Report on Business Accounting Optus Pty Ltd
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Added on 2020-04-07
Report on Business Accounting Optus Pty Ltd
Added on 2020-04-07
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Business accounting
Optus Pty Ltd is second largest telecommunication business in Australia. Major products ofcompany are Fixed Telephony, Leased lines, Data transmission, internet services, Cabletelevision and Mobile Telephony. The present study is based on evaluation of inventoryaccounting and cost management techniques by considering recent year annual report of OptusCompany. Study is based on evaluation by considering principles cited in AASB 101 and 102.The inventories in the annual report of the Optus Company are recorded at a lower of the costand net realizable value. The cost here is determined on the basis of weighted average, and thenet realizable value is estimated on the selling price in the general course of the business whichis less than the selling expenses and estimated cost of completion. The work in progress is alsostated here at less cost of the payments received and the receivables are made on theuncompleted project of information technology. The costs involve the software and hardwarecosts of the third party , along with the direct expense and direct labour cost which are attributedto the activity of the project and are also related with the profits identified on the work inprogress (Annual Report, 2017. Optus Media Limited). In the case when it is likely possible thatthe cost of the contract will be more than the total revenue of the contract the expected loss isidentified as an immediate expense. The financial position in the consolidation statement and thework in progress includes the trade and other receivables. Whereas in the financial statements ofthe company the excess of the progress of the billing over the work in progress in being involvedin the trade and other payables as when applicable. The inventory system used by the Optus Company is the perpetual inventory method. ThePerpetual inventory is a methodology of inventory accounting that maintains records of sales orinventory purchase in an immediate manner by making use of computerized systems and entityassets management software. According to AASB 102, perpetual inventorydepicts systems, andaspects of stock wherein information regarding quality and accessibility of inventory are updatedcontinuously to offer the business with real-time information by which they can make effectivedecisions and inventory records (Needles, Powers, and Crosson, 2013). There are severalbenefits for the business of using perpetual inventory in accounting, and the same areenumerated: i)A perpetual inventory system enables accurate restocking: as changes in the levelof inventory are recorded on a real time basis, from the purchasing of inventory to selling an
inventory. This offers the company an ability to maintain and conduct reports that can determineinventory items that are ineffective or are running low. ii)A perpetual system helps in making acomparison of inventory balance within the system based on year-end count while allowing thecompany to examine any inconsistencies.iii)This system maintains proper balances and providesan appropriate set of a financial statement or reporting all over the year (Horngren,2012). iv)Under this system, always correct inventory levels are calculated with the accurate presentationof inventory turnover ratio. The company is benefitted by knowing whether the individualproducts or sales are running low.The method of costing applied by the Optus Company is the weighted average method which isused to allocate the average cost of the manufacturing of the product and it is supported byAASB 102. The company uses this method for overcoming following situations such as, in thecase when the items of the inventory are so mixed together that it is not possible to allocate aparticular cost to every unit. Further, the company also uses it when the system of accounting isnot adequately complicated to track the LIFO or FIFO layers of inventory (Berlemann, andWesselhöft, 2012). Next reason to apply this method is when the items of the inventory are sosimilar to each other that no other option to allocate the cost to each unit. The company whenapplying the weighted average method divides the cost of the products available for the sale bythe quantity of unit available for the sale; this will capitulate the weighted average cost of eachunit. One of the reasons is that this method can be used under both that is international financialreporting standards and generally accepted accounting principles.
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