Financial Accounting Process: Non-Current Assets, Shares

This report provides an overview of the financial accounting process, specifically focusing on the regulatory framework in Australia, accounting principles and standards for non-current assets, and the differences between shares and debentures. It highlights the importance of financial reporting for ...Read More

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FINANCIAL ACCOUNTING PROCESS
FINANCIAL ACCOUNTING PROCESS
NAME OF STUDENT:
NAME OF INSTITUTION:

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FINANCIAL ACCOUNTING PROCESS
Regulatory framework in Australia.
In Australia the purpose of financial reporting is to drive financial information in the
corporate world for the benefit of the shareholders and other stakeholders. In the conceptual
framework guideline, the information should communicate the financial healthiness of the
enterprise and that information must be of interests to the users (Christian & Ludenbach, 2013).
Generally, shareholders are the owners of the corporate and any financial reports prepared must
be aimed for the benefits of the owner. In a conceptual framework, the existing shareholders
evaluate and interpret the performance of their enterprises on the effectiveness of the financial
reports presented to them. In inconformity to the international financial reporting standards
(IFRS) and the Australian Accounting Standards (AAS), accountants and practicing finance
managers should present and communicate their accomplishments in the organizations in a well
and simple financial statements to the owners periodically as regulated in the act (Lev & Gu,
2016).
According to Tomaszewski “et al” (2018) the conceptual framework represent a
structured format pf accounting that is intended to set the fundamentals and objectives for the
accounting standards development. Under the regulatory principles the conceptual framework
creates the required concept expected to lead the functions, nature and limits of financial
reporting whether principally based or under set rules. Further the absence of the conceptual
framework would lead to an ad hoc guidance which can be incoherent and inconsistent with the
obvious low ramifications (Tomaszewski “et al” 2018).

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Accounting principles and standards for non-current assets, revenues and liabilities.
According to Christian & Ludenbach, (2013), IAS 1 presentations of financial statements,
the minimum requirements for the presentations of financial statements should be well structured
with the overall aim of the going concern of the entity. Generally the concept requires the
composite of financial statements to consist the income statements formerly profit and loss, the
statements of financial position, the statement of changes in equity, statements of cash flows and
the comprehensive income statements. The IAS 1 standards maintains that the presentations of a
financial statements in a particular year must be compatible with the entity’s previous financial
statements period presented. Further the standards addresses the recognition measurements and
disclosure of financial elements and transactions in accordance to the international financial
reporting standards (IFRS) (Christian & Ludenbach, 2013).
According to Wang, (2014). non-current assets are assets owned by an organizations
with an aim of not turning them into cash within the next financial year. These are assets bought
by the entity with the intention of business use to generate profits or long term use with its
benefits to accrue over a number of years. The presence of such assets in the entity reveals the
short term and long-term investments agenda of the company. In a business context neither in
sole proprietorship, partnership or a company, the mutual relations to expense or capitalize on
assets depends on the accounting standards as well as the accounting framework adopted by the
organizations (Wang, 2014).
Differentiate shares and debentures.
In the company structure the ownership is divided into neither shares nor debentures.
According to Surbhi, (2015), shares is that smallest portion rights to the share capital of the

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company, while the debentures refers to the external parties long term instruments to the total
debts of the company. Shares can be offered in the stock market to raise capital for the company.
In a company debentures are raised through a charge on assets, although in some cases the
company is allowed to offer unsecured debentures to raise funds (Surbhi, 2015).
Major differences are.
In a company shares shows the ownership while debentures shows the indebtedness of
the company over a period of time.
Shareholders of a company have voting rights while debentures holders has no voting
rights.
Debentures are convertible while shares cannot be converted.
In the winding up of a company debentures holders are given priority for repayment over
the shareholders.
Debenture holders investors in a company earns incomes inform of interests while the
shares holders earn incomes inform dividends.
In the accounting treatment interest income on debentures is an expense and is allowed as
a deduction while the dividend income in shares is not an expenses and therefore not deductible
(Surbhi, 2015).

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References.
Christian D & Ludenbach N, (2013). IFRS Essentials.
Lev B & Gu F, (2016). The End of Accounting and the Path Forward for investors and
Mangers.
Surbhi S, (2015). Differences between Shares and Debentures. Retrieved 12/10/2018.
https://keydifferences.com/difference-between-shares-and-debentures.html
Tomaszewski G, Choi S & Yeong C, (2018). The Conceptual Framework: Past, Present,
and Future. Retrieved 11/10/2018.From
https://search.proquest.com/docview/2085000705/84168C41CBC4A4BPQ/1?
accountid=30552.
Wang X, (2014). Financial Management in the Public Sector: Tools, Applications, and
Cases.
Presentation of Financial Statements sets out the overall requirements for financial statements, including how they should be structured, the minimum requirements for their content and overriding concepts such as going concern, the accrual basis of accounting and the current/non-current distinction.
Presentation of Financial Statements sets out the overall requirements for financial statements, including how they should be structured, the minimum requirements for their content and overriding concepts such as going concern, the accrual basis of accounting and the current/non-current distinction.