Accounting: Theory Assessment and Case Study Analysis

This article provides an in-depth analysis of accounting theory assessment and case study analysis. It covers topics such as income tax assessment, financial planning, risk management, and more. The article also includes a case study analysis of LMB Motors.

Running head: ACCOUNTING
Accounting
Name of the Student:
Name of the university:
Authors Note:

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Table of Contents
Task 1: theory assessment:.........................................................................................................2
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................7
Task 2: the Case study and Practical Assessment......................................................................8
Answer to Question 1.................................................................................................................8
Answer to Question 2.................................................................................................................9
Answer to Question 3...............................................................................................................10
Answer to Question 4...............................................................................................................10
Answer to Question 5...............................................................................................................10
An answer to question 2: LMB motors:...................................................................................11
A)..............................................................................................................................................11
B)..............................................................................................................................................11
d)..............................................................................................................................................15
E)..............................................................................................................................................16
F)..............................................................................................................................................16
Reference..................................................................................................................................20

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Task 1: theory assessment:
Answer to question 1:
1. In accordance with the rules of Income Tax Assessment Act, 1997 and ATO
guidelines, the assessee will be eligible to claim the expense without any valid
receipts are payments to PYAG, superannuation funds, Union Fees, and others. In all
other expenses, the deduction is available under section 8-1 of the Income Tax
Assessment Act 1997 if appropriate documentation is available (Libby 2017).
2. The expenditure on wages, vehicles, and the telephone can be controlled by making
fixed allowance payments. The company will pay a set amount of allowance based on
assumptions and expected costs.
3. If the accountant follows the basic principles of integrity, objectivity, competence,
and confidentiality in providing the professional service. Then the accountant is said
to be clear in the recommendations.
4. The plans for financial planning extract that summarises the scope of a client's
objectives is as follows:
 Establishing and defining the client-planner relationship.
 Asserting clients data and goals
 Evaluating the client's financial situation
 Fining alternatives
 Implementing recommendations
 Making changes in the recommendations.
5. The key areas that can cause significant taxation issues in business are as follows:
 unpaid present entitlements and trusts
 converting trust into a company
 Low-interest loans to super funds

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6. After ascertaining the risk to the company, the management should implement the
following to managing the risk
 Risk avoidance
 Reduction
 Sharing
 Retention.
7. The short-term finance options are
 Overdraft agreement
 Financing of accounts receivable
 Advance for supply
8. To solve the grievances of the client the following steps or action can be taken.
 Understand the problem
 Analysis of the sources of the problem
 Importance of the problem
 Available options to solve the problem
 Choosing the best and effective alternative available for solving the problem.
9. The five aspects of the legislation that protects a client's rights and responsibilities are
as follows
 be treated with respect and dignity
 having the right to privacy
 right of confidentiality
10. The mains source of information at the time of considering the financing and the
investing are annual reports, and financial statements. Confirmation from the vendors
(Schaltegger and Burritt 2017).
11. The compliance obligations are found in the statutory discloser statement.

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The forms are CFO Form, Accounting reporting Policy.
12. The changes in the legislation are found in the notes and statutory discloser of
account portion.
13. The charges will be calculated on the rate of taxes of the government.
14. The charges levied by state or territory governments are as follows
 GST
 Income tax
 Wealth tax
 Gambling tax
 Horse racing tax
15. The benefits and application of the methods for presenting and formatting financial
data are as follows:
 Summarised statements
 Collective formatting
 Easy to understand
 Higher efficiency
 Uniformity
16. As per the section 8-1 of the ITAA 97 all, the expenses that are contributory in
producing the assessable income are to be treated as the business expense.
17. The allowance is there for a business that manages on behalf of trust are trusts are not
taxed, low liability, capital gain tax discount, and others
18. The measure or technique uses historical data as inputs to make the business trends
forecasting. In addition to that, determine the future prospects of the company or the
business orientation (Hoyle et al. 2015).
The benefits are:

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 Easy to plan
 Effective
 Time-saving
19. The no-profit organizations are those entities that do not perform the activities to earn
profits instead; they perform the activities for social causes.
They are required to make the statutory return for the GST and claiming the Credits.
20. The methods to represent the present client's performance objective are as follows
 To provide adequate feedback to each performer
 To be responsive to the change in the behaviour and the adopting effective
work habits
 Provide adequate data to the managers so they can judge and analysis and
make the decision regarding the assignments.
21. The cash is a valuable and liquefied asset to the company or the business
organization. There are several methods of controlling the cash out them two are
hereby discussed:
 Establishing cash handling policies: the cash handling policy is
required to be implemented in the business as it regulated the
possession of cash.
 Keep Logs: the cash is liquid assets therefore, it is important for the
company to record all the cash inflow and outflow statements.
22. At the time of establishing the business, the business must comply with some
statutory obligations such as not opposing the public policy, all adequate discloser
regarding the business legislature are filled in an effective manner (Jaffe and Irizarry
2014).

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23. The financing is an important and material issue, for seeking advice on that financial
expert such as chartered accountant and other qualified are to be considered.
24. For reviewing the business finance, the following information is to be regarded to
make suitable decision and analysis the data.
 Identifying the industry economic characteristics
 Identify company strategies
 Analysing the probabilities and the business risks.
25. In the financial management, the focus will be on the collective and effective
management of customer and market analysis review. The market and the customer
trends are the factors that contribute to the maximum impact on the business
statements (Maskell et al. 2016).
26. The following questioner can report the current and new objectives
 What are the main business functions?
 Sources of inflows and outflows
 Financial policies
 Methods of accounting and others
The financial policies file note is made for the financial officer.
27. The ratio used to understand the financial stability is the Debt / Equity ratio,
The debt-equity is the measure of finance sources of the business. If the debt is more
than the equity or equal to equity then the financial position of the client will be
treated as restful (Qvortrup 2015).
28. The consequences for a client not meeting reporting deadlines in accordance with the
ATO then in that case penalty will be imposed for every 28 days period up to a
maximum five penalties.
29. Two of the many forecasting techniques is as follows:

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 Qualitative and quantitative technic: the qualitative and quantitative technic in
the forecasting represents a bundle of historical information to analysis and the
trends, and the business activates regulations.
 Average method: the average method of considered both of historical and
predicted and making an assessment on the averages of findings.
30. key features of the secretary's financial management are as follows:
 Communication: the communication of the finical data is to the financial
manager and the secretary.
 Performance: the activities that are performed in relation to the financial
management of the business are required to be evaluated by the secretary
31. Categorise sources of information on financial products and markets are as follows:
 External sources: market analysis, customer trend, growth rate, and others
 Internal source: product disclose statements, information circulars, books of
accounts and others.
32. The risk management options relating to financial and business performance are as
follows:
 error of calculation
 error of prediction
 change in market factors
 change in consumer behaviour and others
Answer to question 2:
1. The client's objective in the relevant case study is to make review and adjustment to
lower the tax liability regarding the income taxes and the Goods and Service taxes.

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2. In the given case the business assets of the clients are equipment, vehicle, building
and inventories which worth $550000
3. The clients business is regarded as medium scale business operations as the revenue is
greater than 1 million but lower than 20 million.
4. The business of the client is Veterinary services.
5. Extra information that re provided in the case study is relating to internal reports
regarding part-time administrative staff that includes fortnightly payroll and payment
of accounts and banking transactions.
Task 2: the Case study and Practical Assessment
Answer to Question 1
Email:
Dear
Molly Smith,
(Subject- information of objectives)
It is grateful to provide services to provide solution to the problems. The dignity and
sincerity of the current performance as an accountant will be assigned into the work. It will
be ensured that the required financial advice will be contributory and beneficial to your
financial issues.
The purpose of the email is to understand the financial prospects and the requirement
of the business. Moreover, the choice of ideas and objectives of the client.

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All the aspects of your business and the details are required to conform to make an in-
depth analysis of the financial position of the company. For more information and
understanding, you are requested to answer the followings.
1. What is the objective of the business?
2. What procedure of accounting is conducted?
3. What is the payment procedures of your business ( creditor/ debtor)
It will be glad if you kindly respond to our questions for the better assessment of your
business regarding the financial requirements.
Thanking You,
Date: With Regards,
(Accountant)
Answer to Question 2
There are certain requirements that are required to be full filled and certain specific
legal requirements are to be addressed at the time of establishing, structuring and financing of
a business (Otley 2016). There are some propaganda and obligation in relation to the
financing that is required to be solved are as follows:
 Registering business name
 Understanding of federal taxation system
 State and local taxes
 Permit of business and license
 Business laws and regulations.

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Answer to Question 3
Based on the requirements of the client, there is some initial steps that are to be
followed by the client (Molly Smith) in the commencement of the business:
a. Appoint an accountant for the bookkeeping and accounting.
b. Follow the applicable Accounting Standards ( AAS 1, 2, 3, 16, and others)
c. Register for the GST
d. Pay returns to the taxation Authorities.
The above implementations are to be made with a period of 3-4 weeks.
Answer to Question 4
The Questions to be asked in the role play:
 What is her new address?
 What influence her to shift the business address?
 Am I able to resolve your any doubts?
Answer to Question 5
In order to help the client perusing any of the material changes, as first the reason for
such change is required to be understood in addition to the business objectives and needs.
Further, the client's response and the legality of such a change are required (Francis et al.
2015). Further, the accounting technique, business activities, legislation, and others are to be
monitored.

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An answer to question 2: LMB motors:
A)
In the given case financial statement and the income, statement of the company is presented.
The financial data can be availed and scrutinize form the Finance manager, accountant of the
company responsible and having knowledge of the books of accounts. In addition that the
financial statements and the income statements can be cross-examined by the various
departments (Angst et al. 2017).
The financial data will be reconciled by checking the other financial documents such
as invoice, ledger books, cashbook, bank statement, and others.
B)
Vertical Analysis Of LMB Motors
For the year Ended 2014
Income statement Percentage
sales 12,00,000 100.00%
Less: Cost of goods sold 8,20,000 68.33%
Gross Profit 3,80,000 31.67%
0.00%
Selling expenses 1,47,000 12.25%
Plus: General expenses 97,400 8.12%
Total Operating expenses 2,44,400 20.37%
Operating Income 1,35,600 11.30%
Plus: Other income 11,000 0.92%
Total Income 1,46,600 12.22%
Less: Other expenses 12,000 1.00%

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Income before income tax 1,34,600 11.22%
Less: Income tax 58,100 4.84%
Net Income 76,500 6.38%
Vertical Analysis Of LMB Motors
For the year Ended 2015
Income statement Percentage
sales 14,98,000 100.00%
Less: Cost of goods sold 10,43,000 69.63%
Gross Profit 4,55,000 30.37%
Selling expenses 1,91,000 12.75%
Plus: General expenses 1,04,000 6.94%
Total Operating expenses 2,95,000 19.69%
Operating Income 1,60,000 10.68%
Plus: Other income 8,500 0.57%
Total Income 1,68,500 11.25%
Less: Other expenses 6,000 0.40%
Income before income tax 1,62,500 10.85%
Less: Income tax 71,500 4.77%
Net Income 91,000 6.07%

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C)
Ratio calculations:
Debt Equity ratio 2015 2014
Particulars Amount (2015) Amount (2014)
Debt
Long term liabilities
$
1,00,000.00
$
2,00,000.00
Equity
Owner's equity
$
8,29,500.00
$
7,87,500.00
Debt/ equity ratio 0.12 0.25
Return On Investment ratio 2015 2014
Particulars Amount Amount
Net Income
$
91,000.00
$
76,500.00
Total assets
$
11,39,500.00
$12,30,500.0
0
Return On Investment ratio 7.99% 6.22%

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Current Ratio 2015 2014
Particulars Amount Amount
Current assets
$
5,50,000.00
$
5,33,000.00
Current liabilities
$
2,10,000.00
$
2,43,000.00
Current ratio 2.62 2.19
Balance Sheet
Assets 2015 2014
Current assets
$
5,50,000.00
$
5,33,000.00
Long term investments
$
95,000.00
$
1,77,500.00
Plant & Machinery
$
4,44,500.00
$
4,70,000.00
Intangible assets
$
50,000.00
$
50,000.00
Total assets
$
11,39,500.00
$12,30,500.0
0
Liabilities
Current liabilities
$
2,10,000.00
$
2,43,000.00
Long term liabilities $ $

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1,00,000.00 2,00,000.00
Total Liabilities
$
3,10,000.00
$
4,43,000.00
Owner's equity
Capital 6,50,000 6,50,000
Retained earnings 1,79,500 1,37,500
Total Owner's equity 8,29,500 7,87,500
Total liabilities and
owner’s equity
11,39,500 12,30,500
d)
From the the analysis, the financial statement of the company LMB motor the
companies' financial position is analysed and it is found to be appropriate. In addition to that,
the key financial ratios and the profitability ratios indicates the financial situation is strong. In
the given case, the debt-equity ratio is regarded to be 0.12 in the financial year 2015. It means
the company is not using debt sufficient amount of debt in its capital structure. The company
is required to understand the cost debt is lower than the cost of equity maintained. There is no
additional requirement of the company to maintain the same amount of growth, the company
having adequate funds to sustain the growth level (Bennett and James 2017).
E)
The statutory obligation of the company are as follows:
 Standard quality

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 Taxation obligation
 Licencing and patent obligation
 Warranty obligation
 Safety obligations
F)
Advise:
1)
Summary of financial performance:
In the given case the company is regulating in the motor manufacturing business. The current
year performance of the company is considered to be good and the return on investment and
profitability of the company has been increased.
2015 2014 trend
sales 14,98,000 12,00,000 25%
Less: Cost of goods sold 10,43,000 8,20,000 27%
Gross Profit 4,55,000 3,80,000 20%
Selling expenses 1,91,000 1,47,000 30%
Plus: General expenses 1,04,000 97,400 7%
Total Operating expenses 2,95,000 2,44,400 21%
Operating Income 1,60,000 1,35,600 18%
Plus: Other income 8,500 11,000 -23%
Total Income 1,68,500 1,46,600 15%
Less: Other expenses 6,000 12,000 -50%

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Income before income tax 1,62,500 1,34,600 21%
Less: Income tax 71,500 58,100 23%
Net Income 91,000 76,500 19%
The increase in sale located in the year 2015 is increased by 25% as compared to the
preceding financial year. The gross profit margin of the company is increased by 20% in the
current financial year. In the current financial year, a substantial portion increases the selling
cost of the company (Mi et al. 2016). In addition to that, the company has secured other
business expenditure by 50% as it has come down from 12000 in 2014 to 6000 in 2015.
Further, the other income of the company is lowered in the current financial year. Because of
the above affect, the company's net income is increased by 19%, therefore, the return on
investment and the return on equity also increased by a substantial margin.
2)
In the motor manufacturing industry, there are some significant risk involvements.
The risk is an integral part of every business but is the duty of the business assessor and
regulator to identify the business threats. The business is required to make provisions and
recommendations to secure the company or the business from those risks. The risk factor in
the gives case that is required to be considered are as follows:
 Debtor default: The company sells good on credit basis to the customers, therefore,
the company receives the due amount form the debtors on a later date this signifies an
inherent risk of no payment or lesser payment. The loss that the company will suffer
by default payment is regarded as Bad Debts. For securing the losses the company
must aside a portion of their income as provisions in ten head called “ Provisions for
bad and doubtful debts”

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 Stability in the global economy: the business of the motor manufacturing is more
dependent on the many factors. if the market and the economy of the country, as well
as the world, is considered to be strong then the company will enjoy higher sales, but
is the business or market environed of the company is weak then the company may
suffer:
3)
To secure the company from the above risks then the company needs to make a proper
portfolio of risk management security by insuring the sales and making short-term and long-
term investment to regulate the business in the difficult period (Otley 2016).
4)
If the company makes proper management of cash then the company can manage the cash
loss. If the company adopts the financing of the receivable then chances of such cash loss can
be lowered.
5)
The company can fulfill all the obligations by compiling the applicable laws, such as
corporation law, legislative protection, taxation legislation, contract act, and others.
6)
There is some short-term investment plan with low-risk factors that are discussed hereunder:
 Investment in bonds
 Government notes
 Fixed deposits
 Investment in debentures and others.

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