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(pdf) Financial Accounting and Reporting Assignment

   

Added on  2021-06-16

12 Pages2724 Words22 Views
RUNNING HEAD: ACCOUNTING AND FINANCIAL REPORTINGLIQUIDATION

Accounting and financial reporting1Executive summary The report explains a detail study of the three companies operating in Australia that went intoliquidation. The first part provides a brief introduction about liquidation and the second part deals with the events that led to the winding up of those companies. The third part explains some ethics and governance which once violated can bring financial stress to the company. Fourth part and the conclusion delivers that liability is the main factor, not the only one, in the shutting down process of an organization. Conclusion consists of the findings of the studywhich stated that compliance with business ethics is very important for the companies to survive in the market.

Accounting and financial reporting2ContentsIntroduction...........................................................................................................................................3Events leading to liquidation.................................................................................................................3ABC Learning...................................................................................................................................4HIH Insurance...................................................................................................................................4One.Tel..............................................................................................................................................5Ethics and governance - explaining financial stress...............................................................................6Liabilities – A major contributing factor to liquidation.........................................................................8Conclusion.............................................................................................................................................8References...........................................................................................................................................10

Accounting and financial reporting3IntroductionLiquidation is the process of closing down a business and distributing all its assets to the claimants. It is that situation which occurs when a company becomes insolvent and is not capable enough of paying its liabilities. Basically it ran out of cash and have insufficient funds to pay off its obligations. At time of liquidation, all the assets remain are used to pay the creditors, lenders and shareholders as per their priorities (RAJASEKARAN, 2011).However, it is always assumed that a company will be a going concern which means it will continue to operate for a long run in future. It is assumed that it will remain forever and there is no intention to stop their operations. But the assumption sometimes proved to be wrong as economy has its own factors to play. Situations like recession, depression, global crisis and many more are prove to be unfavourable for the companies which make them financially weak. But still, the companies try to fix such events as long as it can do under its control. However, sometimes the situations goes out of control which end up in the winding up of the company. The terminology used for this scenario is named as liquidation, which is faced by many Australian companies in the past (Lee and Lee, 2010). Events leading to liquidationThe principle fact which is involved in the process of liquidation is the insolvency of the company and its inability to pay its liabilities and financial obligations. As there are different types of companies which operates in diverse geographical areas dealing with different business activities. So they have various economic conditions for them. In general, situations like conducting an illegal business, lack of cash and capital, weak financial skills, over or under trading and lack of planning and managerial skills may lead to the liquidation of the companies. They are forced to wind up their business and sell all their assets to make debt payments.

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