Essays on Financial Accounting Issues Assignment

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The paper "Financial Accounting Issues" is a good example of finance and accounting assignment.   A proprietary company under the Australian laws is defined under section 45A (1) of the corporation's activities. The Acts puts some restrictions such as barring such companies from having more than 50 members and engaging in fundraising. A proprietary company should not engage in fundraising that would require disclosure of documents such as the prospectus, profile statement or offer any information statement (section 113 (3)). NT resources Limited and its subsidiaries close its books on 30 June of every year.

However, taking note that the organization prepares its budget within which it operates at the beginning of the year, the firm could not factor in the suggested expansion as this investment needed commitment of a significant amount which was not provided for. James is right by rather pushing the idea of carrying out the expansion to July 2012, which is after the close of the current financial period. Based on the reported profits, the management may decide to issue lower dividends if not any and instead utilize the earning in funding the proposed expansion.

Alternatively, the firm may comfortably fund the proposal as one of the projects earmarked for the financial year 2012/2013 as will be stipulated in the budget. Issue 2 The Generally Accepted Accounting Principles (GAAPs) requires reporting of most assets at the historical cost. GAAPs focus much on the reliability of data shown on the balance sheet rather than the speculated market value. As such, the historical cost will work well for assets that are not deemed to be sold soon but rather are for long-term use.

Land should be recorded on the balance sheet based on the historical cost rather than the market value. Basically, the historical cost concept states that transactions should be recorded based on the amounts originally paid rather than market values. Though many years may have elapsed whereas the market value may be quite different from the cost, the figure to be reported in the balance sheet should still reflect the amount paid for the property. Assets should be reported at their costs when acquired- not at their market value or replacement cost.

Basically, it is worth noting historical costs are objective and can be easily traceable and audited (Jones 380). Market value is rather subjective as different people may suggest different amounts for property in question. Although accountants and other users of financial statements, however, advocate the use of market price when reporting, it may be relevant, but fails the reliability test. The reliability principle stipulates that accounting transactions captured it the accounting system should be easily verified and with objective evidence. However, the land is not subject to depreciation, but a write-down may occur due to impairments.

For instance, impairment of land may occur due to the establishment of a toxic waste site. Therefore, with the exception of impairments, land should remain on the balance sheet at the original cost paid by the company.

Work cited

Ball, Richard and Foster Gill. “Corporate financial reporting: a methodological review of

empirical research.” Journal of Accounting Research. 20. 5 (1982):161–234. Print.

Haswell, Solomon and McKinnon Jade. “IASB standards for Australia by 2005: catapult or Trojan horse?” Australian Accounting Review. 13.7 (2003): 8–16. Print.

Jones, Sydney. “Harmonization and the conceptual framework: an international perspective.” Australian Accounting journal. 39. 2 (2003): 369–381. Print.

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