ACT507 Accounting Business Reporting for Decision Making

ACT507 Accounting Business Reporting for Decision Making Assignment

ACT507 Accounting Business Reporting for Decision Making


This problem is consisting of clear theory regarding how companies are dealing with financial policies and framework in Australia. In this report different depreciation charging methods and their impact on the financial statement are considered. There is complete study of given problem described as below

(A) Company A and Company B is identical in all respect but there are slight changes in charging depreciation rate on the Profit and loss account. There are various accounting policies and frameworks issued by the regulatory authority that need to be comply with for garneting good corporate governance by all the companies. Both companies have followed different account practice and depreciation charged method differently and it has resulted into following changes in both companies financial statement (Kane, 2014).

ACT507 Accounting Business Reporting for Decision Making AssignmentCompany A has used straight line method for charging depreciation in which depreciation will be charged at the fixed rate over the period of 20 years. This will result depiction of higher profit earned by the company in the balance sheet of the company where as in case of Company B which has used double declining balance depreciation  method provides low earning of profit during the year comparatively as there will be more amount charged on the profit of the company.

1. Assets depreciation charged on the company B will be completed within 10 years as it is clear fact that depreciation charged in this company is twice the amount depreciation charged by company A

2. Financial statement of company B will portray that company A has more profit earning capacity than company B

3. Even though both companies earn same amount of profit but due to the different depreciation charging method company A will report higher amount of profit.

(B) There are three following financial statement that is used by the stakeholders to identify depreciation amount charged by the companies throughout the time

P&L account or financial statement-This statement is the actual depiction of the amount earned by the company in the relevant year that showcase how much amount has been charged as depreciation on the profit earned by the company in the relevant year. Income statement is the complete set of all the income earned and expense incurred by the company and provides the actual net profit (Fornari, 2015).

Balance sheet-it is also known with the financial statement comprised of two significant parts of the companies named Assets and liabilities. Depreciation is shown on the liabilities side of the balance sheet or it could also be shown at the assets side by making deduction from the assets of the company on which depreciation charged.

Auditor report-Auditor is the independent person who makes qualification report on the financial statement of the company. In auditor report depreciation amount is shown in the remark side and provides a clear description over the assets and amount charged by the company on the assets.

Problem 2:


In this scenario Kangaroo express is company that is owned and managed by a single family in order to enhance their business family is considering various plans to collect the finance for the company. There are following alternative that could be used by the company to raise capital.  In the present time company’s capital structure is very good but to make it better it should make shuffle in its capital structure.  Present capital structure of the company could be described with the help of this pie chart

Present capital structure

Initial public offers –Company in order to enhance its business and brand image of the company should focus on issuing share to the public. This process will help company to capture not only money but also build up image of the company at large.  In case of issue of capital there is always risk of not subscription of shares in the market. Therefore in order to minimize this risk company should enter into underwriting agreement with underwriters (Istudor & Mocanu, 2015).

Hire purchase or lease agreement for acquiring assets-This is method which is used to acquire the assets without making any payment. It is method which can also be used as a source of finance of the company. In this type of method on the initially small amount of payment is made for acquiring assets and in the later time a fixed amount is paid on annual basis to the owner of the assets. Therefore it could be said instead of blocking big chunk of investment in acquiring assets company could use this method.

Retained earnings-It is the amount of profit available for the company that has not been distributed by the company to its shareholders. Retained earnings is the part of assets of the company that is remained unused and in order to identify the real cost of this capital company consider cost of issuing capital in the capital market but issuing expenses are deducted in same. In case of using retained earning there is no loss to company and no cost is involved in using these retained earnings. Since  the fact of the Kangaroo express that all the members of the company are the equity shareholder of the company and they can easily pass the resolution of the company for using retained earnings in the company.


Therefore my advice should be for Kangaroo express to use retained earnings for acquiring capital for the company.

Proposed capital structure of company should be

Proposed capital structure

Problem 3:

In this problem managerial accenting and ethical behaviour of management team is being asked. It is clearly understood that employees are the key pillars of the organization and getting work done from them is all depend upon managerial practice of mangers in the organization

Management accounting is the simple practice to perform complete set of activities for preparing financial statement of the company.  It provides a good aid in preparing financial information and keeping business data in best and efficient manner. On the other part ethical behaviour is the intangible virtue of management team to pursue a good behaviour and positive environment in organization so that employees could be motivated in orderly manner.

Ethical behaviour is considered at the ethical point of view of management potion in the organization. Now a day’s there is several cases such as corporate frauds misleading information manipulation of data etc. have come in to consideration. Ethical behaviour in accordance with management accounting provides a clear view points that financial statement should be prepared in such a manner that actual data is not manipulated. There is mainly problem arouse that sometime managerial persons for their personal use or for their personal benefits manipulate the data or provide wrongful data  that leads in to misleading information to stake holders (Barth  2015).

Importance of doing activities and preparing financial data as per the ethical behaviour in the organization

1. Reduction in employee turnover
2. Generation of high amount of stakeholder’s confidence in company’s functioning.
3. Avoidance of legal penalties
4. Increment of corporate rating

There are various benefits of using ethical behaviour in management practice in the organization. But in order to enhance the company effectiveness as per the corporate governance and ethical standard issued by regulatory authority information in the financial statement should be bases on complete notes of account and management department should also put their managerial accounting practice while preparing financial statement in right and true manner.

Problem- 4

Financial statement is the complete set of books that is comprised of income statement, balance sheet, auditor’s report, board report annual return and furthermore. In the general term it is the statement which is used by the stakeholders to come up with the strong and effective investment decisions. In this scenario company has to make a strategic alliance with other venture in the industry. It is given that one of the management department person has showcases financial statement is best for determining whether the supplier opted is right for the business or not and other managerial persons says that talking with other persons in the market could provide the best source of information.

Financial statement is the complete set of information of relevant company that is used to identify the real position of the company and its financial capacity to compete with the rivals in the business. Moreover this statement allows showcase how much liquid and fixed assets company has for running its business in efficient manner.

Significant of the financial statement

1. It provides two years data and complete level of understanding of the company’s profit earning capacity
2. Financial statement provides information of assets and liabilities of the company, default and compliance made and its legal consequence since the time company was incorporated.

Weakness of financial statement

1. Financial statement is comprised of analytical information and shareholders are the lay man who find difficult to interpretation of data in easy manner.
2. Financial statement is involved in providing only critical information and it does not consider moral values and companies’ image in general public.

Statements to judge a supplier’s ability to remain in business and avoid cash flow problems

In the financial position company could evaluate supplier’s liquidity position, retune on capital and cash flow statement, capital structure. Furthermore company could also consider suppliers creditability in the market and how fast it is providing its material to other partners.

Relationships in the statements would help judge whether the company could attract additional capital for growth?

There are following aspects that is considered for determining company could attract additional capital for growth

Supplier’s gearing ratio
Supplier’s strategic alliance with other ventures


Barth, M.E. 2015, "Financial Accounting Research, Practice, and Financial Accountability”, Abacus, vol. 51, no. 4, pp. 499-510.

Bushman, R.M. & Smith, A.J. 2001, "Financial accounting information and corporate governance", Journal of Accounting and Economics, vol. 32, no. 1, pp. 237-333.

Fornari, A. 2015, "Approaches to ethical decision-making", Journal of the Academy of Nutrition and Dietetics, vol. 115, no. 1, pp. 119-121.

Hörmann, M. & Schabert, A. 2015, "A Monetary Analysis of Balance Sheet Policies", The Economic Journal, vol. 125, no. 589, pp. 1888-1917

Istudor, I.I. & Mocanu, F. 2015, "Financial-accounting Information in the Knowledge Society”, Valahian Journal of Economic Studies, vol. 6, no. 3, pp. 21.

Kane, A. 2014, "Disarmament: The balance sheet", New Zealand International Review, vol. 39, no. 4, pp. 19-22.

Singh, K. 2012, "Financial Accounting", Abhigyan, vol. 29, no. 4, pp. 71.