MAC001A Financial Accounting & Reporting Assignment: Summary Report

This report offers a comprehensive overview of financial accounting and reporting, focusing on the conceptual framework and accounting for leases within the Australian context. The introduction defines financial statements, discusses their importance, and introduces the topics of the report. The main body delves into the conceptual framework, defining financial statements, and explaining the recognition and measurement of elements like assets, liabilities, equity, income, and expenses. It also explores qualitative characteristics such as understandability, relevance, reliability, and comparability. The report then examines lease accounting, differentiating between operating and finance leases and their implications on financial statements, including advantages and disadvantages. The conclusion emphasizes the importance of lease accounting and fair value measurement in the modern business world. The report references relevant books and journals to support its findings.

Financial Accounting &
Reporting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
The conceptual framework: Definition, recognition, and measurement of the elements in
general purpose financial statements..........................................................................................1
Accounting for lease...................................................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES ...............................................................................................................................5

INTRODUCTION
The report discuss about the conceptual framework of financial statement for the country
Australia in which it explain the definition of financial documents, it recognition and analyse the
main principles of financial statement which involves assets, liabilities, equity, income and
expenditures(Pata and Isik, 2021). This elements mainly show the financial position of any
business firm. Afterwards in another part it discuss about the accounting for lease which
basically means that the procedure in which firm records all the financial influencers of its
leasing related tasks. It includes some financial statements which mainly analyse to get the
financial impact in the company financial documents such as balance sheets, income statements
and cash flow statements.
MAIN BODY
The conceptual framework: Definition, recognition, and measurement of the elements in general
purpose financial statements.
This statement create the part of the conceptual framework for the main objective of
reporting the financials in the private and public sectors which is mainly grow by the Australian
accounting standard board also the public sector accounting standards.
Definition of financial statements
It can be define as the procedure in which, if any company want to know its financial
position then they analyse the reports of the company through the income statement, balance
sheet and the cash flow of the organization. Company usually to perform this task for measuring
the profitable situation of the enterprise also to know the debt obligations of the entity (Maffei,
Casciello and Meucci, 2021) . If company find any problem which examining the statement then
it take some corrective action immediately to resolve that issue otherwise, it harm the company
portfolio in future and it create less opportunity to generate more funds in the firm. Because
before investing the money in any organization investor check the company portfolio and the
profitable condition of the company in past years. So, on that basis firm prepare the financial
statements accurately and considering each and every aspect in the statements of the
organization. There are some few types of financial statements:
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 Income statement: This statement of the company is also know as the profit and loss
statement which mainly show the income and expenditure of the company and provide
information regarding how much net profit company generate in the particular financial
year.
 Cash flow statement: This statement of the company is particularly express the inflow
and outflow of firm which mainly show that how much cash in and out of the
organization. It includes three main activities; operating, investing and financing(Ma,
Zhang and et.al., 2020).
 Balance sheet: This statement is prepared after the profit and loss statement which are
having two sides one is asset side and another is liability side and the main aim of the
company to prepare this statement accurately and it need to show the liability of the
company is equal to the assets of the firm.
Characteristic of qualitative financial statement
Financial statement of the company include four qualitative features which involves
understandability, reliability, relevance and comparability:
 Understandability: In context of the conceptual framework, it means that the details given
in the financial documents of the firm required to be correctly analysed by the users and
require to be capable to recognize its importance.
 Relevance: According to the framework, the relevancy of the detail has capable to create
an impact on the economic decision of users by providing an assistance them to estimate
the events of past, present and future or need to ensuring, or correcting their past
estimation.
 Reliability: It is very helpful, detail required to be reliable. The data need to standard of
reliability when it is error free material also it free from the regular basic(Guo, Huang and
Zhang, 2020) . The detail mentioned in financial document required to be impartial.
 Comparability: In this qualitative characteristic of the financial statement indicates that
the company need to compare the statements of the company with other organization and
assess the financial position, firm performance and its position in the business.
Recognition
From very first, it mainly define that it disclose on, or consolidated in values disclosed on, the
face of the financial documents of the company. It mainly disclosing the details regarding the
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assets, debts, equity, incomes and expenditures in disclose of financial it considered in the
financial documents. The particular element usually find as a principle either single or in
amalgamation with some another element.
Measurement of the elements in general purpose financial statements
According to the conceptual framework of Australia, it is the procedure in which it finding the
monetary values at which the principles of the financial documents are to be perceive and moved
in the profit and loss statement and balance sheet(Eaton, Grenier and Layman, 2019). It includes
some specified basis of measurement.
 Current cost: Company assets are moved at the value of cash and cash equivalent that
need to be paid if the similar or equal funds was obtained presently. Debts are moved at
no discount value of cash and cash equivalent that would be needed to fix the duties
presently.
 Historical cost: company assets are recorded at the value of cash and cash equivalent it
should be paid or the fair value of the deliberation provide to obtain them at the
acquisition time. Company liabilities are recorded at the value of transaction get in
exchange for the duty or in some cases like; income tax.
 Present value: company assets are moved at the current discounted value of the upcoming
net cash inflows that element is create in the normal track of business. Company
liabilities are moved at the current discounted worth of the upcoming net cash inflows
that are anticipated to be needed to fix the debts in the normal track of business.
Accounting for lease
This is the type of contract in which the estate/ or the owner of the assets permit other
party to utilize the estate/ asset is exchange for some other thing, it may be cash or other assets.
There are two main type of lease in accounting it includes operating and financing lease:
In order to comparison between the two, it mainly consider that how completely the risks and
rewards come with the asset ownership which mainly moved to the lessee from the lessor
(Baatwah, Salleh and Stewart, 2019).
If the rewards and risks have been completely moved, it is known as financing lease it can also
be say capital lease on the other hand the operating lease it is similar to the landlord and the
renter contract.
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Advantages
 The schedule of payments are highly flexible than the contract of loan.
 After the less cost of tax, the rates of tax are dissimilar for the lessor and lessee.
Disadvantages
 It mainly includes agency cost issue. Lessor will move complete rights to the lessee for a
particular period of time.
 Lessee who control the asset is not the asset owner, in this lessee not perform the equal
amount of care if it not its own asset.
CONCLUSION
Lease accounting is useful in that case where the assets has been purchased on the loan.
The above report shows the accounting of leave in the books of accounts and fair value
measurement principle as the significant part of the organization in today's world. The leave are
being further divided into two categories that is finance lease and operating lease. It is the
amount which is being taken for carrying out operational activities in a business. It can be
explained as important actions which would help the business to grow and expand keeping future
conditions and situations into account.
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REFERENCES
Books and Journals
Baatwah, S.R., Salleh, Z. and Stewart, J., 2019. Audit committee chair accounting expertise and
audit report timeliness: The moderating effect of chair characteristics. Asian Review of
Accounting.
Eaton, T.V., Grenier, J.H. and Layman, D., 2019. Accounting and cybersecurity risk
management. Current Issues in Auditing. 13(2). pp.C1-C9.
Guo, J., Huang, P. and Zhang, Y., 2020. Accounting conservatism and corporate social
responsibility. Advances in accounting. 51. p.100501.
Jill, M.D., Wang, D. and Mattia, A., 2019. Are instructor generated YouTube videos effective in
accounting classes? A study of student performance, engagement, motivation, and
perception. Journal of Accounting Education. 47. pp.63-74.
Ma, L., Zhang and et.al., 2020. The effect of religion on accounting conservatism. European
Accounting Review. 29(2). pp.383-407.
Maffei, M., Casciello, R. and Meucci, F., 2021. Blockchain technology: uninvestigated issues
emerging from an integrated view within accounting and auditing practices. Journal of
Organizational Change Management.
Pata, U.K. and Isik, C., 2021. Determinants of the load capacity factor in China: A novel
dynamic ARDL approach for ecological footprint accounting. Resources Policy. 74.
p.102313.
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