Evaluation of Financial Accounting

Running head: EVALUATION OF FINANCIAL ACCOUNTING
Evaluation of Financial Accounting
Name of Student
Name of the University
Author Note

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EVALUATION OF FINANCIAL ACCOUNTING

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EVALUATION OF FINANCIAL ACCOUNTING
Table of Contents
Answer to Question Part-(A).....................................................................................................3
Defined contribution plan......................................................................................................3
Define Benefit plan................................................................................................................3
Actuarial funding methods.....................................................................................................4
Answer to question part-(B).......................................................................................................5
Cost methods..........................................................................................................................5
Par value methods..................................................................................................................5
Answer to question part-(C).......................................................................................................6
Owners’ Equity and their Subdivision...................................................................................6
References................................................................................................................................10

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EVALUATION OF FINANCIAL ACCOUNTING
Answer to Question Part-(A)
Part (a)
Defined contribution plan
This is a retirement plan in which the fixed amount of money or the certain percentage of
the salary of the employee is contributed in an account that is made to fund their retirement.
In an order to retain and attract top talent, the promoter entity, will tally the employee
contribution. In this plan both the employee and employer invest a certain fixed lump sum of
money (Addo, & Sunzuoye 2013). The amount which are contributed by the employer and
the employee are then invested in places such as stock market to earn higher percentage of
return. In this retirement plan structure, investment risk is being borne by the employee and
not by the employer.
Define Benefit plan
The defined benefit plan is computed to be using the unit benefit and variable benefit
formulae. Flat benefit formulae consider employee time period in the work place as the key
factor formulae that calculate the amount the employer will have to pay towards the
contribution plan.
Annual retirement benefit = employee total tenure of service * flat compensation
amount
Unit benefit formulae.
This methods consider the duration of employment and the employee’s salary.
Annual retirement benefit = year of service * average earning * compensation
percentage