Advanced Financial Accounting: Analysis of Adelaide Brighton Limited

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Advanced Financial Accounting
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Table of Contents
Introduction.................................................................................................................................................3
Accounting concepts...................................................................................................................................5
Conceptual framework and the issue of measurement -...............................................................................8
Fundamental Qualitative Characteristics...................................................................................................10
Conclusion.................................................................................................................................................14
References.................................................................................................................................................15
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Introduction
Financial Accounting keeps tracking on an organizational financial statement. It helps in
examining company’s performance with the help of figures from it’s annually report. This report
comprises the Australian Accounting Principles that includes theoretical models on accounting;
understanding of financial reporting issues relates AASB accounting principles, significance of
conceptual framework in accounting and accounting on assets and liabilities (Christensen, et. al.,
2013).
In this report, measuring issues of Adelaide Brighton Limited Company are also stated. This is a
leading Australian Company of manufacturing and supplying the construction related products
throughout the Australia. The main objective of Adelaide Brighton Ltd is to manufacture and
supply the cement, aggregates, industrial lime and concrete products. This company boosts
distribution networks all over the Australia. Basic Qualitative Characteristics states that the
representational faithfulness and relevancy also plays a specific role in this organization. Thus
this report comprises of various accounting theories and the applicable standards to the
organization for achieving sustainable growth and achievement of preferred objectives.
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Accounting concepts
Adelaide Brighton communicates its business through accounting. It communicates affaires and
financial position during the average of book-keeping. Accounting is the speech of company in
the type of monetary statement (Cascino, 2019).
Here are accounting concepts of Adelaide Brighton which are as follows –
Accrual concept –
Adelaide Brighton recognises its revenue through realisation and not on actual receipt. It uses the
arrangement of money and accumulation system to get free of the restriction
Objectivity concept –
Adelaide Brighton keeps accounting transactions evidenced by commerce documents i.e. invoice
and voucher. Evidence keeps the company free from the partiality of the accountant or others.
These records form the origin of confirmation of entry and of assessment. The Adelaide
Brighton keeps its accounting record based on documentary evidence, therefore it is acceptable
universally.
Realisation concept –
when revenues are earned by the Adelaide Brighton, this concept determines the point of time.
Without this concept profit can not be achieved by the company. It is also known as “revenue
recognition concept” (Cascino, S., 2019). It refers to the revenue is being received on the time on
which it is realised. This is very important as profit earned by the company depends on the
period of time.
Matching concept –
In this theory it is essential that the costs through the book-keeping phase should be matched
with the revenue throughout the similar time. In other word, company’s expenses in an book-
keeping year have to be coordinated with revenues in that year. The object of accounting of a
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Adelaide Brighton is that the documentation to be made in way so that price may be evaluate
with profits.
Cost concepts –
Fixed assets acquired by the Adelaide Brighton are recorded on the account books. This value is
known as book value. If it does not aquire any asset then it does not appear in the accounting
records. The cost of any asset may differ from its market value. This concept is best one for
Adelaide Brighton if it is compared with alternatives. When recording is achieved by the
company the prices of assets get stable.
Money measurement concept –
Adelaide Brighton expresses its transactions in monitory terms. Transactions are recorded in
accounting through quantitative records (Zare, 2015). Thus any transactions, which can not be
expresses in capital will not be evidence in book-keeping book in money measurement concept.
This concept shows all the transactions in the form of money.
Dual Aspect thought (Accounting equation concept) –
This perception tells about two folds of aspect of business transactions of Adelaide Brighton.
1. The compliant of benefit
2. The generous of the benefit
The principle of dual aspect concept is very simple and effective. “ this is the structure of book-
keeping by which acceptance or generous aspect of each business are documentation at a time, so
the operation affect equally the generous as well as the receiving account.
Total Asset = Total Liabilities
Going concern concept –
This is related for long life business. Adelaide Brighton wants its business to continue for an
indefinitely long period of time. It is prolong to activate on a commercial balance ifs treat as an
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available concern. This concept assumes continuity of activity so book-keeping information is
formed as a going unease.
Accounting period concept –
In this concepts company needs to recognize the outcome of its investments and hard work at
everyday interval, so accountant chooses a few shorter phase to tell the outcome of the same
(Bond, et. al., 2016). This period is called book-keeping period. Accounting date shows the
closing day of the accounting. Accounting phase may be 3 months or 6 months. It should not be
neither too long nor too short. So company’s financial report assists to build fine judgment,
curative measures and growth.
Business entity concept –
This concept is important for the company because its commerce is dividing from the individual
who complete assets to the firm. If business affairs and private affaires are mixed, that that case
it will be difficult to find true picture of the business. Financial position or receive capability of
the fixed can be easily find out by this concept. The company keeps its all transactions in its
books.
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Conceptual framework and the issue of measurement -
It is a system of ideas and objectives that creates a set of rules and standards. This framework is
all about how to explain a phenomenon by the researchers. Conceptual framework helps in
accounting disputes. There are so many advantages of this. Adelaide Brighton uses advantages
of this framework.firstly who is making this framework is “ forced” to think carefully about the
variables and give proper description. It is like a “map” or “rudder” that will tell about realising
the objects. This framework is also used for explaining conflict theory. These guidelines helps
the company to reach final results.
The conceptual Framework usually accepts a conceptual principle that produces the frame or
shapes the map for fiscal reporting. Financial reporting is referred as method of delivering
information to the investors that are significant and relevant in the business and financial
decision, hence this framework assists in determining the accountability of occurrence of an
occasion. The conceptual framework is as essential part in financial reporting system in the
Adelaide Brighton Ltd that outcomes in evolving the accounting standards and accounting
theories. An accurate implementation of conceptual framework offers measurements in
accounting as well as offering sustainable and legal behavior. (Wang, 2014).
Adelaide Brighton limited’s purpose is to make conceptual framework. Some are as follows –
Its purpose is to assist accountants to select acceptable accounting alternatives.
Its purpose is to provide description of current practice and frame the new issue.
Its purpose is to explain the limitation of accounting through establish fundamental concepts,
definitions of key terms and objectives (Bond, et. al., 2016).
Strong conceptual framework capture something real, so that it is easy to remember and apply.
Adelaide Brighton limited prepares their conceptual framework by following topics –
Choose a topic –
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Firstly Adelaide Brighton decides the topic of research that should come in the field of
specialization.
Review of literature –
After choosing the topic of research the review comes. It should be relevant and updated enough
to deciede whether these are reliable or not.
variables isolation –
After review relevant information or variable the isolation comes. If the variables are not in the
literature or summary then company quickly identify the variables of study.
Generate framework –
This is the last step in preparing conceptual framework. Company buils this framework by using
mix variables from the articles. In this the problem statement of the company construct the
conceptual framework (Mbobo & Ekpo, 2016).
Conceptual framework develops policies, rules and regulations to establish the accounting
standards.
Issues of measurement –
Conceptual framework of Adelaide Brighton limited points out two fundamental qualitative
features and fair presentation of information. It is highly crucial as far as accounting concern
because it involves formulation of policies and procedures. Another issue with Adelaide
Brighton limited is regarding the lease liabilities which is also considered.
Calculation of fair values which directs the measurement of fiscal as well as non-fiscal assets and
liabilities. For illustrating this, organization has documented a framework in order to measure an
accurate value that involves an expert financial team who observes and manages the entire
management of unbiased values and straightforwardly reports to CFO of company (Flower,
2018).
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For related assets and liabilities, cost is estimated by using conceptual framework that helps in
determining the issues related to measurements. A conceptual framework is extremely important
as accounting concern thus it funds the formulation of procedures and policies. In Adelaide
Brighton Ltd, a measuring issue occurred related to lease liability which is essential to be taken
into concern.
Thus conceptual framework benefits in evolving the policies, rules, and regulations and
additionally contributes to launching the accounting standards founded on the Australian
accounting board. AASB 15, AASB 8, and AASB 134 are implemented inside Adelaide
Brighton Limited and this is prepared by the effective conceptual framework. AASB 15 is
associated with the revenue from contract with clients. The Operating segments concrete,
cement, aggregates run quantitative threshold obligatory by AASB 8 and meeting the
aggregation standards permitting them to be considered as one segment. Consolidated interim
fiscal report for half yearly period has been prepared in agreement with Accounting Standard
AASB 134 (Landherr, 2018).
Thus, the conceptual framework is significant in addressing the concern and development of
appropriate and effective accounting theories, principles and the standards so the organization
can attain its desired goal in an effective manner.
Fundamental Qualitative Characteristics
IASB (International Accounting Standard Board) approved fundamental qualitative
characteristics. It is important to present the relevant and faithful financial information in an
organization. Further to enhance qualitative characteristics timeliness, understandability,
verifiability, comparability has been noted in financial accounting to the part of company.
Adelaide Brighton Ltd is applying financial accounting to make an effective decision in order to
accomplish the company’s objectives. Financial Information assists in controlling cost that will
influence the external part of the company. In order to get an accurate feedback from the market,
relevancy and faithfulness representation of financial information. Financial information must be
unbiased, complete and free from errors (Dietz, et. al., 2018)
Relevancy
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Adelaide Brighton Ltd comprises relevant information that stimulates the economic decisions of
users of an organization by assisting them to estimate the past, current and upcoming events or
confirming their previous estimations. In this organization, items are shown individually to
improve the relevance of financial statements. Because without relevance there will be no use of
information in the market as well as organization’s license will get cancelled so Adelaide
Brighton encompasses the relevant information and the company will display financial
information with correct data.
Adelaide Brighton follows Materiality that is a entity specific characteristic of relevance, means
material to one unit may not be material to another unit. Materiality is influenced by the
magnitude or size and the nature of an item.
Faithful representation
Presentation of Financial Reports in Adelaide Brighton Ltd Company is observed to be faithful
presentation to the other parts of company. The presentation was based on annual reports of
company, and the company is defining the entire information of the consumer to promote and
then work will be taken in the company (Richardson, 2012). The faithful presentation of
financial information helps in maintaining and building trust. The characteristics of faithful
includes: unbiased, completeness and free from errors.
Enhancing Qualitative Characteristics
Comparability
Comparability refers to compare information that facilitates the comparisons inside the entity as
well as across entities. For example: revenue is compared of years 2016, 2017and 2018. This
enables in determining the differences and similarities among different organizations (Mbobo &
Ekpo, 2016).
Understandability
This refers to the extent to which information can be understood. Thus the information should be
presented clearly and precisely. The financial information removes the complex articles and
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produces the report in a simple and an understandable form and it is an improper method to
remove those complex articles.
Verifiability
Verifiability helps in guaranteeing user that the faithful presentation of information. The
information is verified from the clue and the user has a choice to analyze the information
whether it is realistic or not..
Timeliness
To help an organization in constructing effective decisions, the timelessness is most appreciated
factor. And the learning will be done in a specific time period. If timeliness gets delayed, than it
has no use in financial information. Hence timeliness can never be delayed.
Characteristics of Faithful representation
1. Completeness
Completeness refers that the financial information is complete in the record or of users that
presents an appropriate or complete data with the suitable explanation (Richardson, 2012). The
Adelaide Brighton Ltd takes the entire information for advertising.
2. Unbiased
Unbiased refers that the financial statements represents the real state of an organization without
altering the outcomes unnecessarily. In the democratic nation, everybody have freedom and the
association is advertising with the country regulations.
3. Error free
Error free refers to the financial information, that comprises of various types of work and that
will be evaluated in the economic department that will me made error free. The fiscal reports
demonstrate without error than it would be helpful in getting good results. Continuous sequence
of errors leads in biased outcome that may be further undertaken as a case of financial reporting
deceit (Parker & Northcott, 2016).
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Importance of faithful representation
Perception: if the financial information presented would be fake , then after observation it would
be recognized that the data is not accurate. But if providing an accurate data , then it will results
in good perception.
Trust: Faithful Representation will allure in making trust among the users and market. The
Adelaide Brighton is producing advertisements with an accurate data that helps in building trust
among market.
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