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ACCT5021 Accounting for Managers Proof Reading Services
Accounting is defined as a structure for recording and inspecting the business financial transactions. It is the method to analyse, verify and reporting about the monetary results. According to definition, accounting is an act of collecting, organising, and interpreting the financial data. It is the most common function in any business operation. It is classified into numerous areas such as financial bookkeeping, cost accounting, administration accounting and many more. For business accounting, it is important that both financial and management accounting are combined. Financial reporting examines the legislative recording of the company whereas administration accounting emphases on reporting evidence of the management.
This report will outline the definition and requirement of one of the most important term of accounting which is goodwill. It will present the outline of goodwill under the requirements of Australian Stock exchange. It will also refer to the internally generated goodwill, purchased goodwill and the impairment of goodwill. After that the report will describe the various forms of business that exists. It will also portray the advantages and disadvantages of each of the business type. In addition to this, the study will also describe Independent Auditors Report.
1.Define goodwill and outline the current reporting requirements for Australian Stock Exchange (ASX) listed companies.
Accounting is demarcated as a system for recording and examining the business financial transactions. It is the method to analyse, prove and recording about the financial results. According to definition, accounting is an act of collecting, organising, and interpreting the financial data. It is the most common function for any business enterprise (Cavalinhos and Carreira 2015). It is classified into numerous areas such as financial bookkeeping, cost accounting, administration accounting and many more. For business accounting, it is important that both financial and management accounting are combined. Financial reporting examines the legislative recording of the company whereas administration accounting emphases on reporting evidence of the management.
In accounting terms, Goodwill is an insubstantial asset with a business arrangement. It is recorded in the books when any company purchases any other and the buying price is more than the net of the fair value of the recognizable intangible and intangible assets (Otchere and Abou-Zied 2008). Goodwill is the expected price of the appealing force that produces sales profit in the commercial and also assists in adding value to the assets. Goodwill is intangible and thus to get build, it needs heavy and continuous expenditure in the promotion by the company and by creating and maintaining the durable consumers and suppliers relationships (Chaplin 2016). Company’s gains goodwill by providing high quality merchandises and services and with high quality conveyance of management and workforces. Goodwill comprises the value of company individuality and it is heightened by a company performance over the years and its layout location. The proper value of goodwill is not recognised in the accounts but it gets realised when the trade is sold. It is then reproduced in the concern’s selling price by the sum in surplus over the company’s net-worth ("Financial Accounting And Reporting Standards For Private Entities" 2006). The value of goodwill is sometime more than the worth of total physical assets of reputed businesses.
For getting listed in Australian stock exchange, ASX set out the rules to list the companies. The necessities guarantee the excellence of the marketplace that the stock exchange functions. To be listed in ASX, a corporation must fulfill the minimum admittance criteria, which comprises the construction, size, and the number of stockholders.
Listing measures of ASX
Number of shareholders:Minimum 300 non-affiliated investors @ A$2,000 (Groenewold and Paterson 2013).
A company must have at least 300 non-affiliated shareholders with a minimum of $2000 holding each will make the company to pass the general criteria.
Free float: 20%
Profit test-A$1 million accumulated profit from enduring operations over past 3 years + A$500,000 consolidated profit from continuing operations over the last 12 months
Assets test- A$4 million net tangible assets or A$15 million market capitalisation
The acknowledgment of within generated goodwill is termed as an asset. The method behind this is that any expenditure suffered which does not outcome as an asset is an recognizable reserve and thus it is not divisible. In addition to this, any costs experienced are improbable to be precisely recognizable as producing the goodwill (Giacomino and Akers 2011). The situation that the alteration between an evaluation of an occupation and the resounding sum of its discrete assets and accountabilities may be take advantage of as goodwill falls down insofar as that variance cannot be measured as the cost and so cannot be recognized as an asset.
The difference or the alteration between the companies as total sum of its assets minus the total sum of its liabilities is called Purchased goodwill. Its value could be anything involved from the commercial trade of the business to the sum which is not taken as an asset (Groenewold and Paterson 2013). Purchased goodwill is about the combination of the assets which is grouped jointly and which is not the collection of distinguishable assets. Purchased goodwill arises when a business is purchased and the purchase consideration exceeds the net value of the assets of the sold company.
Goodwill impairment is the accusation that companies record when the value of carrying the goodwill exceeds its fair value on the financial statements (Stein and Ginevi?ius 2010). The purchased goodwill is presented in the assets on the side of the balance-sheet.
2.Describe the different forms of business that exist. Your answer should also include the advantages and disadvantages of each type.
The different forms of businesses are:
Sole Proprietorship: It is commerce, when one individual who is the proprietor operates the trade through his or her own workers. It is the regular form of business organisation. The most number of businesses around the globe are on the basis of this form (Martišien? 2010). This form of business is simple but is unsafe as the proprietor or the sole proprietor has the entire and limitless liability of the firm. Self-contractor is a type of sole proprietor business.
1.It is the easiest form of trade to start and to close.
2.The proprietor of the firm is answerable for building all the verdicts and also controls the entire actions of the business (Tennent 2013).
3.All the income of the business goes directly to the owner
4.Sole proprietorship businesses are subjected to very fewer regulations.
5.It also gives tax advantage as the earnings will be declared in the owner’s personal income tax return, therefor there is no need or there is absence of corporate tax.
1.The owner of the company is responsible for all the obligations of the company.
2.He is accountable for all the liabilities of the company
3.For raising the capital, the only thing that own can do is to invest from personal savings or from buyer loans.
Partnership: this is a form of trade where two or more personalities possesses and manage the business. Allies of the business operate the business operations together and also share the unlimited liability (Guy 2009). There are three classifications of partnership business, namely general partnership (partners divide the liability, profit and loss agreeing to their mutual contract), limited liability (in this there is at least one all-purpose partner and other is the limited partner who has the limited accountability to the spending of their asset), and limited responsibility partner (in this all the partners of the business have limited liability and there is no general partner).
1.It is very effortless to form partnership commerce but a significant amount of time must be expended in evolving the partnership treaty (Ngwakwe 2014).
2.It is at ease to raise fund in partnerships business as there are more numbers of owners as compared to sole proprietorship.
3.Income is declared in the partner’s personal income tax returns, therefore, company don’t have to pay any corporate tax.
4.Employees of the business may be motivated to be the partners of the business.
1.Partners are jointly responsible for the liabilities of the company.
2.Partners of the company must make the company’s decisions together as there is always a chance of conflicts in partnership business which eventually lead to dissolvent of the business.
A business means a limited liability company that is done by business owned by various shareholders and is functioned by a board of directors designated by the shareholders (Guy 2009). A company is distinct from the owners and is seen as a separate entity which can enter into agreements, pay taxes and can be prosecuted. The stakeholders gain the profit by bonus and are answerable for the corporation’s debts.
1.A business can raise reserves by selling its stocks (Martišien? 2010).
2.Shareholders of the campy can easily transfer its ownership by selling its stocks.
3.The liability of the owner is limited to the value of the stock which they embrace in the establishment.
1.A company is controlled by many principles and are thoroughly monitors by government assistances
2.It is more expensive than the other methods of business.
3.Profit of a company is overtaxed by corporate tax rate.
3.What is the Independent Auditors Report? Briefly discuss how the audit report is expected to change as from December 2016.
An audit report of a company is its complete business status. It is the company’s financial data review. It is accomplished by a liberated accounting expert that covers a business’s assets and liabilities and also grants the corporation monetary position and future (Halí? 2011). Audit report of a company is compulsory by regulation if a business is in public traded in or listed in securities exchange commissions ("Independent Auditors' Report And Consolidated Financial Statements" 2010). An independent audit report is the inspection of the monetary records, commercial transactions, financial statement, bookkeeping practices and interior controls of a generous non-profit by a self-governing auditor. Self-governing here mentions to the point that the auditor is not a worker or member of the non-profits but in its place is engaged by a contract of service area, and hence is independent. During the independent auditor report, the auditor will review the company’s financial statements to examine whether they are according to generally accepted accounting principles or not.
There are four types of reports that an auditor can issue during his or her analysis namely, unqualified opinion, qualified opinion, adverse opinion and the disclaimer of opinion.
Unqualified Opinion: in unqualified opinion, account which is issued by the auditor determines that the monetary records id free from any misrepresentations and is properly following the Generally Accepted Accounting Principles (Tennent 2013). A company always wants to get this type of report from the independent auditors.
Qualified Opinion: This type of audit statement is accessible when a company’s financial records have no misrepresentations but have not followed the generally accepted accounting principles (Halí? 2011). It consist an added passage which outlines the cause due to which the auditor has stated the report as the qualified one.
Adverse Opinion: It is the poorest type of audit report that can be delivered to a commercial firm. This report indicates that the business has not followed the GAAP rules and also have huge misrepresentations. This may be due to error but often indicated towards a fraud. A company which gets Adverse Opinion report must correct its financial statement as the lender parties will generally not accept this kind of report (Tennent 2013).
Disclaimer of Opinion: this kind of audit report is delivered when accountant is incapable to ample the correct audit report. This occurs mostly due to the nonappearance of commercial records.
Independent Auditors has done the financial report of the Woolworths that encompasses the combined statement of Fiscal Situation as at 26 June 2016. It also encompasses the combined reports of Profit or Loss, the combined statement of other inclusive profits, the combined income of cash flows and the combined report of variations in the equity for the financial year ended on that date (Halí? 2011). The Auditors specified that the managements of the business are accountable for the financial account and provides a true and fair value in agreement with the Australians accounting principles and also the Corporations Act 2001. Woolworths Independent Auditor reports announce that the financial report of the corporation are in accord with the Corporations Act 2001 which contains providing true and fair value of combined financial positions and obeys with the Australian Accounting standards and Corporations Regulations 2001. The Independent auditor also stated that the consolidated financial statement of the company meet the terms of International financial recording principles in the basis of provision.
The audit report might get changed after December 2016 as the International Auditing and Assurance Standards Board (IAASB) has recognized a new set of condition. According to the new condition, Opinion segment must be accessible in the accountant’s report and must include the matter formerly controlled in the preliminary paragraph of ISA 700. It should also incorporate the opinion of the financial announcements as previously controlled in the estimation paragraph of ISA 700. In the modified version of Audit report, the auditor is required to include within the basis of opinion section. The heading of the section would be Basis of qualified opinion.
It has been found in the study that Accounting is defined as a system for recording and examining the business financial transactions. It is the approach to analyse, verify and reporting about the monetary results. It is the most common task for any industry enterprise. The study also outlined that there are different forms of business such as sole proprietorship, partnership and corporation. The study also reviewed the advantages and disadvantages of each of these form of business. In addition to this, the study also examines the independent report of Woolworths. The study found that Woolworths Independent Auditor reports declare that the monetary report of the business are in agreement with the Corporations Act 2001 which gives correct and reasonable value of combined financial positions and fulfills with the Australian Accounting standards and Corporations Regulations 2001.
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