Accountant Work - Assignment Example

ACCOUNTS WORK NAME INSTITUTION AFFILIATE Id number. 1) a) Prepare the journal entries for the year ended 31/12/2018 according to Al’s wishes. Transaction 1- Closing of the production line which cater for 30% of production This reduces the assets of the company. Transaction 2-liquidation of the inventory. This increases the liabilities of the company. NRV (Net Realizable Value) of $1m and the $2m write down of retained product lines would increase the assets of the company. Transaction 3 –Releasing employees reduces the company’s assets The restructuring price of $25m, expected redundancies of $10m and $1.5m environmental provision are credits to the company. The journal entry would look as follows: JOURNAL ENTRY DESCRIPTION FOR YEAR ENDING 2018 DATE DESCRIPTION DEBIT CREDIT Liquidation of Inventory $ 3,500,000.00 Net Realizable value $ 1,000,000.00 Retain Inventory $ 2,000,000.00 Company Restructure $ 25,000,000.00 Expected Redundancies $ 10,000,000.00 Environmental Damage $ 1,500,000.00 b) The journal is effective to any organization as it has the credit side having a higher returns than the debit side. The AASB has a transaction neutrality where similar transactions should be accounted for in a similar manner by the for-profit and non-profits sectors in the public and private sectors. Consideration of the AASB lead to issuance of pronouncements providing a framework document. The CEO of the company releases employees and still uses their proposed salaries for restructuring and redundancies. This is breaking of the law as funds are misappropriated. c) Ali is doing the wrong thing. The funds for expected redundancies are meant to pay the employees who are to be ghost workers in the company by January 2019.Ali would use the funds for his gain as he is sure there are low chances of getting caught. This is the same case for the restructuring expenses which would be divided among the managers left after the resolution of the previous board. Ali would jeopardize the assets of the company as they would continue liquidation and used for self-gain rather than improving the status of the company. This would not provide true presentations of the accounts as proposed by the framework. The journal entry would be as follows: FEASIBILITY SCENARIOS FOR 2019- 2020 DATE DESCRIPTION DEBIT CREDIT Liquidation of Inventory $7,000,000 Net Realizable value $2,000,000 Retain Inventory $ 2,000,000.00 Company Restructure $ 50,000,000.00 Expected Redundancies $ 20,000,000.00 Environmental Damage $ 1,500,000.00 2 a) JOURNAL ENTRY ENDING 31/Sept/2019 FOR KELLY LTD DATE DESCRIPTION ACCOUNT DEBIT ($) CREDIT ($) Aug-19 Kelly Inventory 486,000 Aug-19 Kelly ltd storage fee 40,000 JOURNAL ENTRY ENDING 31/Sept/2019 FOR LEE LTD DATE DESCRIPTION ACCOUNT DEBIT ($) CREDIT ($) 31/09/2019 Lee ltd 230,000 31/09/2019 Lee ltd storage space 50,000 JOURNAL ENTRY ENDING FOR AL LTD 31/Sept/2019 DATE DESCRIPTION ACCOUNT DEBIT ($) CREDIT ($) Aug-19 Kelly Inventory 130,000.00 97200 Aug-19 Kelly ltd storage fee 8000 31/09/2019 Lee ltd 230000 719325 31/09/2019 Lee ltd storage space 50,000.00 b) JOURNAL ENTRY ENDING august 2019 for AL LTD DATE DESCRIPTION ACCOUNT DEBIT ($) CREDIT ($) Aug-19 Kelly Inventory 130,000.00 97200 Aug-19 Kelly ltd storage fee 8000 JOURNAL ENTRY ENDING September 2019 for AL LTD DATE DESCRIPTION ACCOUNT DEBIT ($) CREDIT ($) September-2019 Kelly Inventory 32800 97200 September -2019 Kelly ltd storage fee 8000 31/09/2019 Lee ltd -489,325 719,325.00 31/09/2019 Lee ltd storage space 50,000.00 JOURNAL ENTRY ENDING December 2019 for AL LTD DATE DESCRIPTION ACCOUNT DEBIT ($) CREDIT ($) December -19 Kelly Inventory -258800 97200 December-19 Kelly ltd storage fee 8000 31/12/2019 Lee ltd 230,000.00 719,325.00 31/12/2019 Lee ltd storage space 50,000.00 The journal entries are appropriate since they show the cash flow of the organizations involved in terms of debit and credits hence proving whether the businesses are undergoing profits or loss. 3 a) From the theory of periodicity assumption developed by Keynes (1980) each accounting year is divided into periods and it is from this that one can measure profits failure to which may lead to bad debts. Al’s company records the business transactions monthly to check for profits and loses if any. This follows the realization convention (Turpin and Stein 1986) where revenue is to be collected only if the transactions are entered in the book of accounts. From the money movement convention, (Bierman 1972) all products are to be quantified in monetary units. Al’s company uses dollars to quantify its goods to be viable and stand inflation thereafter. The going concern assumption (Fremgen 1968) which made sure businesses run if they are able to meet their obligations. There should also be a mutual understanding between business owner and stakeholders.Al is concerned about the rights of the shareholders as he wants to make them profits and individually make something for himself. The stable money unit convention (Fisher 1980) money should be used to generate finance statements and should be generally constant over time. For Al’s case whereby the company got more profits in some months compared to others shows signs of irregularities. This may have been caused by the redundancies. Al may be trying to enrich himself from the chaos going on in the company. Before the organization gets back on their feet, Al probably has squandered the finances. From the matching convention theory, (Hyton 1968), profits occur from the point of sale and this is clearly seen from the journal entries which show whether the business is viable or otherwise. b) The financial statements should comply with the IFRS. From a meeting held by the leaders in business in Australia and the rest of the world, concluded that financial stability among the G20 countries is essential for the other middle and low income countries to follow suit. Kelly and Lee limited should therefore upgrade their operations so that smaller enterprises can follow their footsteps just as Al’s company is setting a good example. Directors of the various financial institutions should comply with the AASB regulations by presenting the correct financial organizations to ensure that there is nobody above the law. This in the long run will enable coming up of the new enterprises .In our case, Al’s company should provide correct financial documents of their transactions so that there is no situation where corruption is encouraged by those in power. The public entities are not allowed to adopt the reduced disclosure requirements but instead can follow up on the AASB rules and regulations .Since the company in talk is private, they are allowed to adopt the reduced disclosure requirements as well as the AASB regulations. Lee and Kelly should follow suit of this order. From the various meetings held, it has been noted that diversity in culture among the Australians interferes with the understanding of IFRS .Special purpose accounting has been introduced to cater for those who may not follow the AASB rules and regulations. Al’s company is within the framework and therefore should follow the rules stipulated and not try evading whereby an individual tries to enrich him/herself from company’s property. Due to the high convergence costs, it was concluded that training of officers to carry out the fairness evaluation. Fair valuation of assets and liabilities ensures that there is transparency in book accounts. For our case Ali’s company would not hide the redundant expenses if such officers were around and Lee limited would be able to sue Ali Company due to posing of threats. It was concluded that there need to be technological changes from the introduction of IFRS, the old accounting system is deserted leaving spots for new jobs and professions as well. From our example, if technology is introduced, Ali’s company would not be able to add unnecessary funds to the budget as monitoring would be strict hence reducing cases of inefficiencies. Fair evaluation certificate courses should be introduced so that jobs are provided for the youth who do not attend college. Only those issued with the certificates are the ones to undertake the surveys hence improving the financial competition in various industries. It was recommended that the accounting syllabus should change once in a while so that students are provided with up-to-date information from the sector .Some simplified pamphlets should be distributed nationally to create awareness among the citizens. This would reduce the illiteracy in terms of accounting in the nation hence very minimal vices would be conducted on the Ali’s point of view. Introduce a help desk by the accounting board to answer any queries that may arise concerning how accounting is undertaken in Australia. Furthermore a regulatory body other than the AASB should be started so that it may help in accounting education among the various Australian cultures .It would have been essential for Ali’s company as they would know how to file their transactions hence not get in the wrong side of the law. The AASB was continuing to make progress on its disclosure initiative. It was noted that the Complexity and length of financial statements had been raised at the stakeholder event that was held in Sydney held to encourage the various stakeholders in the financial reporting supply chain to discuss what could be done to improve the quality and usefulness of financial disclosures. The AASB was continuing to work with securities regulators, auditors and preparers to see how Materiality was applied in practice and how better incentives could be given to avoid the disclosure Of immaterial information. In the longer-term, the AASB was starting a research project to see how to Develop clearer principles for disclosures, and would also review disclosures in existing standards to Identify and assess conflicts, duplication and overlaps. This would help the companies to engage in viable communication to grow their businesses. Ali’s company would therefore make proper communication with Lee limited instead of making empty threats. References Accountants Resource Centre. (1990). Journal entries. St Leonards, N.S.W: Accountants Resource Centre. Smith, G. S., & Smith, G. S. (1999). Accounting for libraries and other not-for-profit organizations. Chicago: American Library Association. Haber, J. R. (2004). Accounting demystified. New York: AMACOM. Bragg, S. M. (2002). Accounting reference desktop. New York: John Wiley & Sons. Fulks, D. L., Staton, M. K., & Lerner, J. J. (2004). 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