Management Accounting - Accounting Issues and Solutions

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of student:
Name of the University
Authors’ note

1
MANAGEMENT ACCOUNTING
BUSINESS LETTER
Baker and associates
55 York Street, Sydney.
NSW 2000.
Date: 16-9-2019
Scott White
Managing director of White Pty Ltd
Level 2, 55 York Street,
Sydney NSW 2000
Dear, Scott White,
I am writing this letter on behalf of your email regarding the accounting issues that
the company was faced during the accounting period. This letter is providing the possible
solutions and relevant accounting disclosures statements on behalf of accounting standards
and accounting principles. Those issues and its probable solutions are given as follows;
Issue 1:
White Pty Ltd is the manufacturer and seller of computer chips. Normally, the company
selling its products under the terms of the contract for sale, including warranties as an extra
benefit. Such warranties would be including repair or replacement of products if such
products faced any complications. Generally, the company providing three years of
warranties for every product from the date of sale. Now in the first year that the warranty has
been available, the company does not have any relevant data regarding the warranties.

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MANAGEMENT ACCOUNTING
According to the provisions given under the AASB 137 provisions, contingent Liabilities and
Contingent Assets, in case of a business, there are several similar obligations available like
warranties for individual products. The probability of cash outflow will be required in case of
a settlement, determined by considering the class of responsibilities as a whole. Normally
such uncertainties are surrounding, or the company should recognize the probable expenses
as the number of provisions regarding the warranties of such products. The provisions are
measuring in case of involving a large population of items, then normally the obligations are
estimated by weighting all possible outcomes through their associated probabilities.
As per AASB 137 Para 14, a contingent liability is normally recognized when the company
(White Pty Ltd) has some present obligations due to its past event. It also has a probability of
outflow of some economic benefits in the case to settle the obligations and such obligations
can be reliably evaluated.
According to the provisions that are provided in the Para 36, generally, the provisions are
measured at the best possible estimates regarding expenditure, which is required to settle the
present obligation at the end of normal reporting period along with consideration relating to
risk or uncertainties. Generally in case of disclosures, for each an individual provision, the
opening and closing amounts need to disclose. As per the provision of Para 84-92, the main
reason behind any changes, including the nature of obligations that are giving rise to the
general rules need to disclose in the annual report.
Using the provisions providing under the AASB 137, the White Pty Ltd. is needed to disclose
the number of warranties in its financial statement. Under the head of clauses, contingent
Liabilities and Contingent Assets. It is one type of obligations of the company. In case of
providing such warranties for individual products, the company should maintain the proper
amount of provisions for those probable future expenses. Generally, as per the terms, the