Business Accounting Essay: Principles and Practices in Australia

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Business accounting (essay)

Table of Contents
Introduction......................................................................................................................................3
Conclusion.......................................................................................................................................6
References........................................................................................................................................7

Introduction
This essay will be demonstrating different concepts of business accounting based on the
Australian system of accounting. The main purpose of this essay is to understand the principles
and concepts in the accounting for business. The writing of essay will be dependent on the
GAAP (general accepted accounting principles) which is quite helpful in the business accounting
system of Australia. The essay also dependent on the transaction of Telstra Company, the
accounting information will be briefly explained in this study with the help from Australian
financial regulatory framework. The usefulness of accounting information in business practices
will be briefly explained in this study to take an insight about business practices of Australia.
The Telstra cooperation limited has a good network of customers and provides services across
the Australia. The company chosen for the analysis of the fundamental characteristics presented
in the financial report is AZURE HEALTHCARE LIMITED, which is a famous firm working in
the healthcare sector in Australia for a long time. This company is also listed in the Australian
Stock Exchange.
In the given context, Telstra Ltd. has purchased a piece of land long back in the year 2010 for an
amount of $52 million, the value of which has now increased to a sum of $ 200 million. The
accountant of the firm has asked that the property of land must be revalued and therefore, must
be shown in the book of accounts as per the generally accepted principle of presenting a faithful
position of the firm’s financial statements. This is a true suggestion given by the Accountant as
the firm holds a property which has a very high value as compared to what is being shown in the
books which leads to a misrepresentation of accounting information. The principle of being
faithful in presenting the financial statements suggests that the financial statements must be
prepared in compliance with the accounting standards of AASB (Aasb, 2018). The term, Faithful
presentation means that there must be a fair presentation of all the transactions and their effects,
and all the incomes / expenses and gains / revenues must be which are material for the users of
the financial statements must be disclosed. As per the Australian as per the accounting standards
the assets must be shown at their fair value in the books of accounts. So, the revaluation profit
must be shown and disclosed as it is material information that must be disclosed to the users of

financial statement. The firm must revalue the land and show the remaining amount as
revaluation profit.
As per the analysis of the Australian financial regulatory framework, the essential features of the
accounting information are many. These qualitative characteristics of the accounting information
include features such as reliability, relevance, materiality, the data must be comparable, must be
able of being understood, it must contain timeliness etc (Aasb, 2018). The concept of reliability
states that the accounting information so collected and presented in the financial statements must
be trustworthy and transparent. The information must not be presented in order to give cater to a
section of users of financial statements i.e. it must be unbiased. The concept of relevance states
that the information so collected must be important to the users of the financial statements. The
information which does not hold any importance to the financial statements must not be included
in it. Materiality again states that the information so presented in the financial statements must
hold a substantive importance for the financial users. The feature of timeliness states that the
financial information must pertain to the current accounting and financial year. The past data
which is not relevant today must not be included in the financial statements. The information so
presented in the financial statement must be capable of being compared to the past data, and
other firms working in the same line of business to carry out relevant financial comparisons of
the firm. the data so collected must be transparent as well i.e. it must not have any hidden or
confusing facts as it gives rise to misrepresentation of facts and data. All the financial statements
presentation must adhere to the given above qualitative characteristics.
After studying the financial report of the company AZURE Healthcare Limited, or the year
2017-18, it can be estimated that the firm has disclosed all the relevant information to the users
of its financial statements. This can be said as the firm has clearly presented all the information
in the consolidated statement of financial position and have attached the relevant information in
the form of notes. For example; in the note 10, of balance sheet, the firm has disclosed all the
relevant information regarding this particular topic (Azure Healthcare Limited, 2018). And
similarly, almost all the items in the balance sheet and in the income and expense statement have
disclosures against them in the form of notes so that when the financial user studies the financial
statements, no confusion strikes. Adding to this, a consolidated statement of changes in equity
has also been presented which specifies the balances pertaining to the previous year and the

current year as well. This enables the users of financial statements to compare the given data and
the financial performance of the firm. Similarly, all the relevant information has been informed,
such as the profit and the net profit pertaining to the current year has been calculated and all the
factors/ transactions affecting the net profit and the gross profit has been stated separately so that
it becomes easier for the firm as well as for the stakeholders to understand the profits the
material reasons which result in these profits. All the financial statements including the
consolidated balance sheet, consolidated profit and loss account contains only the relevant
material information for the firm and no other irrelevant information has been disclosed. The
statement of financial position also adhere to the characteristic of comparability because the
given financial statements can be compared to the past year financial statements of the same firm
or any other firm working in the same industry just so as to find out the performance metrics of
the firm. This is because the financial information is capable of being compared. Also, the
charactestics of timeliness has also been adhered to because, as all the data relates to the current
accounting year for the year 2017-18.
The financial statements and the information disclosed in the financial statements are of utmost
importance to the firm as well as to the external and the internal stakeholders of the firm. This is
because the decision to invest in a firm is based on the financial performance of the concerned
firm. For an outside person, aiming to invest in the firm AZURE Healthcare Limited, the
financial statements are the only help / information to understand the actual financial position
and take the investment decisions. For the firm also, the financial statements holds the utmost
relevance as it aids the firm to understand its own financial position and also aids in comparing
its own past and present performance and also helps in comparing the financial position with the
other firms (Cpaaustralia, 2018). The users of financial information would react to the
information so disclosed as the gross profit of the firm has increased from the year 2017 to 2018.
In the year 2017 the gross profit was $ 13,977, 000 which increases to $ 14,134, 000 in the year
2018 (Azure Healthcare Limited, 2018). Interpreting this, the financial users would be happy to
know that the gross profit has increased. The total overhead expenses of the firm has decreased
from the year 2017 to the year 2018 because as there is a major decline in the employee benefit
expense and there is no impairment expense in the year 2018, this has led to a positive net profit
this year whereas, the net profit in the previous year was in negative. So this is a good sign for
the financial users. Also, as all the relevant and material information has been disclosed in the

notes to accounts by this firm, the stakeholders have no grounds to doubt to transparency and
materiality of the transaction of this firm.
Also, the financial statements contain the total income that is attributable to the members of the
firm which amounts to $ 1,367, 000. The amount attributable to the members in the previous
year was in negatives. So, the users of the financial statement would be happy to know this. The
first note i.e. is the statement of compliance which discloses that the statements have been
prepared in accordance with the Australian Accounting Standards Board and also in accordance
with the Corporations Act 2001. Also, the note 1 clearly states that the compliance with the
Australian Accounting Standards Board means that the international financial reporting standards
have also been complied with, while preparing financial statements (Academia, 2019). The
impact of this disclosure is that the users can easily be ensured that all the information so
presented in the financial statements is relevant and material. The note 1 also discloses that the
financial statements comply with the revised and new accounting standards and also with the
interpretations so made by the firm Azure Healthcare Ltd.
The business combinations have also been disclosed by the firm as the event holds a major
importance for the firm as well as for all the stakeholders especially the equity shareholders and
preference shareholders. This states that the characteristic of transparency has been duly
followed by the firm while preparing the firm’s annual reports. The note 2 of the financial
statements represents the revenue item of the balance sheet and it also exhibits the total revenue
earned by the firm separately. In the note 3 of the financial statement the expenses of the firm
have been disclosed and a break up of all the expenses related to the employees, expense done on
research and development, capitalization of costs etc all have been given (Azure Healthcare
Limited, 2018). This states that the characteristic of relevance and reliability are being fulfilled
here and the reaction of the stakeholders towards this would be satisfactory. Also, all the given
expenses, incomes, liability or assets pertain to the current year itself which is for the year 2017-
2018. This states that the firm has complied with the characteristics of timeliness as well. So, it
can be said that all the qualitative characteristics that need to be adhered by the firms are being
fulfilled by the concerned firm Azure Healthcare Ltd.

Conclusion
In the end, it can be concluded that the accounting principles followed by the firms help them
disclose firm all the relevant facts and figures which are essential for the users of the financial
statements. For the firm Telstra, a conclusion has been given that it must revalue its piece of land
and disclose the correct price to the users of financial statement. The other parts of the report
aims at studying the qualitative characteristics of the financial and accounting information that
the firm Azure Healthcare Ltd. aims at providing to its end users of financial statements.

References
 Aasb. 2018. Property, Plant and Equipment. Pp 10-18
 Aasb. 2018. Presentation of Financial Statements. [Online] Aasb Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15_FP_COMPdec17_01-
18.pdf [Accessed on : 20th may 2019]
 Aasb. 2018. Qualitative Characteristics of Financial Information. pp 8-30.
 Academia. QUALITATIVE CHARACTERISTICS OF ACCOUNTING INFORMATION
& FAIR VALUE ACCOUNTING. [Online] Available at:
https://www.academia.edu/34878080/Qualitative_characteristics_of_accounting_information
[Accessed on : 20th may 2019]
 Azure Healthcare Limited. 2018. Annual Report. [Online] Azure Healthcare Limited
Available at: http://azurehealthcare.com.au/wp-content/uploads/sites/39/2018/09/2018-
Azure-Healthcare-Limited-Annual-Report_FINAL.pdf [Accessed on : 20th may 2019]
 Cpaaustralia. 2012. Accounting Concepts and Principles. Pp 9- 15.
 Cpaaustralia. 2016. GUIDE TO VALUATION AND DEPRECIATION. [Online]
Cpaaustralia Available at:
https://www.cpaaustralia.com.au/~/media/corporate/allfiles/document/professional-
resources/public-sector/guide-to-valuation-and-depreciation [Accessed on : 20th may 2019]