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Financial Accounting Assignment | Accounting Treatments

   

Added on  2020-05-16

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Running head: FINANCIAL ACCOUNTINGFinancial AccountingName of the StudentName of the UniversityAuthor Note

1FINANCIAL ACCOUNTING718 Geelong Street, Melbourne, VIC 3000 Telephone 62 8 1215 7080 www.magentaandassociates.com.au06 January 2018Mr. Christopher SampsonThe managing DirectorBeachlife Ltd.Level 7, 927 William Street,Brisbane QLD 4000Dear Christopher, We thank you for the e-mail that has been sent by you and it has been a great pleasure again inhearing as well. We are of the view that we always provide our clients with the bestrecommendations that is possible from our side so that it can help you in taking the decisions in abetter way. Like always, this time as well we will try to help you by providing you with the bestsuggestions so that the accounting treatments of the issues that you have mentioned in the mailcan be provided to you in accordance with the Corporation Act 2001, AASB and theinterpretations of the issues are in accordance with IFRS as well (Lubbe, Modack and Watson2014).

2FINANCIAL ACCOUNTINGYou may be well aware of the fact that contingent liabilities are those ones, which may result inpotential losses within the organization due to the activities that may take place in the future onthe non-occurrence or the occurrence of particular events or due to a specific outcome. There aredifferent examples that can be cited in contingent liabilities such as the investigations that arestill pending, potential claims that are legal in nature and the warranties that are given for theproducts (Picker et al. 2016). The liability that is contingent in nature has to be accounted in thebooks of the company and is recorded in financial statements when the liable amount can beestimated in a proper manner. If the amount can be estimated by the company, then it is keptaside so that the unnatural losses that can take place in the future can be accounted as well. Inaccordance to AASB 137, Para 23, the liability can be recognized under the presentresponsibility along with the outflow of the resources so that it can help in representing thebenefits of the economy of the company and the obligations can be settled in a better manner. Inaccordance with Para 29, the company can jointly and severally be liable for the responsibilitiesand treat is as contingent liability as well (Allen 2017). This is developed in such a manner thatinitially the liability is not expected within the organization. Thus, it is the continuous analysisfor determining the outflow of the resources, which helps in representing the benefits of theeconomy so that it can be seen as probable or not. On the contrary, this provision has to berecognized by the company when it has a present legal and constructive responsibility, which hascome up from the previous events and the obligatory amount can be estimated in a reliablemanner. The major objective of this provision is that it helps in the adjustment of the balance ofthe present year and is presented in an accurate manner as well. This will be done as the cost thatis kept aside for the particular year will definitely mislead the status of finances if the cost is notaccounted in the particular year (Brouwer and Hoogendoom 2017). Thus, provision is not that

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