirm
and verify the transactions. The documents presented
should be free from bias and error. Documents such as

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 invoices, receipts, cash memos, etc. are few examples
which help in verifying transactions.
Application:
Coke maintains documents such as invoices, cash memos,
etc. to show them as evidences. It also follows this
concept without any flaws and maintains these
documents which are free from bias. This also becomes
easier for its parent company coco-cola to present its
documents with evidences.

9.REALIZATION CONCEPT:

According to this concept, revenue is considered as being

earned on the date at which it is realized, i.e., on the date
when the property in goods passes to the buyer and he
becomes legally liable to pay.

Application:
Coke records all its expenses and incomes as soon as it
occurs during the course of daily business. It does not wait
to earn the money in cash and records all the transactions of
the business.

10. ACCRUAL CONCEPT:

The essence of the accrual concept is that revenue is
recognized when it is realized, that is when sale is complete
or services are given and it is immaterial whether cash is

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received or not. Similarly , according to this concept,
expenses are recognized in the accounting period in which
they help in earning the revenue whether cash is paid or not.

Application: Coke records all its transactions immaterial

whether cash is received or not. This helps to ascertain
correct profit or loss for an accounting period and to show
the true and fair financial positions of the business at the
end of the accounting period, Coke make record of all
expenses and incomes relating to the accounting period.

ACCOUNTING CONVENTIONS AND

APPLICATIONS

1. CONVENTION OF CONSISTENCY:

Accounting rules, practices and conventions should be

continuously observed and applied i.e., these should not
change from one year to another. The results of different
years will be comparable only when accounting rules are
continuously adhered to from year to year.
Application:
Coke follows same accounting policies throughout its
financial year and also stick to its regular policies which
gives them better financial statements which helps Coke
to compare its performance with its competitors, and

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also to provide a correct picture of firm to its
stakeholders.

2. CONVENTION OF FULL DISCLOSURE:

According to this convention the users of financial
statements (proprietors, creditors and investors) are
informed of any facts necessary for the proper interpretation
of the statements. Full disclosure may be made either in the
body of financial statements, or in notes accompanying the
statements.
Application:
Coke investors and stake holders are informed of any facts
necessary for the proper interpretation of the statements.
The practice of appending the notes and factual statements
on regular basis fulfils the convention of full disclosure. Coke
has also provided a web platform where anyone can access
to the annual report of the company. The link is mentioned
below:
https://www.coccolacompany.com/forms/sar_order_form

3.CONVENTION OF CONSERVATISM:
This accounting convention is generally expressed as to
“anticipate all the future losses and expenses, without
considering the future incomes and profits unless they are
actually realized.” This concept emphasizes that profits
should never be overstated or anticipated. This convention

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generally applies to the valuation of current assets as they
are valued at cost or market price whichever is lower.
Application:
Coke maintains records of all its inventory at market/cost
price whichever is lower. Similarly it also makes a provision
for doubtful and bad debts out of current year’s profit.

4. CONVENTION OF MATERIALITY:
This accounting convention proposed that while accounting
only those transactions will be considered which have
material impact on financial status of the organization and
other transactions which have insignificant effect will be
ignored.. It gives relative importance to an item or event.
Application:
Coke records all those transactions which significantly has a
major impact on financial status of the company. All the
minor expenses, such as buying of pencil, eraser is ignored
as much as it can. This helps Coke to have a focus on
important events and functions.

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 BIBLIOGRAPHY

• “Coca-Cola Worldwide and in India.” The Coca-

Cola Company, www.coca-colaindia.com/about-
us/coca-cola-worldwide-and-in-india.

• “Annual & Other Reports.” The Coca-Cola

Company, www.coca-
colacompany.com/investors/archives-annual-
other-reports.

• “Annual & Other Reports.” The Coca-Cola

Company, www.coca-
colacompany.com/investors/archives-annual-
other-reports.

• “Accounting Concepts, Principles and Basic

Terms.” MBA Crystal Ball,
www.mbacrystalball.com/blog/accounting/.

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