Financial Accounting Analysis Report: Youtus Enterprise Case Study

This report provides a comprehensive analysis of the financial accounting practices of Youtus Enterprise, an Australian sole proprietorship. It delves into the company's accounting systems, offering three reasons for improvement, and examines the importance of an effective corporate governance system. The report explores the factors influencing changes in business status, contrasts debt and equity financing, and assesses the firm's responses to regulatory changes. It also analyzes the impact of lease liabilities on shareholders and discusses why Youtus should not capitalize on a lease agreement. The analysis incorporates the business decisions and challenges faced by Youtus, including its outsourcing and online sales strategies. The report concludes with a summary of the key findings, emphasizing the importance of adapting accounting practices and corporate governance to ensure the company's financial health and compliance with regulations.

Running head : ANALYSED FINANCIAL ACCOUNTING
Analysed financial accounting
Name of the student
Name of the university
Author’s note

1
ANALYSED FINANCIAL ACCOUNTING
Executive summary:

2
ANALYSED FINANCIAL ACCOUNTING
Table of Contents
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................3
The three reasons for better accounting system are as follows -............................................3
Reasons for effective corporate governance system:.............................................................4
Reasons for change in business status:...................................................................................4
Why cost of funding under debt is better than cost of funding under equity:............................4
Firm’s action towards regulatory changes;................................................................................5
Examples related to the change in the public policy:.................................................................5
How lease liability issue affects the shareholders:.....................................................................6
Why youtus should not capitalize the lease agreement:.............................................................6
Conclusion:................................................................................................................................7
Reference....................................................................................................................................8

3
ANALYSED FINANCIAL ACCOUNTING
Introduction:
The above study discusses about the financial accounting techniques followed by
youtus enterprise, a sole proprietorship family owned private limited company of Australia
along with the current business decisions they need to take care of by implementing new
business policies. Apart from that the case study depicts about the three possible reasons
which would be helpful for the company in implementing better accounting system. Apart
from that the study also focuses on the firms reactions to the possible regulatory changes
implemented within the organization and how it will affect the equity shareholders of the
company. Lastly the study deals with the leasing techniques followed by the company.
Discussion:
Three reasons for better accounting information system:
The three reasons for better accounting system are as follows -
1. Customize by industry: accounting systems are customized by industry since
accountants and book keepers have opportunity to maintain templates for general
ledgers.
2. Saves time: youtus enterprise can look for minimization of time by improving the
current service procedures.
3. Keeping information: Youtus Company can store all the previously collected
information in the system to use them in future. In this way they won’t require to put
extra effort to recollect the old data (Hopkins et al.,2014).

4
ANALYSED FINANCIAL ACCOUNTING
Reasons for effective corporate governance system:
Increasing standards for financial reporting: The Company in order to improve the financial
reporting standards and focus on increase in corporate governance.
Stopping of corruption practises: there is a requirement of strong corporate governance
structure in order to curb down the unethical practises of corruption.
Independent board of directors: the decision making of the company board of directors
should be independent. Hence a strong corporate governance is required for the company.
Reasons for change in business status:
Economical: If the business currently running are nit profitable enough for the company and
the products and services are not generating revenue, hence the company can try to shift in
new business.
Social demand: If the society is demanding for implementation of new business or
diversification in product and technologies. Hence there is a requirement of shift into new
business.
Competitors: Since the competitors of youtus company are providing better products than this
company. Hence it is required that this company also shift in new business to provide
competition.
Why cost of funding under debt is better than cost of funding under equity:
Under the cost of debt funding system the youtus company can look to maintain the
original business. However to improve the business viability they can even try to take loan
from bank. Although the cost of funding technique is very high for the company as they have
to bear the tax expenses along with it. The company can look to pay the loan amount incurred
for the business point of view (Maskell, Baggaley, and Grasso, 2016). Hence the company

5
ANALYSED FINANCIAL ACCOUNTING
will look to increase the business more through this policy. However in the case of cost of
funding under equity the dividend can only be paid to the shareholders if proper amount of
profit is calculated from the total amount. Hence it is important for the company to
implement of effective corporate governance techniques. The company can even try to
change the business from private limited company from sole proprietorship business
(Christensen, et al.,2015). However this technique is not proven to be useful for the company
because if in some financial year there is no dividend then it will hard for the company to pay
dividend to the company shareholders.
Firm’s action towards regulatory changes;
Due to the changes in the regulation of the Australian firms, the Australian firms with
foreign subcontractors are likely to be advisory affected. The company try to implement some
growth strategy in order to improve the business (Weil, Schipper, and Francis, 2013). These
are as follows –
Keeping track of regulatory changes: The Company can try to keep track of regulatory
changes from different sources including regulatory publications, industry and local media.
Hence the cloud computing technique is the perfect solution for keeping regulatory update.
Youtus Company can also apply the same technique within the organization.
Standardizing the taxonomy: The organization has to comply with the inconsistencies relating
to changes in regulatory framework. Having a good regulatory taxonomy within the
organizational hierarchy is important for the company to maintain robust complimentary
framework. However it helps to modify the rules and regulations related to the system.
Examples related to the change in the public policy:
The changes in the public policy depends upon the below process –
1. Intention of legislative authority towards society (Libby, 2017).

6
ANALYSED FINANCIAL ACCOUNTING
2. Direction in which the society is moving.
3. Utilization of natural resources (Shim, 2013).
The Australian company can initiate the agenda setting, generate the policy formulation,
implement the same and evaluate the policy changes within the company. The company
can try to identify the policy issues thus by requiring the attention of the legislator. Apart
from that that the process needs to be checked where the needs and demands of the
customers are taken care of and the legislator need to place the deliberation issue
(Collier,2015).
How lease liability issue affects the shareholders:
Effects on liabilities: capital lease transactions have an immediate effect on the long term
liability ratio which creates a large liability. Business engaging into capital leasing policies
creates immediate change in the liability and asset valuations. For example the company’s
debt to equity ratio appears higher in the capital lease than operating lease.
Asset effect: capital lease also have an immediate effect on the changes in return on assets
ratio. In capital assets the business valuation records accounting treatment. However in order
to start incoming from a newly leased asset takes a few month. Therefore return in assets
ratio can be deflated during the initial period.
Why youtus should not capitalize the lease agreement:
The company is considering a growth agreement for the acquisition of specialised
design making machinery for its customized design making process. The items are intended
to stream five stage customer design model into three stage process which focuses on
reduction of wastages. However the lease contract requires an advance payment of $45000
and subsequent t annual payment of $85000 at the end of each financial year. However at this

7
ANALYSED FINANCIAL ACCOUNTING
price the company can try to purchase the machine from outside without leasing. Hence. The
company should nit lease the machine (Schaltegger, and Burritt, 2017).
Conclusion:
Hence it can be concluded from the above study that Youtus Company can apply
various reasons in they require better accounting research technique , better corporate
governance technique and changes in the business policies. Apart from that the decision has
been taken on why the debt financing policies can be chosen over the equity financing
policies. Apart from that the study described about the possible changes in the regulation
policies implemented by the company and what are the possible effects could occur in the
company if they are not capitalizing on the lease agreement. Hence it is said that the company
have to maintain all the regulation policies taken by the company as per the Australian
government.

8
ANALYSED FINANCIAL ACCOUNTING
Reference
Maskell, B.H., Baggaley, B. and Grasso, L., 2016. Practical lean accounting: a proven system
for measuring and managing the lean enterprise. Productivity Press.es:
Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for
decision making. John Wiley & Sons.
Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to
concepts, methods and uses. Cengage Learning.
Hopkins, D., Stringfield, S., Harris, A., Stoll, L. and Mackay, T., 2014. School and system
improvement: A narrative state-of-the-art review. School Effectiveness and School
Improvement, 25(2), pp.257-281.
Christensen, H.B., Lee, E., Walker, M. and Zeng, C., 2015. Incentives or standards: What
determines accounting quality changes around IFRS adoption?. European Accounting
Review, 24(1), pp.31-61.
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues,
concepts and practice. Routledge.
Shim, J.K., 2013. Dictionary of accounting terms. Simon and Schuster.
Libby, R., 2017. Accounting and human information processing. In The Routledge
Companion to Behavioural Accounting Research (pp. 42-54). Routledge.