Asia Pacific International College, Melbourne Accounting Assignment

This document presents a comprehensive solution to a Foundations of Accounting assignment, addressing various aspects of financial reporting and analysis. Part A delves into the roles of key regulatory bodies, including the Financial Reporting Council (FRC), Australian Accounting Standards Board (AASB), IFRS Interpretation Committee, Australian Securities and Investments Commission (ASIC), and Australian Stock Exchange (ASX). Part B refers to an excel sheet, and Part C provides a statement of cash flows for Richmond Electronics Pty Ltd. Part D conducts a detailed financial analysis, calculating and interpreting various ratios to assess the entity's earning ability, financing sources, accounts receivable collection, ability to meet unexpected demands, interest coverage, and inventory turnover. The analysis provides insights into the company's financial health and performance.

Running head: FOUNDATIONS OF ACCOUNTING
Foundations of accounting
Name of the student
Name of the university
Student ID
Author note

1FOUNDATIONS OF ACCOUNTING
Table of Contents
Part A.........................................................................................................................................2
Part B..........................................................................................................................................4
Part C..........................................................................................................................................4
Part D.........................................................................................................................................5
Reference....................................................................................................................................8

2FOUNDATIONS OF ACCOUNTING
Part A
Roles of below mentioned regulators
a. Financial reporting council (FRC)
FRC is the statutory body that is responsible for offering broad oversight of the
procedure required for setting the accounting standards in Australian and providing minister
advice and reports regarding that procedure. It is responsible for supervising effectiveness of
Australian financial reporting framework (Frc.gov.au 2019). Major roles of FRC are –
 Supervising the procedure of auditing and accounting standard setting for private and
public sectors
 Providing the strategic advice regarding audit quality that is conducted by the
Australian auditors and advising ministers regarding this and associated matters to the
extent it impact Australian reporting framework
 Monitors development of the international auditing and accounting standards
 Works for promoting development of single set of the auditing and accounting
standards for its use all over the world and promoting its adoption (Frc.gov.au 2019).
b. Australian Accounting Standards Board (AASB)
AASB is the agency of Australian government that updates and provides standards for
private as well as public sector financial reporting for the Australian organization. It works
for facilitating interactions among global economy and Australian business and contributes to
development of the global standards for financial reporting (Aasb.gov.au 2019). Major roles
of AASB are –
 Developing conceptual framework for evaluating the proposed standards
 Making accounting standards under the section 334 of Corporations Act 2001
 Formulating accounting standards for various other purposes
 Participating and contributing to development of single set of the accounting
standards for using it all over the world
 Advancing and promoting main object of ASIC Act, part 12 that includes reduction of
capital cost, allowing the Australian companies in competing overseas efficiently and
maintaining the confidence of investors in Australian economy (Aasb.gov.au 2019).

3FOUNDATIONS OF ACCOUNTING
c. IFRS interpretation committee
IFRS interpretation committee is interpretative body of IASB. It works with AASB
for supporting IFRS standards adoption. It responds to the questions regarding application of
standards and does the other works at request of board (Ifrs.org 2019). Major roles of IFRS
interpretation committee includes –
 Discussing the application questions from the stakeholders and deciding the way in
which to respond to the questions
 Reviewing the widespread accounting issues on timely basis those are generated with
current IFRS context and providing the authoritative guidance regarding those issues
 Working with similar type of national committees closely and following the
transparent, open and thorough due process for developing the interpretations (Ifrs.org
2019).
d. Australian Securities and Investments Commission (ASIC)
ASIC is the market, corporate and regulator of financial services in Australia. It
contributes to the economic reputation as well as the wellbeing of Australian through
assuring that the financial market of Australia are transparent, fair and are supported by the
informed and confident consumers and investors (Asic.gov.au 2019). Major roles of ASIC
includes –
 Enforcing and giving effect to ASIC act
 Maintaining, improving and facilitating performance of financial system and the
entities under ASIC act.
 Promoting the confidence as well as informed participation by the consumers and
investors in financial system (Asic.gov.au 2019).
 Effectively administering the law (ASIC act) with minimum procedural requirements
 Storing, processing and receiving quickly and effectively information those are
provided to it
 Making information regarding the entities and the other bodies that is available to
public as soon as possible
 Taking action whatever they can and whichever is necessary for enforcing and giving
effect to law (ASIC act) (Asic.gov.au 2019).

4FOUNDATIONS OF ACCOUNTING
e. Australian stock exchange (ASX)
ASX acts as the clearing house, payment facilitator and market operator and provides
the educational materials to the retail investors. It is an umbrella that was developed for
reflecting roles of the ASX Limited as holding entity of a group with wide range of the
market services associated with the common commitment for providing infrastructure
required for creating globally capital market that is competitive and robust and vibrant
economy (Asx.com.au 2019). Its major roles are –
 Assuring transparent, fair and orderly market with the operating rules
 Providing settlement and clearing services in effective and fair manner through using
the operating rules
 Enforcing and monitoring the compliance with the operating rules
 Regulating the entities whose securities are listed with ASX
 Supervise the market through regulating the listed entities for complying with the
listing rules (Asx.com.au 2019).
Part B
Refer to excel sheet
Part C
Statement of cash flows for Richmond Electronics Pty Ltd

5FOUNDATIONS OF ACCOUNTING
Part D
Performing financial analysis
a. Earning ability of the entity
Gross profit ratio
Gross profit $ 1,55,000.00
sales $ 4,62,500.00
Gross profit/sales 33.51%
Net profit ratio
Net profit $ 75,000.00
Sales $ 4,62,500.00
Net profit/sales 16.22%
Return on assets
Net profit $ 75,000.00
Average assets $ 4,04,087.50

6FOUNDATIONS OF ACCOUNTING
Net profit/average assets 18.56%
Return on equity
Net profit $ 75,000.00
Average equity $ 2,11,717.50
Net profit/average equity 35.42%
Gross profit ratio of the company is 33.51%, net profit ratio is 16.22%, return on asset
is 18.56% and return on equity is 35.42%. All these ratios represent the earning ability of the
entity. These are signifying that the company’s earning ability is good to provide return to the
shareholders.
b. Internal sources used for financing asset acquisition
Equity ratio
Equity 232935
Total assets 420675
Equity/Total assets 55.37%
An internal source that is the shareholders fund used for financing the asset
acquisition is 55.37%.
c. Rapidity with which the accounts receivables are collected
Accounts receivable ratio
Sales 462500
Average accounts receivables 141750
Sales/average accounts receivable 3.26
Account receivable days
365/accounts receivable days 111.87
Accounts receivables collected by the entity in 3.26 days and the receivables are
collected 111.87 times a year.
d. Ability of meeting unexpected demands
Ability to meet unexpected demand
Current ratio
Current assets 285075

7FOUNDATIONS OF ACCOUNTING
Current liabilities 156240
Current assets / current liabilities 1.82
Ability to meet the unexpected demands for working capital is 1.82 times that is the
current assets are 1.82 times of the current liabilities.
e. Ability of earning to cover the interest commitments
Interest coverage ratio
Operating profit $ 1,09,650.00
Finance expenses $ 3,150.00
Operating profit/finance expense 34.81
Company’s earning ability to cover the interest commitment is 34.81 times that is the
operating income can cover the interest commitments 34.81 times.
f. Time taken for selling the inventories
Inventory turnover ratio
Cost of goods sold $ 3,07,500.00
Average inventory $ 1,18,125.00
COGS/ average inventory 2.60
Inventory turnover days
365/inventory turnover ratio 140.21
Time taken for selling the inventories is 2.60 days that is it can sell the inventories
140.21 times during the year.

8FOUNDATIONS OF ACCOUNTING
Reference
Aasb.gov.au., 2019. Australian Accounting Standards Board (AASB) - Home . [online]
Available at: https://www.aasb.gov.au/ [Accessed 28 Apr. 2019].
Asic.gov.au., 2019. ASIC Home | ASIC - Australian Securities and Investments Commission .
[online] Available at: https://asic.gov.au/ [Accessed 28 Apr. 2019].
Asx.com.au., 2019. Home - Australian Securities Exchange - ASX. [online] Available at:
https://www.asx.com.au/ [Accessed 28 Apr. 2019].
Frc.gov.au., 2019. Financial Reporting Council. [online] Available at: http://www.frc.gov.au/
[Accessed 28 Apr. 2019].
Ifrs.org., 2019. IFRS . [online] Available at: https://www.ifrs.org/groups/ifrs-interpretations-
committee/ [Accessed 28 Apr. 2019].