Accounting and Management Decisions - Week 11 Assignment Analysis

This homework assignment delves into the realm of accounting and management decisions, focusing on key concepts such as the accounting entity, materiality, and cost principles. It explores ethical considerations arising from various scenarios, evaluating the impact of decisions on stakehold...Read More

Running head: ACCOUNTING AND MANAGEMENT DECISIONS
Accounting and management decisions – Week 11
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Name of the student
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Author note

1ACCOUNTING AND MANAGEMENT DECISIONS
Table of Contents
BE13.2 Concepts and principles................................................................................................2
E13.3 List of concepts, recognition and principles....................................................................3
Additional question 1.................................................................................................................3
Readily available ethical issues for decisions........................................................................3
Key parties those can be affected or can influence by decision.............................................4
Fundamental ethical principles..............................................................................................4
Further information................................................................................................................4
Conflict between ‘commercial’ and ‘guardian’ strands.........................................................4
Additional question 2.................................................................................................................5
Readily available ethical issues for decisions........................................................................5
Key parties those can be affected or can influence by decision.............................................5
Fundamental ethical principles..............................................................................................5
Conflict between ‘commercial’ and ‘guardian’ strands.........................................................6
Reference....................................................................................................................................7

2ACCOUNTING AND MANAGEMENT DECISIONS
BE13.2 Concepts and principles
a. Accounting entity concept
This concept states that business transaction shall be recorded separately from the
owner’s personal expenses. It requires that the usage of separate accounting records for the
company that excludes the personal transactions of the officers, employees and owners
(Legenzova 2016).
b. Materiality concept
Materiality is the concept in which omission of any item may influence the decision
of users. In the given case, there is high probability that the company will have to pay big
amount as damage suit and therefore shall have been recorded it as provision in balance
sheet. The Provision is the amount recorded in the balance sheet that is kept aside for
probable, how uncertain economic obligation of the company. Provisions are also recorded in
the income statement for meeting matching principle. It is kept aside for meeting covering up
future liability. As the damage is probable the item should have been recorded as provision
(Edgley 2014).
c. Cost principle
As per the cost principle assets shall be recorded at the amount for which it is
acquired. For instance, land and building shall be reported at cost value rather than recording
it at market price or estimated selling price. Hence, recording of land and building at
estimated selling prices have violated the cost principle (Reichelstein and Rohlfing-Bastian
2014).

3ACCOUNTING AND MANAGEMENT DECISIONS
E13.3 List of concepts, recognition and principles
A Going concern assumption (7)
B Accounting entity assumption (1)
C Full disclosure principle (6)
D Monetary principle (2)
E Materiality(5)
F Accounting period concept (3)
G Expense recognition criteria (9)
H Cost principle (4)
Additional question 1
Readily available ethical issues for decisions
For you personally
Without asking for the full explanation from FD (financial director) this situation
cannot be allowed to get continued. If the matter is not further discussable with him then the
person within the company with whom it can be discussed must be found out. It shall also be
found out whether the company have proper policy matters. If any other director is there to
approach regarding the matter shall be found out.
For the company
To find out if supportive environment is there for open discussion regarding practical
dilemmas without the culture of ‘blame’ or ‘recriminatory’. Further, whether FD putting
through the adjustments on behalf of his own or someone else is there who is exerting
pressure on him.

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Key parties those can be affected or can influence by decision
Financial controller, the FD, other directors, employees, shareholders, banks,
suppliers and customers
Fundamental ethical principles
Integrity Integrity will not be retained if issues are ignored. If enough discussion with
FD is already done regarding the issue. As FD warned not to raise the same
again with him, the consequences if the external auditors ask questions
regarding stock and adjustments (Wilson 2018).
Objectivity Financial controller must be able to question the senior personnel in case
something wrong taken place.
Professional
competence and
due care
It is assumed
Confidentiality It is assumed
professional
behaviour
Professional courage shall be displayed through getting to bottom of matter
Further information
Likelihood is there that FD is telling truth and Sundance & Cassidy Ltd has stock that
is located at the premises of another entity. However, in such case the main question is that
why FD is not providing the evidence regarding justification of the stock adjustments.
Conflict between ‘commercial’ and ‘guardian’ strands
If FD is falsifying accounts for quarterly management then it is considered that he
must be doing so under commercial pressure for ensuring that the company is satisfying
funding conditions required by bank. If the terms of bank covenants are breached, bank will

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take action and likelihood is there that the company may run out of business if the funds are
withdrawn. On the other hand, guardian role requires the accountant for assuring that
monthly management accounts are fair representation of financial position and performance
of the company (Adams, Smart and Huff 2017).
Additional question 2
Readily available ethical issues for decisions
For you personally
1st issue is whether it can be immediately raised by the CA with someone senior
before the caller call back. Secondly, if the caller calls back whether the call will be
transferred to someone else who is senior or someone more senior will be contacted to listed
the conversation or CA himself will deal with the caller. 3rd issue is whether the CA will
professionally and sensitively deal with the accusation of caller internally. However, the
matter shall be discussed with the ethics partner, if any ethics partner is there. If no such
person is there the matter shall be discussed with someone trusted in the firm.
Key parties those can be affected or can influence by decision
CA himself, the partners, the caller, the bank, employees of the company, prospective
buyers and other creditors
Fundamental ethical principles
Integrity Integrity of the CA will not be retained if he distorts the process of tender.
Further, it is important to find out the way in which the CA will deal with the
allegations raised by the caller regarding senior personnel in the company
Objectivity interests of all the other parties involved in tender process shall be considered
Professional It is assumed

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competence and
due care
Confidentiality divulgence of confidential information to caller with the objective of
maximising the land’s selling price is conflicting (De Castro, Khavul and
Bruton 2014)
Professional
behaviour
Client’s allegations shall be handled professionally and sensitively as the CA
has no knowledge regarding the accuracy of allegations made by caller.
Conflict between ‘commercial’ and ‘guardian’ strands
Bank and the firm will be considered as in commercially better position if information
is actually divulged. However, this is not sure that there may be prospective buyer with late
bid before the deadline. On the other hand, guardian aspect is ensuring that fair process for
tender is held that appears to be in conflict with short term commercial pressure.

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Reference
Adams, R.J., Smart, P. and Huff, A.S., 2017. Shades of grey: guidelines for working with the
grey literature in systematic reviews for management and organizational
studies. International Journal of Management Reviews, 19(4), pp.432-454.
De Castro, J.O., Khavul, S. and Bruton, G.D., 2014. Shades of grey: how do informal firms
navigate between macro and meso institutional environments?. Strategic Entrepreneurship
Journal, 8(1), pp.75-94.
Edgley, C., 2014. A genealogy of accounting materiality. Critical Perspectives on
Accounting, 25(3), pp.255-271.
Legenzova, R., 2016. A concept of accounting quality from accounting harmonisation
perspective. Economics and Business, 28(1), pp.33-37.
Reichelstein, S. and Rohlfing-Bastian, A., 2014. Levelized product cost: concept and decision
relevance. The Accounting Review, 90(4), pp.1653-1682.
Wilson, R.J.T., 2018. Shades of grey: embracing uncertainty in the exercise room. British
Journal of Anaesthesia, 120(6), pp.1145-1146.