Financial Characteristics of Entity - Assignment Example

Running Head: FINANCIAL ACCOUNTING ASSIGNMENT Financial Accounting Assignment Name of Student Name of Course Course Instructor Date Financial Accounting Assignment Part A Question 1-A Universally useful external monetary reports give data about a specific reporting entity. For instance, those reports give data about the entity's monetary assets (ie its benefits), cases to those assets (ie its liabilities and value), and the impacts of exchanges and different occasions and conditions that change an entity's assets and the cases to them. As it were, it is simply the entity that is the subject of budgetary reporting, not its proprietors or others having an enthusiasm for the entity[PSA16]. Subsequently, a qualification can be drawn between the subject of broadly useful outer monetary reports and the clients of those reports, (for example, speculators and creditors).In its most broad sense, the term reporting entity is utilized to allude to the particular entity that is the subject of a specific arrangement of budgetary reports[IAS08]. A reporting entity is an encompassed range of business action important to existing and potential value speculators, banks and different lenders. It incorporates, yet is not constrained to, business exercises that are organized as legal substances. Cases incorporate a sole proprietorship, enterprise, put stock in, partnership, affiliation and a gathering of substances[AAS16]. Question 1-B Some of the characteristics which define a firm as a reporting entity and whether Large Mart is a reporting entity or not are discussed below[AAS16]: Distinguishing proof of Whether Dependent Users Exist For the reasons for this Statement, the ID of an entity as a reporting entity is connected to the data needs of clients of general reason money related reports. In many examples, it will be promptly obvious whether, in connection to an entity, there exist clients who are reliant on broadly useful money related reports as a reason for making also, assessing asset assignment choices[ASI15]. Separation of administration or management from economic interests The more prominent the spread of possession/participation and the more noteworthy the degree of the partition amongst administration and proprietors/individuals or, on the other hand others with an economic enthusiasm for the entity, the more probable it is that there will exist clients subject to universally useful monetary reports as a reason for making and assessing asset designation choices[ASI15]. Economic or political significance/impact Economic or political significance/impact alludes to the capacity of an entity to have a huge effect on the welfare of outside gatherings. The more prominent the economic or political significance of an entity, the more probable it is that there will exist clients subject to general reason money related reports as a reason for making and assessing asset assignment choices[PSA16]. Reporting entities recognized on the premise of this component are probably going to incorporate associations which appreciate prevailing positions in business sectors and those which are worried with adjusting the interests of huge groups, for instance, manager/representative affiliations and open part entities which have administrative forces. Financial Characteristics of Entity Such financial features that ought to be considered include the size (for instance, estimation of offers or resources, or number of workers or clients) or obligation of an entity. On account of non-business entities specifically, the measure of assets gave or designated by governments or different gatherings to the exercises led by the entities ought to be considered. The bigger the size or the more prominent the obligation or assets designated, the more probable it is that there will exist clients subject to universally useful money related reports as a reason for settling on and assessing asset allotment choices[AAS16]. Question 2-A The special requirements that the CFO of Large Mart should be aware of when accounting for the transactions and events being a reporting entity are listed below: The limit of the reporting entity ought to be controlled by the extent of its control. For this reason, first direct control and, furthermore, coordinate in addition to aberrant control should be taken into account when recording transactions[KPM15]. Budgetary records must be independently kept up for each economic entity. Economic entities incorporate organizations, governments, school areas, houses of worship, and other social associations. In spite of the fact that bookkeeping data from a wide range of entities might be joined for money related reporting purposes, each economic event must be related with and recorded by a particular entity[ASI15]. Furthermore, business records must exclude the individual resources or liabilities of the proprietors. An economic entity's bookkeeping records should incorporate just quantifiable transactions. Certain economic events that influence an organization, for example, employing another CEO or presenting another item, can't be effortlessly measured in money related units and, subsequently, don't show up in the organization's bookkeeping records[AAS16]. The expenses of working together are recorded in an indistinguishable period from the income they help to create. Resources are recorded at cost, which levels with the esteem traded at the season of their obtaining[KPM15]. Budgetary and financial statements are set up under the supposition that the organization will stay in business uncertainly. Accountants must utilize their judgment to record transactions that require estimation. The quantity of years that hardware will stay beneficial and the part of records receivable that will never be paid are cases of things that require estimation[IAS08]. Accountants take after the materiality principle, which expresses that the necessities of any bookkeeping principle might be overlooked when there is no impact on the clients of monetary data[KPM15]. Question 2-B If Large Mart is characterized as a reporting entity, then the company would be more limited and restricted in its accounting procedures. For instance, the managers would have to record certain transactions by estimating the amounts and thus management will have to make use of their judgment. The entity would then have to conduct audit to verify its financial statements and enhance the credibility of its reporting process[IAS16]. Secondly, certain rules such as recording as the assets at historical cost can create problems for the management. For Example, recording an asset at cost and then failing to account for the change in the price level of the assets can distort the information provided by the financial statements of the entity[AAS16]. Therefore, it is evident that being a reporting entity, Large Mart would be highly restricted and limited in its accounting procedures. Part B 1). The depreciation of the microscope and high performance computer and the journal entries would be as follows: Microscope: 150000/6 *(1/12) = $ 2083.3 Microscope Depreciation Expense – 2083.3 Debit Accumulated Depreciation – 2093.3 Credit Computer: 50000/2 *(1/12) = $ 6250 Computer Depreciation Expense – 6250 Debit Accumulated Depreciation – 6250 Credit 2). The net book value of microscope at 1 June 201x would be: 150000-2083.3 = $ 147916 Microscope Cost (147916.7 + 32083.3 – 2083.3) 177916.7 Debit Accumulated Depreciation 2083.3 Debit Revaluation Reserve 180000 Credit 3). The net book value of computer at 1 June 201x would be: 50000-6250 = $ 147916 Revaluation Reserve 20000 Debit Computer Cost (43750 -23750 – 6250) 13750 Credit Accumulated Depreciation 6250 Credit References PSA16: , (PSASB, 2016), IAS08: , (IASB, 2008), AAS16: , (AASB, 2016), ASI15: , (ASIC, 2015), KPM15: , (KPMG, 2015), IAS16: , (IASPlus, 2016), Read More