Sample on Current Accounting System

Facts about articles

This article was published in Sydney morning herald by Sue Mitchell named Target scandal claims another victim. Wesfarmers Ltd is an Australian Company conglomerate headquarter is in Perth in west Australia. It operates in Australia. Bangladesh, Ireland, New Zealand, United Kingdom and carry out its business in chemicals, fertilisers, coal mining, industrial and safety products. With AU$65.98 billion in 2016, it is largest Australian company in terms of revenue and further it overtook Woolworth s and BHP Biliton. Wesfarmers new departmental chief Russo is under pressure to assess whether to accelerate the turnaround strategy target or come up with new strategy following a sharp fall in terms of earning in December (Anessi-Pessina and Barbera 2016). As per Wesfarmers, a group of 10 target team had inflated the retailers earning by almost 40% or $21 million in December by booking extra rebates in return from suppliers for promising higher price in June Without extra rebates target earnings before interest and tax have fallen 24% to 53%. Wesfarmer has launched crackdown Involved three members of targets executive team which have different departed in last few months and more are set to follow. So investors will have to wait until the release of Wesfarmers remuneration report to see what if any termination benefits or compensation were paid.

Current accounting Principles, standard and concept

In the industry of the accounting there are several number of the standards, theories, concepts as well as principles are to be settled and framed by the respective authorized frameworks. On the basis of such kinds of things the company able to record the financial transactions in the appropriate manner to assess business performance in their relevant industry. There are different types of accounting standards which shows accounting treatment of each and every transaction such as inventory, allowances, assets, liabilities, schemes and many more. In addition to this, GAAP is also the best and one of the most considered kind of theory by business entities which stands for Generally accepted Accounting Principles. Various types of the accounting standards and principles along with the proper guidelines are provided as below:

Economic Assumption entity: As per the current kind of accounting system the accountant of the company keep record and of all the transaction which comes under the financial are to be treated as the personal transaction of the owner itself. The reason behind converting the transaction is because of the sole trader company at where ownership and liability of the form is with the entrepreneur only (Deegan, 2016). It is used by sole trader companies at majority level.

Monetary Unit assumption: In this type of accounting principle there are only monetary transactions considered which are done in same unit or currency. If there are money transferred from one currency to another currency, then in this case monetary unit consumption is not considered by the accountants. According to this respective principle of accounting there is type of currency or power must be constant rather than varies.

Time period Assumption: At the time period assumption principle there are different types of transactions and expenses must be treated within specific and particular period of time. For instance, taxation amount of the property or land and building is pad at every financial year ending then for the further years the time of taxation paying needs to be same.

Costing principle: As per the accounting principle such as costing the amount which spent at the workplace of the firm in different activities such as manufacturing, administration etc. is called as cost. When the production is to be manufactured and then ready for sale in the market, in this whole type of expenses from start to end are considered as cost of the production which are treated in the books of profit and loss of an entity (Girella and Bagnoli, 2016).

Fully disclosure principle: The principle and standard where all the treatments done under the books of different financial accounts is called as fully disclosure. In the statement of disclosures there are all the accounting treatments are shown which are comes under consideration while preparing the financial accounts.

Going concern concept: As per the going concern concept there are all sum of the money is carry forwarded in each and every fiscal year in the financial statements. Apart from this, at the current principle it has been assumed that company will never stop the production but will continue for many financial years and operate in its relevant industry.

Current Accounting standards for Discounts and Rebates: This accounting method will further discuss the method of accounting of purchase and rebates on the inventory purchase.

Relevant standard: The standards which are framed as well as prepared by the authorized committee or board are called as International financial reporting standards (IFRS). Further, name of the board is such as International Accounting Standard Board (IASB). The accounting standards in context to international as well as Australian equivalent are such as follows:

Trade discount: On the basis of this the discounts which are allowed in the trade are must be deducted or subtracted from the expenses associated with the stock level.

Settlement Discount: (Discount from prompt payment) should be deducted from cost of inventories, such as inventories and related liabilities are initially recorded at the net lower amount. If the purchaser does not take the advantages, then the additional amount should be recorded as financial charges since settlement discount should be highly effective in order to financing arrangement and should be through the accounted accordingly (Gow and Larcker 2016).

Contractual rebates: Such kind of aspects or principle which relies under th accounting is related to the inventory or extent of stock available at the working environment of the business. in this kind of principle amount or cost of the inventory once made then it directly treated in the books of account. With the inventory or stock there are International Accounting Standard falls which is like as IAS 18 and the cash receipts or payments related to the stock are treated in the financial statements by considering IAS 18. With the help of the IAS 18 the management able to assess that inventory transaction needs to treated in which way as well as provide the proper and fruitful guidance.

Discuss consequences: Target organization of Wesfarmers violated the accounting principle of company and for this they suffered the loss from 70% earning to 24% or 53 million AUD.

Industry expert’s comments: Mr. Goyder on Monday said that if Mr. Jenkins wasn’t aware of the questionable transaction he should have been aware. As per firefax media report, Target’s general manager of finance left the business at the end of March for unknown reasons. A per Glenn Carmody, the treatment of supplier rebates had been on the radar of auditor and audit committee for several years. Current accounting standards for the treatment of rebates were relatively flexible, he said but new revenue standards will come into effect in 2018 would be more perspective about how and when revenues were booked (Guffey and L Harp, 2016).

Role of Accounting in the business

Accounting is one of the highly important as well as significant aspect which plays key and integral role in the working environment of each and every business entity. In case, there are any kind of business organisation that does not use and adopt accounting systems and different theories then it not capable to manage as well as administer whole business process in the proper manner. Accounting is a process in which several kinds of financial transactions are to be made, analysed, recorded, controlled as well as measured in the effectual way. It plays role in the business as well as assesses internal business process and decisions along with the external environment. In the accounting, there are mainly two fields taken into consideration which are management as well as financial. The accounting system which is used by the internal stakeholders of the company for taking internal business decisions is called as the management accounting. On the other hand side, financial accounting is the field and aspect of the whole accounting where the company is able to make external business decisions because it helps in conducting all financial transactions in the workplace. In addition to this, the accounting process is considered language as well as blood of the business entity for operating in the relevant industry as well as market. By considering the management accounting, the firm is able to know internal things as well as constraints about the company (Hartwick, 2016). Due to this, the internal stakeholders such as managers, employers, employees etc. can assess business conditions and in accordance to that they can perform in the market.

Furthermore, the financial accounting prepares different types of financial statements. With the help of financial statement, performance of the firm is analyzed. It helps the organization to know that up to which extent and level, the company performs in the industry related to the financial then can frame the strategies as well as tactics for the further decisionsfor next fiscal periods. From the financial accounting, entrepreneur is able to know and determine the amount of the dividend which it can provide to the potential shareholders by assessing the value of profit level. By this, it is capable to analyse that in the future years, whether number of the stockholders will improve or not along with assessing amount of capital rose for the business. The management accounting process is helpful for the business in order to assess accurate as well as timely information which are necessary for the managers to make fruitful business decisions. On the other side, key role of the financial accounting aspect is to evaluate and determine present and past financial performance in the market in which it operates and then provide products and services according to its consumers.

In the internal business process, there are several information that are required to be predetermined for making further business strategies to become more financially sound in the industry (Accounting- Need and Importance, 2016). In this, criteria of estimation about the different types of business and financial data there are budget aspect come into consideration which is a main part of the accounting process. By taking into account, the managers are able to prepare budget for different aspects by which company is able to know its business condition along with the financials for the future. Budget is the statement under which different types of data are to be estimated by considering the past financial statements as well as performance. With the help of budget, the management is able to determine different information such as sales, cash inflows, outcomes or cash disposals, cash position, profitability etc. Hence, it can be said that through accounting, the entity able know that how much needs to be for the further manufacture and business process; Apart from this, how much raw materials should be produced as well the amount of sales to be generated in the upcoming year is to be estimated by considering the budget aspect. In addition to this, amount which must be generated for the next period in order to make expenses are also forecasted with the help of cash budget statements.

Another importance of accounting in the company is to manage and handle the inventory as well as level of stock which is available at the workplace of the business organisation. When in the firm level of inventory is there then it must necessary to evaluated and analyse valuation of it whether the system helps to generate the revenue and sales or not (The Role of Accounting in the Business, 2016). With the help of inventory management system, management of the firm is capable in making effective utilization of the stock to earn higher amount of ales and turnover at the end of year.

Executive Summary

This proposal is all about explaining various benefits of utilising different accounting standards in enhancing the overall performance of an entity as their desired aim is to achieve all the goals and the objectives of an entity. Role of an entity has been increased by utilising all the accounting standards that helps in generating higher aims and targets within a given time span.

Introduce major issues in new standard

Adopting new accounting standards requires support of all business users who will use the standards in improving their current performance. The major issue faced by IASB authority is to consider the developed areas of Internal financial reporting standards to eliminate all the errors lies in the current system which in turn facilitate an individual in achieving desired aims and targets to satisfy all conditions of the external market as they can affect the existing performance of an entity in a particular financial year. Consistency needs to be maintained by an entity owner while adopting all IFRS in improving their current performance of an entity as their desired motive is to accomplish all the goals and the objectives within a less period as this will help an entity to consider all the factors which will enhance an entity's overall performance in a financial year (McLean and Pontiff, 2016). The development of IFRS is an important factor which depends on the global capital markets that needs to be evaluated by an entity in a specific time interval which can enhance current skills and the capabilities of the business to gain higher business opportunities lies in the external business environment. Opportunities are analyzed by an entity owner that helps in increasing all skills and the capabilities of an individual to minimise the external market complexities imposed on an entity.

Explain if there is consensus or disagreement between commenting parties. Examine in detail why some parties may have a dissenting point of view

The convergence of the accounting standards which are regarded as the major are due which will disturb the existing trade practices of all the business entities located in the external business environment. The reactions of all the users located at the external market is only negative as they think their trade practices will get disturbed with the interference of legal environment by imposing accounting standards which needs to be followed by an entity to achieve desired aims and target within a given period. Role of an entity increases with the passage of time when they adopt variety of accounting standards in their existing business as this focuses on all current skills and the capabilities of an individual. The comparison of the business would get easy with the adoption of this particular process of converging all types of the accounting standards with GAAP principles. The convergence of generally accepted principle and variety of accounting standards will help an entity to grab higher market advantage in the external business environment. Various entities have different opinions on the current topic according to their tastes and preferences as the desired aim of the business is to extend their existing business share by redefining its knowledge in improving the current performance of an entity (Murthy, 2016). Convergence of accounting standards require several factors that play a significant role in simplifying the process to eliminate all frauds and errors in the existing systems.

From the international perspective, it is regarded as one of the important approach that will be used by an individual in accomplishing all aims and targets by linking all their goals with the external point of view of all the business users. By doing this, an entity will determine all the errors which lies in the current business system by taking comments of the external market users on the current topic which helps in improving the existing performance. The ability of the business increases with the time which in turn creates additional value for the firm in maintaining the survival in the market for long term.

Analyse the assumptions behind public interest, private interest and capture theories

The public interest theory assumes that an entity exists in the market is sensitive as minute changes occurred in the market while directly affect the overall performance of an entity. The government will act like an arbitrator as they have neutral position in terms of taking important decisions for the business (Anessi-Pessina and Barbera, 2016).

Conclusion

It can be summarized from the above proposal which is all about accounting standards as new standards is introduced by IASB in accordance with the FASB. Role of an entity has increased by utilising all accounting standards which helps in generating higher aims and targets within a given time span. This report focuses on improving quality of all the business practices followed by an entity owner.

You may also like to read: Accounting Standard For Intangible Assets

References

• Anessi-Pessina, E., Barbera (2016). Public sector budgeting: a European review of accounting and public management journals. Accounting, Auditing & Accountability Journal. 29(3). pp.491-519.
• Deegan, C., 2016. So, who really is a “noted author” within the accounting literature? A reflection on Benson et al.(2015). Accounting, Auditing & Accountability Journal. 29(3). pp.483-490.
• Girella, L., Bagnoli (2016). Exploring the conceptualisation of Intangibles in law and accounting in the USA: A historical perspective. Journal of Intellectual Capital. 17(1). pp.11-26.
• Gow, I. D., Larcker, (2016). Causal inference in accounting research. Journal of Accounting Research, 54(2). pp.477-523.
• Guffey, D. M. and L Harp, N., (2016). The Journal of Management Accounting Research: A Citation Analysis of the First 25 Years. The Journal of Management Accounting Research: A Citation Analysis of the First. 25.
• Hartwick, J. M., (2016). National Accounting and Economic Growth. Edward Elgar Publishing.
• McLean, R. D. and Pontiff, J., (2016). Does academic research destroy stock return predictability?. The Journal of Finance. 71(1). pp.5-32.

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