Accounting Theory and Current Issues

This document discusses accounting theory, including concepts, structures, and techniques used in financial reporting. It also explores the current issues faced by organizations in accounting, such as tax cuts and traditional accounting. The document includes questions related to journal entries, fair value of lease assets, payroll, basic and diluted EPS, exchange rates, CSR, and legitimacy of companies.

Accounting Theory and
Current Issues

Contents
INTRODUCTION.......................................................................................................................................3
QUESTION 3- Week 3...............................................................................................................................3
Provide journal entries necessary to account...........................................................................................3
QUESTION 2 – Week 5..............................................................................................................................5
Fair value of lease assets.........................................................................................................................5
QUESTION 2 – Week 6..............................................................................................................................6
QUESTION 3 – Week 9..............................................................................................................................8
(a) Basic EPS amount..............................................................................................................................8
QUESTION 3 – Week 10............................................................................................................................9
a. Exchange rates.....................................................................................................................................9
b. Prepare the journal entries...................................................................................................................9
QUESTION 3 – Week 11............................................................................................................................9
(a) Term of CSR......................................................................................................................................9
(b) Legitimacy of companies.................................................................................................................10
CONCLUSION.........................................................................................................................................11
REFERENCES..........................................................................................................................................12

INTRODUCTION
Accounting theory is a collection of concepts, structures and techniques used in the
analysis and implementation of financial reporting concepts. An analysis of both the traditional
principles and accounting standards in the manner of accounting practices which are altered and
applied to the legislative system. The regulating financial statements and financial reports are
subject of the research of accounting theory (Croes and Rivera, 2017). A guideline for efficient
accounting and auditing is given by accounting theory. The theory of accounting encompasses
the premises and techniques used in financial statements, including an analysis of accounting
rules and the review regime. In present time organizations face different issues in accounting like
tax cuts, traditional accounting and many others that impact on the business in adverse manner.
In this report consist of different questions related to accounting theory and related issues.
QUESTION 3- Week 3
Provide journal entries necessary to account
On 30th June, 2020:
Machine Cost: $650000
Accumulated Depreciation: $110000
Value after Revaluation: $450000
Useful Life of machine: 5 year
Residual Value: $50000
On 1st July 2023
Fair Value of Machine: $460000
Computation of value of machine and revolution effects:
Machine Cost 650000
Less: Accumulated 110000

Depreciation
540000
Revalued At 450000
Decrease in value due to
revaluation
90000
Depreciation during period 2022-23 = (450000 - 50000) / 5 = 80000
Value as on 1st July after depreciation = 450000 – 80000 = 370000
Fair Value As on 1st July 2023 = 460000
Increase in Value of Machine = 90000
 The depreciable amount is the value of an asset, or another cost-replacement number, less
its variable cost.
 The systematic distribution of the accumulated depreciation of an intangible asset is
depreciation (Fisher and Aguinis, 2017).
Date Particulars Dr. Cr.
30-06-2022 Machinery 650000
Cash at Bank 650000
30-06-2022 Depreciation 110000
Accumulated Depreciation 110000
30-06-2022 Accumulated Depreciation 110000
Machinery 110000
30-06-2022 Revaluation 90000
Machinery 90000
01-07-2023 Depreciation 80000
Accumulated Depreciation 80000

01-07-2023 Accumulated Depreciation 80000
Machinery 80000
01-07-2023 Machinery 90000
Revaluation 90000
AASB 116: In this norm, the actual statement is used with definitions stipulated:
A plant with a carrier is a growing plant that:
(a) It used for the manufacture or distribution of farm commodities;
(b) It is forced to bring production for even more than one time frame; and
(c) It has a distant probability of being offered, with the exception of occasional surplus
transactions, as agricultural goods.
Land, plant and equipment formula calculates so that consumers of the financial reports can
distinguish details about the object's expenditure in, and improvements in, the property, plant and
equipment. Acknowledgement of the properties, the assessment of their holding quantities and
the operating expenses and impairment losses to be accepted in regard to them are the critical
topics of accounts for land, property and machinery (Gotti and Fasan, 2020).
QUESTION 2 – Week 5
Fair value of lease assets
Fair value of the lease assets will be earned at the calculation date to sell an item or to be
charged to move a responsibility in an organized exchange.
Given Information:
Date of entering lease: 1 July 2019
Life of assets: 6 years
Duration of lease: 5 years

Lease payment inception (at the beginning): $60000
Unguaranteed residual value: $40,000
Annual payments (5): $65,000
Implied rate: 11.0 %
Year Lease
Payment
PV Factors @ 11%
1 60000 0.900901 54054.05
2 65000 0.811622 52755.46
3 65000 0.731191 47527.44
4 65000 0.658731 42817.51
5 65000 0.593451 38574.34
6 65000 0.534641 34751.65
Unguaranteed residual
value
40000 0.534641 21385.63
Fair Value of Lease
Assets
291866.1
QUESTION 2 – Week 6
Weekly Payroll 200000
Employees Entitled to: 2 weeks non vesting leave per
year
employees will take the full 2
weeks' sick leave
56%
employees will take 1 week's leave
each year
22%
Expected annual sick-leave expense for
Dainty Ltd:

= 200000 * 56% * 2 Weeks + 200000 * 22%
* 1 Week
= $ 268000
Journal Entries:
Particular Debit Credit
Sick Leave Expense Obligation 268000
To Employee benefits expenses 268000
(Being expenses identify 26800)
Employee benefits expenses 268000
To Profit and Loss Account 268000
(Being expenses write off from P&L account)
Salary expenses 360
PAYG tax 108
To Salary payable 468
(Being salary paid with tax)
Weekly Salary $600
Per Day Salary $600 / 5
120
2 day off salary $120 *2
240
Net Weekly Salary 360
PAYG Tax 30%

QUESTION 3 – Week 9
(a) Basic EPS amount
Net income after tax 2000000
Shares at the beg, 900000
Shares issues on 1st Jan
2018
300000
Bonus Issue on 1st Mar
2018
1200000 * (1/5)
240000
5% Preference Shares 500000 @ 1.00
Basic EPS as on
30/06/2017
1.5 per share
(b)
Diluted EPS is a measure used if all tangible bonds have been conducted to gauge the reliability
of a company's earnings per share (EPS). All existing adaptable preference stockholders, accrued
liabilities, company stock, and contracts are contingent instruments. The diluted EPS would
characteristically be greater than the plain or basic EPS, but it could be stronger in the rare
instance where bashing-dilutive bonds are present. Only the basic EPS is stated in the financial
reports in this situation. For investors, diluted EPS is absolutely important because it falls asleep
the profits which an investor will obtain in one of the worst situations. If a publicly listed
company has more than one sort of inventory in its capital structure, it will provide either diluted
EPS or basic EPS data (Hayek, 2018).
Diluted EPS is more thorough than EPS because it reveals the real investor prices on the
basis about which the operating income are distributed. In addition, the diluted EPS influences
both the ratio of firm prices to earnings (P / E) and other accounting metrics. We have to identify
the net profits, the preferred dividends, the subordinated debentures dividend, the corporate tax,
the calculated dilutive shares outstanding ratio, the convertible new stock, the debt securities and
the non-exercised investment income in order to measure the diluted EPS. The diluted EPS is
still smaller due to the EPS.

,,,,,,,,,,,Shares at the beg, 900000
……..Shares issues on 1st Jan 2018 300000
………Add: Bonus Issue on 1st Mar 2018 1200000 * (1 / 5)
240000
Total 1440000
QUESTION 3 – Week 10
a. Exchange rates
1 March 2020: NZ$ 750000 * 1.2 = $ 900000
30 June 2020: NZ$ 750000 * 1.25 = $ 937500
b. Prepare the journal entries
Date Particular Debit Credit
01-Mar-20 Machinery 900000
Payable to New Zealand company 900000
(Being machinery constructed)
01-Jun-21 Machinery 900000
Loss due to foreign currency rate
change
37500
Payable to New Zealand company 937500
(Being face loss on machinery)
QUESTION 3 – Week 11
(a) Term of CSR
Corporate social responsibility (CSR) is a word used to denote the efforts of a corporation
to this in any form enhance society. Such activities can range from contributing cash to non -
profit organizations to adopting workforce eco - friendly practices. CSR has an influence on
corporations, charities, and workers alike. In the United States, corporate social responsibility is
not a compulsory practice; therefore, that is something special that corporations do to enhance

their communities around the world. This is becoming highly essential to have a socially
responsible picture as the usage of social governance grows. When selecting a product or
organisation, customers, workers and shareholders priorities CSR. Along with they hold
responsible entities for their corporate values, policies and revenues to affect progressive reform
(Nicholls, 2018).
Corporate social responsibility (CSR) is a matter of self-regulation of business with the
goal of becoming socially responsible. There is no "true" way in which corporations should
exercise CSR; many company CSR programmers aimed to contribute favorably to the public, the
community or the climate. Employers and employees put a premium on operating for and
investing their time with companies that value CSR in today's politically progressive climate.
A properly applied CSR concept will offer a range of strategic strategy, including such
greater access to resources and markets , increased revenue and income, operating cost
reductions, increased productivity and effectiveness, productive human natural resources,
identifying features image and credibility, customer satisfaction, strengthened risk management
framework and decision-making.
(b) Legitimacy of companies
Business credibility is also about business governance and transparency and how
customers and investors are connected to this. It is important to establish minimum provisions
that a business must conform to, for which legislators and courts will hold businesses
accountable. Perceived credibility affects customer decision-making, and it has been found that
greater perceived credibility enhances a positive corporate assessments. By enhancing
communication and interaction with customers, businesses may use SNSs to gain credibility.
Restricted transparency and restricted roles are prescribed by the legal institutionalization
of business firms: the task for companies in the new century is to give them access and expand
our perception of the social importance of organizational operation without undermining their
mechanisms of generating wealth. This will entail a reconsideration of the investor relation and a
new concept of the stakeholder group. Businesses in competitive industries such as hospitality
also fail to connect convincingly regarding their environmental and social successes with their
shareholders. Even so, reliable corporate social responsibility (CSR) communication has been

developing theory, but never implementation of sustainable, as an indicator of credibility for
organizations in society. The aim of this paper is to assess a CSR website's trustworthiness as a
primary indicator of validity (rational, mental and moral) digital and analog.
CONCLUSION
As per above discussion it has been concluded that the conceptual system of accounting
theory is connected by all concepts of accounting. This structure is established by the Financial
Accounting Principles Board (FASB), an autonomous body working to formulate and evaluate
the main goals of governmental and corporate enterprises' financial reporting. In addition,
accounting theory can be considered to be the rational rationale that helps analyze accounting
practices and direct them. Accounting theory will help establish new business practices and
techniques as legislative requirements change.

REFERENCES
Books and Journal
Croes, R. and Rivera, M. A., 2017. Tourism’s potential to benefit the poor: A social accounting
matrix model applied to Ecuador. Tourism Economics. 23(1). pp.29-48.
De Villiers, C., Venter, E. R. and Hsiao, P. C. K., 2017. Integrated reporting: background,
measurement issues, approaches and an agenda for future research. Accounting &
Finance. 57(4). pp.937-959.
Fisher, G. and Aguinis, H., 2017. Using theory elaboration to make theoretical
advancements. Organizational Research Methods. 20(3). pp.438-464.
Gotti, G. and Fasan, M., 2020. International Accounting Research: The Italian Context. Journal
of International Accounting Research. 19(1). pp.73-83.
Hayek, C. C., 2018. The State of the Literature on Audit Committee Compensation and Its
Implications for Practice and Research. Current Issues in Auditing. 12(2). pp.A1-A11.
Jones, J. P., Long, J. H. and Stanley, J. D., 2019. Pane in the Glass: A Review of the Accounting
Cycle. Issues in Accounting Education. 34(1). pp.35-50.
Nicholls, A., 2018. A general theory of social impact accounting: Materiality, uncertainty and
empowerment. Journal of Social Entrepreneurship. 9(2). pp.132-153.
Simon, C. A., Smith, J. L. and Zimbelman, M. F., 2020. How Fraud Risk Decomposition Affects
Auditors' Fraud Risk Assessments. Current Issues in Auditing. 14(1). pp.P26-P32.
Zeff, S. A., 2019. A Personal View of the Evolution of the Accounting Professoriate. Accounting
Perspectives. 18(3). pp.159-185.