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Financial Accounting - Assignment

   

Added on  2020-05-28

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Running head: FINANCIAL ACCOUNTINGFinancial accountingName of the student:Name of the university:Author note

1FINANCIAL ACCOUNTING718 Geelong Street, MELBOURNE, VIC 3000Telephone +61 7894 679094www.magentaandassociates.com.au15th January 2018Mr. Christopher SampsonThe Managing DirectorBeachlife Ltd.Level 7, 927 William Street,Brisbane QLD 4000Dear Christopher,It is a great delight for us to get the feedback from you and we convey our thankful wishto you in return of your email that you have sent us. We cannot express our happiness in wordswhen we saw that you have reached to us and we can guarantee you with the best solutionsavailable to you so that you can be able to take decision in a better manner. As always, we willhelp you to take the proper decision in making the best solutions for the problems persisting inaccounting in addition to the issues that you have described within the body of the previous mail.You will get help in the recommendation part that will be presented to you as per theCorporation Act 2001, AASB and the elucidation will also be in context of the accounting issuesthat exist in IFRS. I hope you are attentive of the fact that the contingent liabilities are those that have theprobability of losses which can come up in the future days. The reason behind these upcominglosses are considered to be either the non- occurrence or occurrence of a particular event. On theother hand the reason can also be the outcome of a definite event or others as well. There areseveral instances that can be taken into consideration in these cases of contingent liabilities suchas the exploration about the failure of the organization which might not be clearly completed yetand the claim comes that although it is legal in its characteristics but the warranties that exist inthe each and every products are procured by the customers in the end (Macve 2015). Theliabilities which are known to be contingent require to be displayed in the financial statement ofaccounting of the company along with the potential amount that has been already estimated by

2FINANCIAL ACCOUNTINGthe company. It will help in tracking and keeping a proper record in the annual sheet of thecompany. The approximate amount of the company will be helpful in preventing the probableloss of the company that can arise in the coming days because a specific amount has been keptseparately by the company alongside. That is why it is recommended that contingent liabilitiesshould always be used for the betterment of the company. As per Para 29, it can be found out that altogether the liabilities of the company are sothat they have to take care of the responsibilities in such a way that it can be flashed under thebroad banner of contingent liability (Pratt 2016). The prime factor here is that the companyshould develop these liabilities from the root because there is no possibility that it will take placelater in the financial year. Henceforth, the explanation related to these liabilities has to beconsistent and continuous which will control the outflow of the resources and this will also bearthe advantage of strengthening the economy of the company. On the other hand it can be saidthat the provision or benefit that is available inside the company has to be clearly determined dueto the fact of the current and legit responsibilities which might turn out from the previous eventsof the history. Also the assumption can be made in an appropriate way so that the proper worthof money can be kept separately for it. The primary motive behind the benefit provided to thecompany is that it needs to be regulated with the amount or balance of the ongoing financialyear. This will help in getting the cost back that was allocated for a fixed year and the level offinances that was approximately thought of can be calculated within that specific time period(Barth 2015). This is the reason why the provision that is used in the company is not a direct version ofsaving, which might look like one in the first place. In general it can be determined that theamount comes in direct form under the balance sheet which further comes under the banner ofincome statement and thus it needs to be placed in the bucket of expenses. Also it can be statedthat the key distinction in between the contingent liabilities and the provision is that the latter oneis taken up in form of the financial statements whereas the former one which is also termed ascontingent can be used under the banner of liabilities. This, in turn, is kept a record in the form ofa note inside the financial statements of the company. In addition to that if there is high rate ofpotential liability whereas it is estimated to be around 60 percent to 90 percent then it isabsolutely mandatory to be shown under the banner of provision inside the financial statementswhich was used for the company. But it can be contradicted by saying that if it is seen that therate of liability has exceeded five percent but still has not reached sixty percent then it should bekept in record in the form of a note within the financial statement of the company but if thepercentage still falls less than five percent then the company will not be able to decide on anykind of action about it. Hence in accordance with the AASB 137 in the Provisions, Contingent Liabilities andContingent Assets, the main issue has been explained well in the mail that has been sent(Henderson et al. 2015). We can help you by providing suggestions that the intangible assetsshould also exist in the current balance sheet which will be effective in carrying the requisite

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