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FNSACC504 Corporate Entities and Compliance Proof Reading Services
1.Interest A/c Dr. 900000
To Accrued Interest a/c cr. 900000
(Being interest earned but not received on a $20 million 3% term deposit of 6 months)
2. Accrual accounting means recording the revenues and the expenditures in the year to which they pertain regardless of the fact if they have been paid for or not. Accrual accounting ensures that the actual performance of the organization is portrayed with the help of this practise. This principle or co9ncept underlines two basic principles that is the periodicity concept and the matching principle. The matching principle advises to match the revenue with the cost in order to present the true and fair view of the performance of the concern.
A. Any system which falls short of the double entry system of bookkeeping is referred to as the single entry system. In reality there no established system of accounting known as single entry system. The system of financial accounting which fails to capture the dual aspect of entering transactions is a single entry system. In a single entry system it is not possible to construct or compile a balance sheet and a profit or loss statement. It is only possible to compile a statement of affairs with the help of the incomplete records and best business judgement.
B. The key principles of double entry system are as follows:
- For every transaction there is a debit and a credit of an equal amount
- Every account has a debit side and a credit side
- The flows from universally accepted accounting principles and conventions
- The transactions are recorded in the subsidiary books from where the transactions are posted as journals. These journals are then posted to the respective ledger accounts from where the balances are posted to the trial balance (Symon, 2006)
- As every entry or transaction has a debit and credit impact the balances of debit and the credit side of the trial balance should always match. If the balances don’t match the accounts need to be checked for errors.
C. A company must adopt these principles in order to depict the true nature of the performance and to avoid confusion.
1. According to the Corporations Act 2001, a company which has a single owner is referred to as a proprietary company. Such companies are further classified into small or large proprietary concerns. According to the section 45(A)3 of the Corporations Act 2001 a company which satisfies two of the below mentioned 3 conditions is classified as a large proprietary concern:
- $25 million or above in consolidated revenue
- The consolidated gross assets of the organization at the end of the financial year should be equal to or more than $12.5 million
- There should be equal to or more than 50 full time employees at the end of the financial year.
Hence the organization of Shane would be classified as a small organization behavior as it fails to satisfy all the above mentioned conditions (Symon, 2006).
2. Since he is a sole trader he would not be required to obtain a separate tax file number and can use his own tax file number for business dealings
3. The three legal requirements of a sole trading organization have been underlined below:
- a. If the turnover of the organization is more than $75000 annually the organization is required to register for GST (Adams, 2002).
- b. To get a business name the organization needs to procure a ABN or Australian Business Number
- c. Like every individual a sole proprietor is required to file his tax returns.
- d. A general purpose financial statement is for the use of public at large whereas a special purpose financial statement is for the use of a particular interest group or groups. For instance where the financial statements are filed with the tax authorities using their prescribed format the same would be classified as special purpose financial statements.
- e. The companies are categorized as tier 1,2 or 3 companies based on the facts mentioned below:
- i. Tier 1: $250000 of revenue or less
- ii. Tier 2: $250000 or more reported as revenue but less than $1 million
- iii. Tier 3: Companies or organization with reported revenue of more than $1 million
Hence according to the above conditions Shane’s organization would be a Tier 3 company and is necessarily required to file the tax returns.
Any conflict of interest should be disclosed according to the code of ethics as mentioned by the PGPA Act 2013. For instance the director of an organization needs to disclose if he or she is holding any other offices or not. In addition to the same the director of an organization also needs to state if he or she has procured loans from the organization in which he is a director or any other subsidiary of the organization.
The definition of insider trading is “the illegal practice of trading on the stock exchange to one's own advantage through having access to confidential information”. Hence where an individual within an organization has access to information system which the common people don’t have and makes profit through the same on a stock exchange is referred to as insider trading. As the people at large don’t have access to such information the same puts them at a disadvantage which moves them away from the markets thereby disrupting the flow of the financial market. This is the primary ethical consideration of insider trading (Bainbridge, 2011).
Adams, M. (2002). Essential corporate law. 1st ed. Sydney: Cavendish Pub. (Australia).
Bainbridge, S. (2011). Insider trading. 1st ed. Cheltenham, UK: Edward Elgar Pub.
Symon, H. (2006). Corporations Act 2001. 1st ed. Melbourne: Leo Cussen Institute.