Accounting Theory Report: Financial Accounting, Governance, Issues

This report provides an executive summary of accounting theory, focusing on the analysis of financial transactions, accounting concepts, and legislation. It explores the role of accounting in analyzing an entity's monetary position, including accounting theories and voluntary reporting related to climate change disclosures. The report delves into the normative and conceptual approach to asset definition and measurement, the role of positive and other theories in explaining accounting policy, and the analysis of complex financial accounting, governance, and sustainability issues. It emphasizes the significance of accounting in terms of Australian Accounting Standard Boards (AASB) and the impact of climate change on financial reporting. The conclusion highlights the importance of accounting in recording financial transactions, decision-making, and ethical considerations, referencing relevant academic sources to support the analysis.

ACCOUNTING THEORY

EXECUTIVE SUMMARY
This report is based on understanding the accounting concepts and legislation for
recording financial transactions. It includes presenting role of accounting in analysing monetary
position of an entity. Including this, accounting theories and voluntary reporting are introduced
during preparing financial statements regarding climate change disclosures. Further, governance
and significance of accounting in terms of Australian Accounting Standard Boards (AASB) are
also given in this report.

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Normative, conceptual approach to the definition and measurement of assets......................1
Role of positive and other theories in explaining and predicting accounting policy, voluntary
reporting.................................................................................................................................2
Research, analyse and discuss complex contemporary financial accounting, governance and
sustainability issues, formulate well-reasoned and coherent arguments................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Accounting theory consists of important aspect that assist to accomplish effective results
in the business unit. In this regard, in the corporate financial world financial statement take place
that assists to determine important information to take business decisions. It includes
mathematical science of collecting, recording and financial information that provides effective
results. These theories also provide the basis of methods and practices that are considered to
shape and structure. Accounting policies are those principals which are made by authorities to
present the financial statements.
PURPOSES
These financial statements put a direct impact on the overall working of organization.
These accounting standards are regulated by non-governmental bodies and foundations.
International Accounting Standard Board (IASB) has made legislation regarding the same which
is compulsory to be followed by all Australian firms. But, Board is under pressure because of
changes in political conditions. This creates situation of accounting scandals, economic crisis and
recession condition in the country. If government is not stable then companies have to suffer
from critical consequences whereas if they are stable and supporting to these firms then it assists
to entities can expand their business and contribute well in the economic development of nation.
MAIN BODY
Normative, conceptual approach to the definition and measurement of assets
It is fact that mechanism requiring for auditors, improper legal frameworks and sections
against directors impact on climate to great extent. After that investor think it is not profitable
investment for them so they withdraw their money from Australian firms. In such condition,
these corporations have to struggle a lot from arranging funds in order to run their operations
smoothly. As per the survey of International Standard committees 2000, it was noted that
substantial level of non-compliance claim to firm to adopt these standards. For firms which are
operating their business globally, they are required to adopt IFRS standards and have to prepare
financial statements as per these standards. It supports in convincing the investors for taking
interest in company (Accounting for climate change, 2017). By this way, most of the firms
arrange funds in the organization. With the help of these monitory resources, they are able to
generate higher profit and pay good amount of tax to government. This tax amount collected by
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big firms is further used for the development of nation which supports in changing situation of
climate.
There are two main principals related to accounting where first is to prepare lobby against
proposals which also follows principals strictly. Because these principals are not being followed
by authorities effectively then it makes the system and weak and impact on climate badly
(INFLUENCES ON, AND CONSEQUENCES OF ACCOUNTING POLICY CHOICES, 2017).
Accounting standards suggest the firms that they need to present reliable and relevant
information through their financial statements so that decision making can become easy and
other companies would also understand about the situation of entity. On the other hand, if
climate in not appropriate then it impacts on other business operations as well. If political
condition is not good then other firms will not think to enter into the country for business and in
such condition, they may have to face huge complications.
Role of positive and other theories in explaining and predicting accounting policy, voluntary
reporting
Financial statements are much more depended upon the venture of capital have by the
firm. But it is also depended upon the cultural aspects because by this way companies try to
increase their value for stakeholders (Ahrens and Chapman, 2015). This process helps in
increasing the sustainability and short term profit at workplace.
Climate change is the implication in business which directly impact on public and private
both types of firms. It is the regulatory obligation that companies have to disclose their reports to
concerned authorities. Apart from this, increasing interest of shareholders is also bound to firms
to disclose their expenditures, revenues and other essential elements. Accounting standards and
policies allow the persons to identify situation’s internal and external position of corporation and
make decision of joint venture. Accounting policies are also important as with the help of these
tools, any entity can show its operations, prior periods, growth and capabilities. Any kind of
misstatement is not acceptable by government and higher authorities in the condition and
director impact on partners to meet with punishment (Accounting Policies and Accounting
Estimates, 2017).
All companies which are running their operations globally are required to disclose
resources. The main reason of this report is to high uses of carbon impact on surrounding and
due to which climate condition is changing rapidly. Government or non-government; all types of
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organizations have to follow guidelines properly and need to minimize carbon uses in their
manufacturing of goods (Bebbington, Unerman and O'Dwyer, 2014). This will support in
minimizing risk from the business environment and will help in making positive changes in
climate. There are many technical supplements available for organizations in order to understand
the climate related scenario. These are like energy outlook and publically available reports which
are published by international energy agency. These reports show the extent to which operations
of an entity can harm the condition of climate. There are many firms which are engaged in oil
import and export due to improper use of resources, natural resources are getting affected. These
firms are required to show their use of resources in their financial statements (The case for
consistency in corporate climate change-related reporting, 2017).
Research, analyse and discuss complex contemporary financial accounting, governance and
sustainability issues, formulate well-reasoned and coherent arguments
Financial accounting is the specialised branch of the accounting which assists to develop
effective results in the business to cater financial transactions. In this aspect, several types of
standardized guidelines follow and recorded that are presented in a financial report. For example,
income statements and balance sheet (DRURY, 2013). Mainly company issue develop
statements to create routine schedule. Statements also consider external aspects at workplace for
primary recipient owners and stockholders. In the corporation stock, secondary recipient such as
customers, competitors, labour organisation, etc. are taking their important participation.
It is very important to point out objectives and purposes of financial statements that
create effective value of the organisation. With the help of relevant information, financial
accounting consists important aspect in enterprise. In this regard, enough information is required
to assess the values of enterprise for undertaking effective and relevant information. However,
external financial statements are used by several numbers of people in different aspects so that
common rules are known as the accounting standards that are generally accepted accounting
principles. Financial accounting standards board also develop the regulations and principals
which are made by corporation for ascertaining results publicly and traded with reporting
requirements of the securities and exchange commission (Climate Change Reporting
Framework, 2012).
Contemporary financial accounting is described as the advanced accounting system in
which critically examine issues evaluates that are selected for prevailing and set of accounting
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standards (Freeman and et.al., 2014). There are several ranges of elements included such as share
issues, assets, intangible consolidation, tax effect accounting, leases, etc. Therefore, unit focuses
on the well practices in the Australian context.
Contemporary financial accounting research is to understand the role of accounting in
different aspects as organisation, market, society and so on. In accordance with this, journal is
published in terms of expressing financial transactions. It is beneficial for decision making
regarding further operations and for increasing its economic position (Hopper and Bui, 2016).
However, it is essential to research for accounting of financial transactions as of Australian
Accounting Standard Board (ASSB) for appropriate recording. In addition to this, several rules
and regulations are identified for accounting and maintaining financial records. Along with this,
issues occurred during accounting are also recognised as ethical, recording of financial
transactions in terms of amount, debit and credit sides (Fullerton, Kennedy and Widener, 2013).
Therefore, this research is beneficial for effective financial accounting and recording transactions
appropriately.
Governance on financial accounting: There is governance on recording of financial
reports as different rules and legislation are identified. For instance; analysing a company’s
accounting records put a direct impact on income tax and economic position of the entity and
nation as well. In this regard, some legislations are amended in context of recording transactions
and preparing information (Micheli and Mari, 2014). Including this, governance also includes
awareness towards issues occurred during financial accounting and the way to overcome them.
In addition to this, it also includes financial reports as well for defining purpose of taxation. It
affects the monetary position of organisation and also, it is beneficial for compiling statistics.
Therefore, governance is recognised in terms of disclosing financial reports and decision making
for the further years.
Sustainability issues: Sustainability issues in accounting are related corporate
sustainability reporting, triple bottom line accounting, etc. It impacts on financial recording and
further, on decision making for business operations (Miller and Power, 2013). Including this,
issues are occurred as differences in total amount of debit and credit side same wrong
calculations in terms of financial recording
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In this regard, arguments are defined in terms of recording suspense account in financial
statements. However, according to ASSB, it is identified that it is needed to record these
accounts for which further decisions can be made regarding business operations.
CONCLUSION
It can be concluded that accounting is essential for recording financial transactions on
which further decisions are made regarding business operations. In this regard, accounting
theories and their usefulness have been understood for reporting and maintaining financial
transactions as of AASB. Similarly, contemporary financial accounting concept is identified for
recording transactions on which decisions are made for further years. Including this, governance
on accounting regarding recording and maintaining data is discussed. Along with this, issues
occurred in accounting are described for creating balance and recording transactions ethically.
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REFERENCES
Books and Journals
Ahrens, T. and Chapman, C. S., 2015. Management accounting as practice. Accounting,
organizations and society. 32(1). pp.1-27.
Bebbington, J., Unerman, J. and O'Dwyer, B., 2014. Sustainability accounting and
accountability. Routledge.
DRURY, C. M., 2013. Management and cost accounting. Springer.
Freeman, R. J. and et.al., 2014. Governmental and nonprofit accounting: Theory and practice.
JPAEJOURNAL OF PUBLIC AFFAIRS EDUCATION VOLUME 20 NUMBER. 6(5).
p.441.
Fullerton, R. R., Kennedy, F. A. and Widener, S. K., 2013. Management accounting and control
practices in a lean manufacturing environment. Accounting, Organizations and Society.
7(1). pp.50-71.
Hopper, T. and Bui, B., 2016. Has management accounting research been critical?. Management
Accounting Research. 56(5). pp.10-30.
Micheli, P. and Mari, L., 2014. The theory and practice of performance measurement.
Management accounting research. 56(2). pp.147-156.
Miller, P. and Power, M., 2013. Accounting, organizing, and economizing: Connecting
accounting research and organization theory. Academy of Management Annals. 56(1).
pp.557-605.
Online
Accounting for climate change, 2017. [Online] Available through:
<http://www.ey.com/Publication/vwLUAssets/EY-Accounting-for-Climate-Change-SP/
$FILE/EY-Accounting-for-Climate-Change-SP.PDF>.
Accounting Policies and Accounting Estimates, 2017. [Online] Available through:
<http://www.ifrs.org/-/media/project/accounting-policies-and-estimates/exposure-draft/
amendments-to-ias-8-accounting-policies-and-estimates-ed.pdf>.
Climate Change Reporting Framework, 2012. [Online] Available through:
<https://www.cdsb.net/sites/cdsbnet/files/cdsb_climate_change_reporting_framework_ed
ition_1.1.pdf>.
INFLUENCES ON, AND CONSEQUENCES OF ACCOUNTING POLICY CHOICES, 2017.
[Online] Available through: <https://bib.irb.hr/datoteka/518772.Mance__Katunar_-
_Influences_on_and_Consequences_of_Accounting_Policy_Choices.pdf>.
The case for consistency in corporate climate change-related reporting, 2017. [Online]
Available through: <https://www.cdsb.net/sites/cdsbnet/files/the-case-for-consistency-in-
climate-change-related-reporting.pdf>.
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