ACC566 Acc Systems and Processes

ACC566 Acc Systems and Processes

ACC566 Acc Systems and Processes

Q2-1 Naming cells in spreadsheets

The advantages of naming a cell in spreadsheet include using the cell for putting formula in another cell using the named cell. It makes the using formula easier as the name of cell need not to be identified by row name and column name. The name given to the cell can be directly used in formula. It also helps in saving time along with making formula easy.

Naming cells in spreadsheets

(Kastberg, et. al., 2013)

Q2-2 Negative numbers

2 Negative numbers

(Kulesza, et. al., 2011)

Q2-3 Spreadsheet structures

Spreadsheets shall be designed with separate data areas and report areas since the data entered in the data area needs formatting such as number, percentage, decimal, fraction etc. Once formula is applied the formula cannot be formatted. Therefore the formula is contained in the report area whereas the data is contained in the data area. Also the data can be grouped and used in another formula due to separate areas of both. This avoids complications and make the use of spreadsheet easier. For example if net income has to be calculated the formula is used to deduct expenses from sales which is contained in report area. Now if the negative income has to be shown in red colour then it will need formatting which will be done selecting the cell in the data area and not the formula. However if function can also be used but it conmplicates the simple formula.

3 Spreadsheet structures

(Ruiz de Arbulo-López & Fortuny-Santos, 2010)

Q2-4 IF functions

For creating an ‘IF’ function in excel, go to the formula button in the tool bar, click on the logical function and select the IF function or simply type =IF in the cell and put the bracket. After this type the logical test for example if the sales is greater than 5000 the commission is 5% of sales otherwise 10%, then in such case select the cell of sales, type>5000. After the logical test use a comma and then type the value to print if logical test is true and then again afterusing comma type the value to be printed if the logical test is false. Then close the bracket and press enter.

4 IF functions

(Patxi Ruiz de Arbulo-López & Fortuny-Santos, 2010)

Q2-5 Spreadsheet apps

The four examples of spreadsheet softwares are as follows:

iWork Numbers – Apple Office Suite
LibreOffice -> Calc
Google Sheets such as Smartsheet
lotus Symphony - Spreadsheets (Hanifi & Taleei, 2015)

Q2-6 Perpetual versus Periodic systems

Basis

Perpetual Inventory System

Periodic Inventory System

Timing

Under this system inventory account and cost of goods sold are updated continuously.

Under this system the inventory account and cost of goods sold account is updated at the end of period.

Purchase and purchase return accounts

No separate accounts are used. Purchases are directly debited and purchase returns are directly credited to inventory account.

Separate accounts are used for purchases and purchases returns and they are not directly debited or credited to inventory account.

Sales transaction entry

In this method two journal entries are made for recording sales transactions. One records sale value of inventory and other records the cost of goods sold.

In this method only single entry is made for recording sales transaction.

Closing entries

It does not require closing entries for inventory account.

It requires closing entries for closing the inventory account.

(Prasad & Green, 2015)

Q2-7 Journal entries

Type of journal entry

Perpetual inventory system

Periodic Inventory system.

Purchase of inventory

Inventory A/c Dr.

      To Accounts Payable

(Purchased inventory on credit)

Purchases Dr.

     To Accounts Recievable

(Purchased inventory on credit)

Sales returns

Sales Returns a/c Dr.

       To Accounts receivable

(Return of goods sold)

Sales Returns a/c Dr.

       To Accounts receivable

(Return of goods sold)

End of periodic stock take

-

Inventory (Ending) Dr.

Cost of goods sold Dr.

       To Inventory (Beginning)

        To Purchases

(Meiryani & Syaifullah, 2015)

Q2-8 Worksheet and financial reports

A. Normal view

Data Entry Area

Data Entry Area

(Pärl, 2011)

Worksheet

Worksheet

(Pärl, 2011)

Financial reports

Financial reports

Financial reports

(Pärl, 2011)

B. Formula View

Formula View

Formula View

(Pärl, 2011)

C. Trial balance

Trial balance

(Pärl, 2011)

Worksheet

Trial balance worksheet

(Pärl, 2011)

Financial reports

Normal View

trial balance Financial reports

trial balance Financial reports

(Pärl, 2011)

Formula view

trial balance Formula view

(Pärl, 2011)

D. Business Report

To,

Senior Management

Re: Corporate Spreadsheets contain errors

It is to report to the management that the corporate spreadsheets sometimes contains errors. The information provided in this report is based on reasearch from internet and other realted sources.

Many studies conducted worldwide reveal that 9 out of 10 corporate spreadsheets contain errors making it 88% of the spreadsheets are those containing errors (Leung, 2014). The most carefully designed worksheets also contain 1% errors in them. The spreadsheet software provides data entry platform but there are chances of overtyping or putting incorrect formulas or numbwers in the cells which cannot be detected particularly in sales, busibnes s and marketing fields. Every formula used in spreadsheed is unique and has a defined task but there is no automated tool which can detect the mistakes.However some industries are making effoerts to avoid the miscalculations that take place in worksheet by using financial modelling but those not applying it are prone to errors in financial reporting via spreadsheets. Several cases haver been reported in past for spreadsheet errors that create pressure for organizational actions (Pärl, 2011).  

Thus, it can be concluded that the corporate spreadsheets are not 100% error free and therefore corporated need to make efforts to avoid miscalculations and errors by using tools such as financial modelling to ensure error free use of spreadsheets.A final peer review can also be used as a good practicwe by companies (Pärl, 2011).

Regards

Consultant

Q2-9 Accounting principles and Inventory

The three accounting principles relevant to inventory are as follows:

1.LIFO –This is the method of valuation of inventory under which it is assumed that the inventory which is purchased last is sold first by a business. It is also known as last-In-First-Out. It is less practical method as compared to other methods such as FIFO and Weighted Average method (Kurniawan & Hiererra, 2014).

2.Inventory Qualification – According to US GAAP all the tangible property or asset which is intended to be sold are considered as inventory. The raw materials not used, work in progress which has not finished and the finished goods which are not sold are all the part of inventory.

3.Periodic Inventory System – It is an accounting system for recording the inventory under which the transactions are recorded and updated on a periodic basis regularly rather than at the end of period. It uses purchases account and purchase return accounts as separate accounts for recording purchases and purchase returns rather than debiting or crediting them in inventory account as per GAAP (Kurniawan & Hiererra, 2014).

Q2-10 Lower of Cost and NRV

This rule states that the inventory for accounting purpose and reporting purpose shall be valued at lower of cost or NRV. The cost of the inventory is the amount spent for the purchase of inventory whereas the Net Realisable Value is the amount which is estimated on the basis of market price of inventory which can be realised from its sale (Sisaye & Birnberg, 2010).

Q2-11 Application of Inventory flow assumptions

Normal view with problem requirement

Application of Inventory flow assumptions

(Gibbs, et. al., 2014)

Requirement 2

The gross profit is lowest in LIFO method since the cost price per unit is increasing and thus the goods sold have the highest price in this method resulting in increasing the cost of goods sold.

Requirement 3

The gross profit is lowest under FIFO method since now cost per unit is decreasing and thus the goods sold first have the highest cost resulting in decrease of profit as the highest cost goods are sold first (Gibbs, et. al., 2014).

Formula View

Application of Inventory flow assumptions formula view

(Gibbs, et. al., 2014)

Q2-12 Thinking about internal control issues for e-commerce.

Computer virus: - It is an malicious software program or Malware that when executed, replicated by reproducing itself (copy its own source code), or also infect other computer programs or files by making unnecessary modifications in it.

Phishing: As per this concept fraudulent practices of sending emails as a reputed firms in order to influence others so that they reveal personal information like passwords, account numbers, credit card numbers, etc. related to the customers and clients (Busco & Scapens, 2011).

Firewalls: It is an effective set of programming that located at a network gateway server in order to protect the private network from other fraudulent networks. It is an network security system (hardware or software), that put control over incoming and outgoing network traffic as per the set of rules.

Encryption:It is an effective concept of achieving data security. Data get password secured and in order to access encrypted file there is a requirement of secret key or password in order to decrypt it. Encrypted data is termed as cipher text (Busco & Scapens, 2011).

Q2-13 Bank Reconciliation

Scenario: - On 31st Dec, 2014 the bank Colum of XYZ Ltd.'s cash book shows a Dr. Balance of $825. While examining cash book and pass book some measures get identified such as: -

1. Out of total issued cheques of amounting $800 only $580 amounting cheques are presented for payment till 31st Dec 2014.

2. Cheques amounting $410 were credited in pass book from total amount of $600 till 31st Dec 2014.

3. On 28th Dec. a customer make direct deposit of $350 and it is recorded only in pass book.

4. Cash book debit side is overcastted by amount $10.

5. There is no entry made among cash book related to the payment of rent of amounting $80 (Lv, et. al., 2013).

6. There are few entries such as credit of $32 for interest and debit of $4 for bank charges, but these entries are not shown in cash book.

Bank reconciliation statement as on 31st Dec 2014: -

Particulars

Plus item

Minus Items

Cash book balance

$825

 

Add: Issued cheque not presented. (800 - 580)

$220

 

Direct deposit by customer

$350

 

Bank credit interest

$32

 

Less: Cheque sent for collection not yet credited (600 - 410)

 

$190

Cash book debit side overcast

 

$10

Bank pay rent as per standing instructions

 

$80

Bank Charges

 

$4

 

$1,427

$284

Balance as per pass book (Cr.)

$1,143

 

(Lv, et. al., 2013)

Q2-14 Journalising accounts receivable entries.

1. Sales on credit:

Particulars

Debit Amount

Credit Amount

XYZ Ltd. A/c Dr.

4,000

 

To sales

 

4,000

(Being credit sales made)

 

 

(Jerman, et. al., 2012)

2. The collection of part of the amount owing: -

Particulars

Debit Amount

Credit Amount

Cash A/ c Dr.

2,000

 

To XYZ Ltd. A/c

 

2,000

(Being part debtors amount received)

 

 

(Jerman, et. al., 2012)

3. The write off of a bad debt

Particulars

Debit Amount

Credit Amount

Bad debts Expense A/c Dr.

4,000

 

To Accounts receivables

 

4,000

(being bad debts amount get written off)

 

 

(Jerman, et. al., 2012)

4. The reinstatement of an amount written off

Particulars

Debit Amount

Credit Amount

Cash A/c Dr.

2,000

 

To Bad debts A/c

 

2,000

(Being bad debt amount recovered)

 

 

(Jerman, et. al., 2012)

5. The collection in full of the amount owing

Particulars

Debit Amount

Credit Amount

Cash A/ c Dr.

4,000

 

To XYZ Ltd. A/c

 

4,000

(Being whole sale amount is recovered)

 

 

(Jerman, et. al., 2012)

Q2-15 Estimating bad debts

It is an financial forecasting approach that get based over the premise that most Income statement and Balance sheet differentiate with sales. With the use of this approach financial statement get analysed where all the accounts get expressed as a ratio of sales. There are various items get calculated as a percentage of revenue such as cash, inventory, accounts receivable or payable, net income and cost of goods sold (Artamonova & Brusakova, 2016).

Q2-16 Credit cards

The interest charged over the credit cards is much higher than the other forms of credit because credit card renders a facility of instant cash whenever it is required to an fixed limit. Credit card get utilised for making various payments without using in hand cash. It facilitate in case of emergency as it render an facility of withdrawing cash also. With the effect of these attractive features interest rate over credit cards is bit higher as compare to other forms of credit (S, 2012).

Q2-17 Credit sales transactions

1. Journal entries

Date

Particulars

Debit

Credit

31st Dec, 2014

P & L A/C Dr.

$128,000

 

 

To Bad debts A/c

 

$128,000

 

(Being bad debt expense is  4% of credit sales)

 

 

10th Jan, 2015

Mills & Brown A/C Dr.

$12,000

 

 

To sales a/c

 

$12,000

 

(Being goods sold to MB)

 

 

20th Jun, 2015

Accounts receivables A/c Dr.

$12,000

 

 

To Mills & brown A/c

 

$12,000

 

(Being accounts receivables paid by MB)

 

 

25th Jul, 2015

Bad Debts A/c Dr.

$39,000

 

 

To BK A/c

 

$22,000

 

To MM A/c

 

$17,000

 

(Being BK & MM become bad debts)

 

 

15th Aug, 2015

Cash A/c Dr.

$9,000

 

 

To Accounts receivables A/c

 

$9,000

 

(Being part payment is made by MB)

 

 

31st Dec, 2015

P & L  A/C Dr.

$200,000

 

 

To Bad debts A/c

 

$200,000

 

(Being bad debt expense is  5% of credit sales)

 

 

(Li-Sheng & Ru-Ping, 2015)

Two ledger accounts: -

Accounts receivables account: -

Date

Particulars

Amount

Date

Particulars

Amount

10th Jan 2015

To mills and brown

$12,000

20-Jun 2015

By cash

$9000

 

 

 

31-Jun 2015

By Balance C/f

$3000

 

Total

$12,000

 

Total

$12,000

(Li-Sheng & Ru-Ping, 2015)

P & L Account:

Date

Particulars

Amount

Date

Particulars

Amount

31-Dec 2015

To bad debts A/c

$200,000

31-Dec 2015

By Balance C/F

$200,000

 

Total

$200,000

 

Total

$200,000

(Li-Sheng & Ru-Ping, 2015)

2. General Ledger T Accounts: -

Bad debts expense account: -

Date

Particulars

Amount

Date

Particulars

Amount

25th Jul 2015

To BK

$22,000

31st Dec, 2015

By P& L A/c

$200,000

25th Jul 2015

To MM

$17,000

 

 

 

31 Dec 2015

To balance

$161,000

 

 

 

 

Total

$200,000

 

Total

$200,000

(Li-Sheng & Ru-Ping, 2015)

Allowance for doubtful debts: -

Date

Particulars

Amount

Date

Particulars

Amount

1 Jan 2015

To P& L A/C

$128,000

25th Jul 2015

By BK

$22,000

 

 

 

25th Jul 2015

By MM

$17,000

 

 

 

31st Dec 2015

By balance

$89,000

 

Total Balance

$128,000

 

Total balance

$128,000

(Li-Sheng & Ru-Ping, 2015)

3.The 31st December 2015 balance of Accounts receivable is $ 600,000 recorded under balance sheet in assets side as an current asset with the amount of $600,000 (Li-Sheng & Ru-Ping, 2015).

Q2-18 Dishonour of a bill receivable

S. No.

Particulars

Debit

Credit

1.

A credit sale

 

 

 

ABC Ltd. A/c Dr.

2,000

 

 

To sales

 

2,000

 

(Being credit sales made)

 

 

2.

A conversion to a Note receivable

 

 

 

Notes receivables A/c Dr.

2,000

 

 

To Accounts receivable A/c

 

2,000

 

(being converted into note receivable)

 

 

3.

The dishonour of the note

 

 

 

Accounts receivables A/c Dr.

2,200

 

 

To Notes receivables

 

2,000

 

To Interest revenue

 

200

 

(Being note get dishonoured)

 

 

4.

Subsequent delayed payment

 

 

 

Expense A/c Dr.

200

 

 

To Expense payable

 

200

 

(Being payment delay)

 

 

(Shuhui, 2015)

ABC Ltd. account: -

S. No.

Particulars

Amount

S. No.

Particulars

Amount

1.

To sales

2,000

1.

By Balance

2,000

Sales Account: -

S. No.

Particulars

Amount

S. No.

Particulars

Amount

1.

To Balance

2,000

1.

By ABC Ltd.

2,000

Note receivables account: -

S. No.

Particulars

Amount

S. No.

Particulars

Amount

1.

To Accounts receivables

2,000

1.

By Accounts receivables

2,000

Accounts receivables: -

S. No.

Particulars

Amount

S. No.

Particulars

Amount

1.

To notes receivables

2,000

1.

By balance

2,200

2.

To interest revenue

200

 

 

 

Interest revenue: -

S. No.

Particulars

Amount

S. No.

Particulars

Amount

1.

To balance

200

1.

By accounts receivables

200

Expense A/c: -

S. No.

Particulars

Amount

S. No.

Particulars

Amount

1.

To Expense payable

200

1.

By balance

200

Expense payable: -

S. No.

Particulars

Amount

S. No.

Particulars

Amount

1.

To Balance

200

1.

By expense

200

(Shuhui, 2015)

Q2-19 Explain the following accounting terms. Give examples of each.

1.Impairment –It refers to as the amount by which the value of an asset declines as the result of external factors such as damage, obsolescence etc. If the carrying amount of an asset is less than its recoverable amount then the amount of difference is known as loss on impairment. The recoverable amount is lesser of fair market value and values in use.

2. Revaluation –It refers to as the process of valuation of asset at the end of each accounting period so as to record the appreciation or depreciation in the value due to external factors (Ling-Fang,  2015).

3. Depletion – It is an accounting concept that commonly utilised by the businesses like mining, timber, petroleum and other similar industries. As per this concept deduction is allowed to owner in order to reduce the product's reserves.

4. Patents: It is an grant of protection for an invention. Protection is provided to person or legal entity with its exclusion making, using or selling rights of concept or inventions and exclusion of  others in order to perform the same for a period of patent (Ling-Fang,  2015).

Q2-20 Work Integrated Assessment case study

1. How much profit did Qantas make?

Qantas earned an underlying profit before tax of $975 million and statutory profit after tax of $560 million during the year 2015 (Dull, et. al., 2012).

2. Earnings per share?

The statutory earnings per share of Qantas for the year 2015 is 25.4 cents per share.

3. What expertise does Todd Sampson bring to the Board of Directors?

Todd Sampson is one of Australia’s foremost brand and marketing experts. He has experience of around 20 years in marketing, communication, new media and digital transformation. The expertise of digital marketing and branding has been brought by Todd Sampson to the Board of Directors of company (Dull, et. al., 2012).

4. Explain EBITDA, Revenue Seat Factor, Revenue received in advance and Retained Earnings.

EBIDTA –It is the amount of earnings before charging interest, depreciation and tax. The EBIDTA of Qantas for the year 2015 is $1,048 million.

Revenue Seat Factor – it is the factor which represents the revenue per seat in terms of passenger kilometres. It is obtained by dividing the Available seat kilometres by Revenue passenger kilometres. It is also known as seat factor, load factor or load. The revenue seat factor of Qantas for 2015 is 79.1.

Revenue received in advance -It is the amount of revenue which has been received by the company but does not relate to the period of financial statements due to which it is recorded as current liability. The revenue received in advance for the year 2015 by Qantas is $3,584 million (Dull, et. al., 2012).

Retained Earnings – It is the amount of reserves and surplus maintained by the company by retaining the profits rather than distributing them to the shareholders. The amount of retained earnings of Qantas for 2015 is ($1,115) million (Dull, et. al., 2012).

5. Calculate the Working Capital ratio

Working capital ratio = Current Assets/ Current liabilities

                                    = $5,049 million /$7,470 million

                                    = 0.6759

Thus, the working capital ratio of Qantas for the year 2015 is 0.6759 (Dull, et. al., 2012).

6. Create a chart in Excel showing 3D columns for the operating cash flows and another showing a pie chart for the components of current assets. Paste the spreadsheet graphs in your assignment. Show the data area.

Operating cash flows

Operating cash flows

Operating cash flows

(Dull, et. al., 2012)

Components of current assets

Components of current assets

(Dull, et. al., 2012)

7. Summarise your advice to Tom re the investment decision.

The net operating cash flows of the company are positive which indicates that the company has the potential to generate profits from the business in future. Also the EBIDTA and revenue seat factor of the company is high which shows that the company has the growth potential. Therefore, Tom is recommended to invest in the company to earn long term returns at high rate. Thus, Tom shall invest $30,000 given by his uncle in the shares of Qantas to earn returns on his investment (Dull, et. al., 2012).

References

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