Financial Accounting: Classification of Expenses, Disclosures of Accounting Policies, Depreciation, Amortization and Impairment Policies

Running head: FINANCIAL ACCOUNTING
Financial accounting
Name of the student
Name of the university
Author note

1FINANCIAL ACCOUNTING
Table of Contents
Task 1.........................................................................................................................................2
a) Classification of expenses...............................................................................................2
b) Reasons behind different methods for classifying the expenses.................................3
Task 2.........................................................................................................................................4
Disclosures of Accounting Policies, Estimates and Errors....................................................4
Task 3.........................................................................................................................................6
Depreciation, Amortization and Impairment policies............................................................6
Reference....................................................................................................................................8

2FINANCIAL ACCOUNTING
Wesfarmers, since its establishment during 2014 as Western Australian farmers
Cooperative, the company reached to the level of topmost listed companies in Australia. The
company has its headquarter in Western Australia and the diverse business of the company
includes the business of home improvements, hotels, supermarkets, liquor, departmental
stores, office stores and industrial divisions for fertilizers, energy, chemicals, coal and various
industrial safety products. The main objective of the company is to deliver satisfactory return
to the shareholders through satisfying the requirements of customers. The company also
provides healthy and safe working environment to the employees and are responsible for the
expectations and attitudes of communities under which it operates its activities
(Wesfarmers.com.au 2018).
Task 1
a) Classification of expenses
Expenses under the income statement are classified either by function or by nature.
Where the expenses are classified by nature the expenses are disclosed as per the nature, for
instance, transportation cost, depreciation, wages, rents expenses and salaries. The expenses
are not reallocated under the different functions of the company that is the selling cost,
COGS, other expenses and administration expenses (Weil, Schipper and Francis 2013). This
method of disclosing the expenses are used under single step income statement and is
generally used by the small businesses owing to its simplicity. However, the main limitation
of this method is that under this method the gross profit of the company cannot be calculated.
On the other hand, where the expenses are classified by function the expenses are
disclosed as COGS, administrative expenses and selling expenses. This method enables the
calculation of operating profit and gross profit under the income statement. The classification