Accounting System and Process - Finance Homework Solution

This document presents a comprehensive solution to an accounting system and process assignment. It starts with explanations of spreadsheet applications, including the use of named ranges and negative number representation, and then moves on to the segregation of data and report areas within spreadsheets. The assignment includes examples of IF functions within Excel, and a discussion on periodic inventory systems. The solution further covers the preparation of adjusted spreadsheets, income statements, and balance sheets, alongside an analysis of the advantages of using spreadsheets for accounting. It also includes an inventory analysis, bank reconciliation, and journal entries for accounts receivable and bad debts. The document evaluates financial position through receivables, provides journal entries for a given scenario, and analyzes the business operations of Wesfarmers, including its financial statements, dividends, return on equity, earnings per share, risk mitigation strategies, and sustainability. Finally, it offers investment advice based on Wesfarmers' financial performance and working capital ratio.

Running head: ACCOUNTING SYSTEM AND PROCESS
Accounting system and process
Name of the university
Subject code and name
Student name and student ID number
Assignment task number
Author note

1ACCOUNTING SYSTEM AND PROCESS
Table of Contents
Question no. 1.........................................................................................................................................................2
Question no. 2.........................................................................................................................................................2
Question no. 3.........................................................................................................................................................3
Question no. 4.........................................................................................................................................................3
Question no. 5.........................................................................................................................................................4
Question no. 6.........................................................................................................................................................5
Question no. 7.........................................................................................................................................................9
Question no. 8.......................................................................................................................................................11
Question no. 9.......................................................................................................................................................13
Question no. 10.....................................................................................................................................................13
Question no. 11.....................................................................................................................................................13
Question no. 12.....................................................................................................................................................14
Question no. 13.....................................................................................................................................................14
References.............................................................................................................................................................18

2ACCOUNTING SYSTEM AND PROCESS
Question no. 1
Under spreadsheet, names replace the cell references so that the users can calculate and use the formulas
to make it convenient and useful. Examples of spreadsheet that represents the liabilities as well as the owner’s
equity are represented below –
Question no. 2
The negative numbers are put in brackets rather than showing it through putting the minus sign facing
the negative numbers to present the negative numbers clearly and make it more visible to the users (Golyagina,
& Valuckas, 2016). One example of putting the negative numbers in bracket is as follows –

3ACCOUNTING SYSTEM AND PROCESS
Question no. 3
The spreadsheet makes is easier to enter various entries in proper way under separate colums
particularly at the time of recording inventory. The spreadsheet must show the data area distinct from the report
area as the data area includes the entire data that are not yet processed whereas, the report area includes that
data which are processed. It helps the users to extract the processed as well as unprocessed data as per his
requirement. The below presented image is an example of segregating the report area and data area –

4ACCOUNTING SYSTEM AND PROCESS
Question no. 4
IF function performs the logical test and returns True value on fulfilling the specific condition,
otherwise returns the false value. Under excel, IF functions is considered as logical function.
IF function example –
Normal view –
Formula view –
Question no. 5
Periodic systems for inventory

5ACCOUNTING SYSTEM AND PROCESS
Under the periodic system, the inventories are updated at the end of the each period rather than after
each transaction of purchase or sales (Hoggett et al., 2015). Goods available for the purpose of sales are
calculated through adding the purchases with opening balance and the closing balance is calculated through
physical count of inventory.
Example –
Question no. 6
Adjusted spreadsheet of fancy Footwear – Normal view

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Adjusted spreadsheet of fancy Footwear – Formula view
Income statement under Normal view –

7ACCOUNTING SYSTEM AND PROCESS
Income statement under Formula view –

8ACCOUNTING SYSTEM AND PROCESS
Balance sheet under normal view –

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Balance sheet under Formula view –

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Spreadsheet as the accounting tool –
 It makes the calculation simple and easier through various formulae
 The cells can be made visible or hidden as per the requirement of the user (Drury, 2013).
 The sheet can be formatted through specified font, size, text and numbers as per requirement
 Various graphs and charts can be prepared under spreadsheet using the data
Question no. 7
Inventory under normal view –
Calculation of gross profit under normal view –

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Inventory under formula view –
Calculation of gross profit under formula view –
Inventory after changes in data –
Gross profit after changes in data –

12ACCOUNTING SYSTEM AND PROCESS
Question no. 8
Bank reconciliation under normal view –
Bank reconciliation under formula view –

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With changed data under normal view –

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Question no. 9
Account receivables – journal entries
Question no. 10
Bad-debts estimation
Write-off method – when the amount of debt is considered as uncollectible, the bad debt is debited against the
amount of account receivable (Abdelmoneim Mohamed & Jones, 2014).
Example, if bad debt allowed for amount of $ 1,000, journal entry will be –
Allowance method –under this, the uncollectible amount with regard to the receivable are estimated at the end
of each period.
Journal entry for the allowed bad debt of $ 1,000 will be –
Question no. 11
Evaluation of financial position through receivables
The solvency of an organization can be analysed through the receivable status of the organization. It is
considered that when a firm efficiently collects its receivable, it has less chance of facing the consequences of
bad-debts (Myrelid & Olhager, 2015). Further, the efficiency of sales of the entity can be analysed through its
receivable.

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Question no. 12
Scenario
Journal entries for the above scenario –
Question no. 13
1. Wesfarmers group’s business
Wesfarmers is involved in various businesses like –
 Industries and safety
 Departmental store
 Food and liquor

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 Energy, chemicals and fertilizers
 Office improvements
 Home improvements
2. Comprehensive income statement
It is recognized from the statement that it represents the profits that is contributed to parent member.
The statement represented the translation reserve for foreign currency and the amount involved were $ 15
million and it also represented the cash flow from hedge reserve. The comprehensive loss of the company for
the period amounted to $ 78 million.
3. Comment on various items
Dividends – after the right with regard to receiving the dividend is confirmed, the amount is recognized as
revenue. Further, with regard to payment of the dividend, the company paid $ 2,600 million of dividend for the
year ended June 30th 2016
Return on equity – it represents the management’s efficiency in using equity financing for the operational fund
requirement.
ROE = Net income / Shareholder’s equity
ROE = $407 / $22,949 = 0.018
It can be identified that the company is earning only $ 0.018 on the equity that is considered very poor.
Earnings per share – diluted EPS and basic EPS of the company both are 36.2 cents for the year ended June
30th 2016. Basis EPS of the company is calculated through dividing the amount of attributable profit to parent
member by the weighted average numbers for the ordinary share.
Risk and the mitigation - the company does not guarantees that the information included in the financial report
is free from misstatement, error or omission and it is reliable, complete, contemporary, suitable and accurate in
all respects. For mitigating the risk, company does not mention any specific individual for the financial report
and prepare the report as per the conceptual framework of AASB.
Sustainability – as the company is performing consistently for the past years and it has competitive advantages
over its competitors, the company is regarded as sustainable for the long-run (Bebbington, Unerman &
O'Dwyer, 2014).
Corporate governance – the company complies with the recommendations issued dated 27th March 2014 and
the third edition of ASX corporate Governance council’s principle for corporate governance.
Income statement – from the revenues, the expenses are deducted to calculate the figure of EBIT and then
interest costs and income tax expenses are deducted to calculate the figure of the net profit (Wesfarmers.com.au
2017).
Balance sheet – balance sheet of the company is divided in the following sections –
 Assets that is divided in non-current assets and current assets
 Liabilities that is divided into non-current liabilities and current liabilities
 Shareholder’s equity

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4. Calculation of working capital ratio
As the working capital ratio is less than 1, the company shall acquire more current assets to increase the
ratio.
5. Net profit after tax

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6. Advise to Vikram for investment
It is recognized from the performance of Wesfarmers that the performance of the company is quiet
stable and further the net profit of the company for last 5 years. Moreover, the working capital ratio of the
company can be increased through acquiring some current assets. Therefore, Vikram can invest his $ 50,000 in
Wesfarmers group.

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References
Abdelmoneim Mohamed, A., & Jones, T. (2014). Relationship between strategic management accounting
techniques and profitability–a proposed model. Measuring Business Excellence, 18(3), 1-22.
Bebbington, J., Unerman, J., & O'Dwyer, B. (2014). Sustainability accounting and accountability. Routledge.
Drury, C. M. (2013). Management and cost accounting. Springer
Golyagina, A., & Valuckas, D. (2016). Representation of knowledge on some management accounting
techniques in textbooks. Accounting Education, 25(5), 479-501.
Hoggett, J., Edwards, L., Medlin, J., Chalmers, K., Hellmann, A., Beattie, C., & Maxfield, J. (2015).
Accounting.
Myrelid, A., & Olhager, J. (2015). Applying modern accounting techniques in complex
manufacturing. Industrial Management & Data Systems, 115(3), 402-418.
Wesfarmers.com.au. (2017). Retrieved 9 September 2017, from
https://www.wesfarmers.com.au/infodetail/about/investors/2016AnnualReport.pdf