Importance of Accounting Concepts: A Case Study of Corp Travel Limited

This report highlights the importance of accounting concepts and focuses on the accounting issues of measurement and qualitative characteristics. The case study of Corp Travel Limited is used to illustrate these concepts.

Running head: CORP TRAVEL LIMITED
CORP TRAVEL LIMITED
Name of the Student
Name of the University
Author Note

1CORP TRAVEL LIMITED
Executive Summary
The accounting can be considered to be an essential part of the firm and with respect to this,
it becomes essentially important for the firm to ensure that they are being able to carry out the
different functions of accounting in an effective manner. In line of this the accounting concepts
have a key role to play as they go a long way in ensuring that the firm is successfully able to
meet with the needs of the investors. The main aim of the report is to outline the overall
importance of the accounting concepts and focus on the accounting issues of measurement
and the qualitative characteristics of the report. The Corp Travel limited has been used as the
case study of the firm.

2CORP TRAVEL LIMITED
Table of Contents
Introduction.................................................................................................................................3
About the company.....................................................................................................................3
Discussion...................................................................................................................................3
Analysis of the accounting concepts.......................................................................................3
The Issue of Measurement and the usefulness of the Conceptual Framework.....................5
Representational Faithfulness and Relevance of the Statements..........................................6
Conclusion..................................................................................................................................7
References..................................................................................................................................8

3CORP TRAVEL LIMITED
Introduction
The firm is believed to have a duty towards the general stakeholders and it is in the lieu
of this duty, that the different firms are required to prepare the annual books of accounts as it
goes a long way in helping the firm to communicate effectively with the different stakeholders
and in the same manner, be successfully able to ensure that they are able to maintain the
entire system in a transparent manner (Bekaert and Hodrick 2017). Accounting helps the firm
to communicate with the stakeholders as it can be stated to be a graphical representation and
an analytical analysis of the overall performance of the firm in a given time period. However, it
is not easy to maintain the books of accounts as the subject of accounting on a whole needs
to cater to various policies, standards as well as concepts which help in ensuring that the
statements which are formed are clear and serve their purpose well (Brusov et al. 2015) The
primary aim of the given report can be stated to be to highlight the different accounting
concepts which exist in theory and in addition to this, compare this to the actual use of the
concepts in the different annual reports of the different organizations. The organization which
has been chosen for the purpose of the report is the Corp. Travel Limited. The report will be
discussing the different accounting concepts, highlight the issue of measurement and
conceptual framework which exists and in addition to this, will also highlight the qualitative
characteristics which the accounting reports are required to fulfil.
About the company
The Corporate Travel Management Limited can be understood to be a provider of the
travel management to the corporate market which is present in Australia (Travelctm.com
2019). In addition to this, it is crucial to understand that that the firm is a member of the Global
Star network which is formed by an amalgamation of the 70 travel companies and allows the
provision of an international service for the different clients as present.
Discussion
Analysis of the accounting concepts
The accounting concepts tend to form a crucial part of the origination and with respect
to this, it becomes essentially important for the firm to undertake the development of their
accounting statements by making use of the different accounting concepts. Hence, in line of
this, the different accounting theories which have been made use by the Corp. Travel Limited
can be stated to be as follows:
The Dual aspect concept
The Dual aspect is an accounting system which is largely based on the double entry
book keeping. The theory states that, for every business transaction which takes place, two
accounts are essentially affected (Burtonshaw-Gunn 2017). These can be understood to be
the double entry book keeping or the dual aspect concept. In this case, it can be understood
that in case where the business has to make the payment to the different suppliers, then two
accounts shall be impacted in such a case and these are the purchase account and the cash
account. It is important for a firm to ensure that they are able to incorporate this dual concept
into its operations as it will bring about a sufficient balance in the statements of the books. In
line of the Corp Travel Limited, it can be rightfully understood that, the firm makes use of the
Dual concept of accounting where both the sides of the transaction like the Debit and the
Credit of the report are essentially present in the report. The different accounting statements

4CORP TRAVEL LIMITED
which are formed by the firm can be stated to be the Balance sheet, income statement and
the cash flow statement. All transactions are mentioned twice so as to balance the books of
accounts.
The Going concern
The going concern is a popular accounting concept which states that, for a firm to
achieve success in the long run, it becomes essentially important for the firm to take into
consideration the longevity of the firm. Hence, keeping this concept in mind, it has to be
understood by the business that they would be required to ensure that they are being able to
make decisions keeping in mind the lifetime of the firm and not take any decisions which shall
be benefit for the firm only in a short period of time (Cumming et al. 2017). This is because, if
the firm looks out for the needs of just the shorter time frame, then in such a case it will be
losing out on the long term and the overall future of the firm might be brought down in such a
case. The annual report of the firm mentions that in lieu of preparing the individual financial
statements of the firm, the directors of the firm would be largely responsible to see that they
are prepared keeping in mind the going concern of the firm and that, all matters are required
to be disclosed in a manner such that, all decisions regarding the liquidity of the firm or the
assets needs to be based on it (Kimmel et al. 2016).
Money measurement
The money measurement concept can be understood to be a basic concept of
accounting with respect to which it can be understood that, any firm as present in the
business environment will be required to form the books of accounts solely based on the
matters which have a monetary relevance (Dang Li and Yang 2018). This means that, all the
crucial transactions which can be mentioned in the terms of money are required to be
mentioned in the books of the accounts and all other transactions which are not capable of
being mentioned in the terms of money, should not be mentioned in the books of accounts,
however important they might be. There can be a case, where an old board member left the
organization and hence, with respect to this, they will be required to take into account this
event but cannot because of the underlying principle. The Corp. Travel makes use of the
money measurement concept by ensuring that the firm is reflecting the overall status of the
firm in a monetary measurement. The books of accounts are prepared and the values of
various assets, liabilities and other such relevant accounts are in financial terms. All the
relevant but non-financial matters are given in the notes to the accounts (Travelctm.com
2019).
Accounting Period
The books of accounts are required to be prepared as per the overall standards of the
firm and in addition to this, they are required to be prepared at a specific time period. This
makes it easy to compare the different financial statements because it brings about uniformity
in the different operations of the firm. In addition to this, when the accounting statements are
prepared at irregular periods then the profits for a specific time period cannot be identified
successfully (Hoyle, Schaefer and Doupnik 2015). Moreover, it can also be considered to be
integral that, when the accounting statements are prepared at regular intervals, the trend
analysis can be carried out easily and in line of this, it becomes easier for the fir to predict the
future performance of the firm. Generally the most common type of an accounting period is a

5CORP TRAVEL LIMITED
period of 12 months. The accounting period which is followed by the firm can be largely
considered to be from July 1st to the end of the month of June, thereby covering a period of 12
months.
The Cost and revenue concept
The cost and revenue accounting concept can be understood to be largely based on
the fact that the exact profit of a period becomes crucial to find out and in line of this, when
the costs and revenues of different periods are considered, then the profit for the exact period
cannot be found out adequately (Travelctm.com 2019). As the overall motive of the company
is to earn a large amount of profits, the accounting statements must take into consideration
the fact that, they are required to manage the statements in the right manner. In line of this,
the Corp. Travel ensures that all the revenues as well as costs as incurred by the firm are
mentioned in the books of accounts at that period itself so as to ensure that the comparability
of various years profit and loss can become considerably easier.
The Verifiable Objective
The accounting and financial statements cannot be just stating down the different
figures and other amounts without backing those figures by some kind of a proof. The proof
helps in making the overall claim much stronger in nature. Hence, all the accounting
transactions are required to be backed by the proofs (Whittington 2016). The proofs can take
place any format like the vouchers, cheques, bills, notes and correspondence as well. The
Corp Travel ensures that, it maintains a notes to the accounting statement and financial
statements so as to ensure that, the relevant assumptions and calculations could be backed
by adequate proofs.
The Issue of Measurement and the usefulness of the Conceptual Framework
In order to ensure that a firm is able to achieve all its targets and attain the overall
objectives and their duty to the different stakeholders, the firm will be required to take into
consideration the conceptual framework which guides the overall development of the different
accounting statements (Fracassi 2016). The conceptual framework acts as an assistance to
the firm and helps it in seeing to it that the overall objectivity of the accounting and the
financial statement can be met with adequately.
The measurement concept in accounting can also be understood to have a good role
to play. It is important for the organization to take into consideration that, the overall
performance of the firm in terms of the assets, liabilities and other payments and receipts can
be made in monetary terms (Kaplan and Atkinson 2015). However, the measurement of the
different aspects of the firm often turns out to be very difficult in nature and also becomes
difficult to carryout effectively (Gullifer and Payne 2015). In line of this, the firms start using
various ways while undertaking the measurement aspects. This tends to clash with the
conceptual framework and hence, the overall objective of the firm cannot be attained in such
a case. Moreover, if the assumption of the measurement is not taken in the right manner then,
in such a case, the overall reflection of the true financial positioning of the paper may not be
carried out in the right manner.

6CORP TRAVEL LIMITED
Many organizations have begun to make use of the fair value measurement as an
adequate tool to measure the overall values of the different assets as well as the liabilities
(Johnson, McLaughlin and Haueter 2015). The measure is consistent in nature and ensures
that the aggregate of the fair values have a considerable meaning and thereby can be proven
as a good solution to the firm. Like other firms, even the Corp Travel makes use of the fair
value measurement in order to gain a measurement of the different assets as well as
liabilities. The fair value measurement can be understood to be a relevant tool which helps in
balancing the value of the assets as well as the liabilities of the firm (Travelctm.com 2019).
The foreign exchange contracts, another hedge funds of the firm had also been measured in
the same way. In line of this, it can be understood that, although the measurement often
tends to be an issue in case of firms providing services, the fair value measurement helps in
attaining the overall objectives adequately.
Representational Faithfulness and Relevance of the Statements
As mentioned previously, the financial statements of the firm should have the capability
to convey the overall financial condition of the firm to the different stakeholders as present.
Very often in order to deceive the different investors, the firm often engages in the
manipulation of the financial statements and tends to represent the overall performance in a
manner such that it pleases the firm (Finance 2017). However, any financial statement should
have the two basic qualitative characteristics such as relevance and representational
faithfulness.
Relevance: The aspect of relevancy states that, the financial information which is disclosed by
the firm needs to be such which is relevant to the different parties and should comprise of the
capability and ability to move the decision made by the investor.
Faithful representations: The faithful representation states that the financial statements of the
firm needs to be unbiased in nature and should not be having any errors which would then
effect the firm or the different investors as present (Foley and Manova 2015). As mentioned
earlier, the financial statements need to reflect upon the true nature of the firm and in such a
case, it will be required to comprise of the given characteristics which will ensure the firm is
being able to attain its overall objectives.
 Complete: The financial statements are required to be complete in nature which means
that all the accounts ae required to be balanced adequately and in line of this, they will
be required to be reflecting the exact financial positioning of the firm to the audience.
 Error free: The financial statements should not comprise of any error. This means that,
they cannot comprise of any trial balance errors, any missed information or any fault
calculation. This is because, the financial statement has the capability to impact the
investors on the whole and in case they are wrong, then the investors may end up
taking the incorrect decisions as present (Ehrhardt and Brigham 2016).
 Unbiased: Very often the analysts of the financial statement turn out to be considerably
biased in nature but this does not need to be the case and hence, the results need to
be represented just as they are.

7CORP TRAVEL LIMITED
The financial statements should comprise of the most relevant information and in line
of this, they must be required to help the investors in analysing and taking the relevant
decision making. For instance, if any report is unable to convey the information relating to the
Earnings per share then in such a case, they are not relevant in nature ( Barr and McClellan
2018). The relevancy is influenced by the materiality of the information which is disclosed by
the organisation.
In the case of the Corp. Travel Limited, it can be mentioned that the financial
statements of the firm represent relevant information and in line of this, they have the
capability of representing the information of the firm very faithfully (Travelctm.com 2019). In
line of this, it can also be understood that, as the financial statements of the firm have been
assessed by external auditors, the completeness, no error and the non- biasness of the
statement can be guaranteed by the external auditors which is a proof of the fact that the firm
has been following the qualitative characteristics of representing the financial statements.
Conclusion
Hence, in such a case, it can be largely understood that if a firm aims to ensure
success in the long run then they will be required to undertake different measures which will
ensure that the firm is being able to achieve the different goals of the firm and in addition to
this, reflect the overall positioning of the firm in the right manner to the different investors. The
main aim of the report was to outline the overall accounting concepts on which the financial
systems are based and in addition to this, the report also aims to outline the different issues in
measurement and the qualitative characteristic of the financial reports of the firm. The case of
Corp travel was undertaken and the different accounting concepts, issues of measurement as
well as the qualitative characteristics of the reports of the firm were discussed.

8CORP TRAVEL LIMITED
References
Barr, M.J. and McClellan, G.S., 2018. Budgets and financial management in higher education.
John Wiley & Sons.
Bekaert, G. and Hodrick, R., 2017. International financial management. Cambridge University
Press.
Brusov, P., Filatova, T., Orekhova, N. and Eskindarov, M., 2015. Modern corporate finance,
investments and taxation(pp. 1-368). Berlin: Springer International Publishing.
Burtonshaw-Gunn, S.A., 2017. Risk and financial management in construction. Routledge.
Cumming, D., Filatotchev, I., Knill, A., Reeb, D.M. and Senbet, L., 2017. Law, finance, and the
international mobility of corporate governance.
Dang, C., Li, Z.F. and Yang, C., 2018. Measuring firm size in empirical corporate
finance. Journal of Banking & Finance, 86, pp.159-176.
Ehrhardt, M.C. and Brigham, E.F., 2016. Corporate finance: A focused approach. Cengage
learning.
Finance, C., 2017. Empirical Corporate Finance. Volume A.
Foley, C.F. and Manova, K., 2015. International trade, multinational activity, and corporate
finance. economics, 7(1), pp.119-146.
Fracassi, C., 2016. Corporate finance policies and social networks. Management
Science, 63(8), pp.2420-2438.
Gullifer, L. and Payne, J., 2015. Corporate finance law: principles and policy. Bloomsbury
Publishing.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Johnson, C.J., McLaughlin, J. and Haueter, E.S., 2015. Corporate finance and the securities
laws. Wolters Kluwer Law & Business.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Kimmel, P.D., Weygandt, J.J., Kieso, D.E. and Trenholm, B., 2016. Financial Accounting.
Wiley Custom Learning Solutions.
Travelctm.com 2019. Annual reports [online]. Available at:https://www.travelctm.com/wp-
content/uploads/2018/08/FY18-Annual-Financial-Report.pdf (Retrieved on: 25 May. 2019).
Whittington, G., 2016. Accounting and economics. The New Palgrave Dictionary of
Economics, pp.1-6.