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Report on FNSACC504 Prepare Financial Reports for Corporate Entities- FNS50215 Diploma of Accounting

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FNSACC504 Prepare Financial Reports for Corporate Entities

FNS50215 Diploma of Accounting

 

1.      Accounting policies are the particular standards and techniques executed by an organization's supervisory crew that are utilized to set up its fiscal summaries. These incorporate any bookkeeping strategies, estimation frameworks, and systems for introducing exposures. Bookkeeping approaches vary from bookkeeping standards in that the standards are the bookkeeping rules and the arrangements are an organization's method for holding fast to those guidelines.

 

Example of Accounting Policies:

Policies are related to revenue recognition and measuring. This normally includes the criteria in the company could recognize its revenue and amount to be recognized.

For example, the revenue is recognized only when the goods are receipt by the customer. In this case, the evidence to support revenue recognition in the Financial Statement would be a delivery note that signed receipted by the customers.

Accounting Policies related to expenses including the general expenses and specific expenses like depreciation. For general expenses, for example, training is recognized only when the training incurred o not at the time cash advance for training.

The policies for expenses normally link to liabilities both recognition and measurement. Account policies for depreciation would be the nature of expenses that should or should not capitalize, the depreciation rate as well as the process of disposal assets.

 

2.      Charts of Accounts screenshots are attached… The screenshots are taken from Chart of Accounts in QuickBooks Accounting software.

 

3.      TAX EFFECT ACCOUNTING METHOD:

Tax effect on Accounting is the technique to change the Differences so as to sensibly match benefits before deducting corporate and different charges (total compensation before duties) under business bookkeeping with corporate assessments and so forth. Under business bookkeeping, for instance, if a capital loss of 300 yen—which isn't recognized as a cost under expense law—is recorded and net gain before duties is determined as 250 yen, with corporate charges at 40 percent and without applying duty impact, the measure of assessments is 220 yen (= (300 yen + 250 yen) x 0.4), and overall gain after expenses is 30 yen. In the event that assessment impact is connected, the measure of duty changes of 120 yen (= 300 yen x 0.4) is deducted from corporate expenses of 220 yen, at that point, thus, overall gain after charges ends up 150 yen. This measure of duty modifications of 120 yen is recorded in a critical position sheet as conceded charge resources. It ought to be noted here that the measure of corporate duties payable is as yet 220 yen, regardless of whether the duty impact bookkeeping is connected. At the end of the day, the measure of corporate expense changes recorded with the utilization of duty impact bookkeeping is just a bookkeeping treatment.

 

In other words tax effect accounting is the allotment of personal duties during the time the charges acquired rather than when the assessments should be paid.TAX PAYABLE METHOD:

As determined by the Internal Revenue Code, the eligibility of an expense incurred by a taxpayer to be deducted from the adjusted gross income (AGI) thereby reducing the amount of income subject to taxes. For example, mortgage interest paid on a residential home is an eligible expense that can be deducted from AGI.

 

4.      Financial industry provide Monetary administrations and it is basically the financial administrations given by the account business, which incorporates an expansive scope of organizations that oversee cash, including credit associations, banks, creditcard organizations, insurance agencies, bookkeeping organizations, buyer money organizations, stock financiers, venture reserves, singular chiefs and some legislature supported endeavors.

Australia’s financial services sector is the largest contributor to the national economy, contributing around $140 billion to GDP over the last year. It has been a major driver of economic growth and, with 450,000 people employed here, will continue to be a core sector of Australia’s economy into the future.

 

Examples:

The major categories of financial institutions include central banks, retail and commercial banks, internet banks, credit unions, savings, and loans associations, investment banks, investment companies, brokerage firms, insurance companies, and mortgage companies..

 

5.      Information which would be typically in the financial reports can be described by clearly understanding what type of information is included in the financial reporting.

According to the Financial Accounting Standards Board, financial reporting includes not only financial statements but also other means of communicating financial information about an enterprise to its external users. Financial statements provide information useful in investment and credit decisions and in assessing cash flow prospects. They provide information about an enterprise's resources, claims to those resources, and changes in the resources.

Financial reporting is a broad concept encompassing financial statements, notes to financial statements and parenthetical disclosures, supplementary information (such as changing prices), and other means of financial reporting (such as management discussions and analysis, and letters to stockholders). Financial reporting is but one source of information needed by those who make economic decisions about business enterprises.

The primary focus of financial reporting is information about earnings and its components. Information about earnings based on accrual accounting usually provides a better indication of an enterprise's present and continuing ability to generate positive cash flows than that provided by cash receipts and payments.

 

 

6.      Types of Budgets including Zero based budgeting

There are four common types of budgets that companies use: (1) incremental, (2) activity-based, (3) value proposition, and (4) zero-based.

Incremental budgeting takes last year’s actual figures and adds or subtracts a percentage to obtain the current year’s budget.

Activity-based budgeting is a top-down budgeting approach that determines the amount of inputs required to support the targets or outputs set by the company.  For example, a company sets an output target of $100 million in revenues.  The company will need to first determine the activities that need to be undertaken to meet the sales target, and then find out the costs of carrying out these activities.

In value proposition budgeting, the budgeter considers the following questions:

  • Why is this amount included in the budget?
  • Does the item create value for customers, staff, or other stakeholders?
  • Does the value of the item outweigh its cost? If not, then is there another reason why the cost is justified?

Value proposition budgeting is really a mindset about making sure that everything that is included in the budget delivers value for the business. Value proposition budgeting aims to avoid unnecessary expenditures – although it is not as precisely aimed at that goal as our final budgeting option, zero-based budgeting.

As one of the most commonly used budgeting methods, zero-based budgeting starts with the assumption that all department budgets are zero and must be rebuilt from scratch.  Managers must be able to justify every single expense. No expenditures are automatically “Okayed”. Zero-based budgeting is very tight, aiming to avoid any and all expenditures that are not considered absolutely essential to the company’s successful (profitable) operation. This kind of bottom-up budgeting can be a highly effective way to “shake things up”.

a.       Cash flows.

Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a business. At the most fundamental level, a company’s ability to create value for shareholders is determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flow.

b.      Profit and loss statement

The profit and loss (P&L) statement is a financial statement that summarizes the revenues, costs and expenses incurred during a specified period, usually a fiscal quarter or year. The P&L statement is synonymous with the income statement. These records provide information about a company's ability or inability to generate profit by increasing revenue, reducing costs or both. Some refer to the P&L statement as a statement of profit and loss, income statement, statement of operations, statement of financial results or income, earnings statement or expense statement.

c.       A balance sheet is a financial statement that reports a company's assets, liabilities and shareholders' equity at a specific point in time, and provides a basis for computing rates of return and evaluating its capital structure. It is a financial statement that provides a snapshot of what a company owns and owes, as well as the amount invested by shareholders.

 

7.      Producing reports are significant and viable to a business' wellbeing. For enormous organizations money related announcing ought to be done all the time during that time as they can likewise be vital devices for deciding dangers and spotting patterns identifying with items and administrations. On the off chance that you are a sole owner/accomplice in a little firm, you would have a quite decent sign on how your organization is getting along and may not want to produce ordinary reports. Month to month or quarterly are adequate with between time halfway reports for income streams as it were. Banks or different moneylenders/Managers/Shareholders and Vendors might need to see reports all the more as often as possible. Huge organizations are bound by law to disseminate quarterly and yearly reports to investors.

 

8.      Cash accounting, if you choose this accounting method, gives you a better idea of your cash flow.

When you file your first tax return for your small business with the Internal Revenue Service, you need to report your choice of accounting method. You are required to use the accrual method of accounting if any of the following three conditions apply to your business:

  • Your company is a  corporation.
  • Your company has inventory.
  • Your gross sales revenue is greater than $5 million. There are exceptions to this rule that you should discuss with your tax accountant.

 

9.      Liable to penalties either by form of units or a fine. You will be unable to claim a deduction for any penalty paid during the year.

 

 

10.   

i.                    Business Combinations outlines the accounting when an acquirer obtains control of a business (e.g. an acquisition or merger).

ii.                  AASB 101 allows the presentation of either a statement showing all changes in net assets/equity, or a statement showing changes in net assets/equity other than those arising from capital transactions with owners and distributions to owners in their capacity as owners.  IPSAS 1 requires the presentation of a statement showing all changes in net assets/equity.

iii.                AASB 107 requires a reconciliation to profit or loss (or net cost of services, when applicable) to be disclosed in the notes when cash flows from operating activities are presented using the direct method.

iv.                Specifies other disclosures to be made in respect of assets, liabilities and items of equity. The Australian Accounting Standards Board makes Accounting Standard AASB 1040 “Statement of Financial Position” under section 334 of the Corporations Law.

v.                  Accounting Standard AASB 112 Income Taxes as amended. This compiled Standard applies to annual reporting periods beginning on or after 1 January 2018. However, for such periods, this principal Standard has been superseded by AASB 112 (August 2015), but can be applied earlier.

vi.                Australian Accounting Standard AASB 118 Revenue (as amended) is set out in paragraphs Aus1.1 - 38. ... In the absence of explicit guidance, AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies

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