ACCT 20051/20077: Double-entry Bookkeeping system - Essay Report Writing Assessment Answers

Details

The assignment must be completed as an individual assignment. There is no specific writing style required such as a report or an essay for answering the questions.

Assignment questions

1. Discuss the purpose of a double-entry bookkeeping system.
2. Differentiate between financial and management accounting. Give an example of how management accounting reports would be incorporated into financial accounting reports.
3. BHP Billiton Ltd includes a sustainability report in its annual report. What key performance indicators are included in this report? Explain the different stakeholders that would be interested in this information.
4. ‘Complying with the law will always mean that you are acting ethically.’ Discuss this statement.
5. Comment on the following situations in relation to the ASXCGC corporate governance principles and recommendations.
6. A member of a board of directors insists on being involved in the employment of personnel.
7. The auditor of a company is the brother-in-law of one of the company’s directors.
8. The XYZ company ensures that as much information as possible about the operations and financial affairs of the company is made available on the company website.
9. The chairman of the board puts forward a proposal to remunerate the CEO. A member of the board questions the proposal, giving the opinion that ‘in comparison to similar size entities, it seems excessive’.
10. A board member is a major shareholder of a company that has tendered on a contract worth millions of dollars. When the board meets to consider the tenders received, the board member declares that she has a conflict of interest, and leaves the meeting room while the tenders are being discussed.

Answer to Question No. 1

Double entry book keeping is an accounting method in which all the transactions of the business are recorded for both debit as well as credit aspects. This type of book keeping is more informative. The purpose of double entry book keeping is as follows:-

• The recoding of the transactions under the double entry book keeping is very systematic as each transaction has its own debit as well as credit aspect. Therefore, it assists in better control of books of accounts (Book-keeping, 2016).
• Since, both the debit and credit aspects are recorded the books maintained are complete because each and every aspect of a transaction is present in the books of accounts (Book-keeping, 2016).
• Double entry books keeping states about the financial position of the business by reflecting the assets and its corresponding liabilities and equities.
• This type of book keeping is more effective for decision making by the managers as the records that are present in the books of accounts are very detailed and it helps in studying all the accounts in a comprehensive manner.
• If the books of accounts of previous years are extracted the double entry book keeping would be more informative and helpful for the users of the books of accounts.

Answer to Question No. 2

Financial Accounting is used in the preparation of the financial statements of an enterprise in order to ascertain the financial results and financial position of then entity. Management accounting is the process of accounting where the profit or loss of the business is ascertained on the basis of functions like production, marketing etc. in order to assist the managers of various departments in the effective decision making (Bendrey and Hussey, 2003). The main objective of the financial accounting is to provide information to the stakeholders of the business. The main objective of management accounting is to provide information to the internal management of the business in order to assist in effective decision making. Preparation of financial accounting is compulsory while management accounting is discretionary (Diffen.com, 2016). Specific format is prescribed for the preparation and presentation of the financial accounting while the format of the management accounting is at the discretion of the management.

The management accounting can be considered as detailed presentation of the results of the financial accounting. The financial accounting states the result on an overall basis aggregating all the functions of the business while management accounting presents the results on the basis of function. Therefore, all the results of management accounting are present on an aggregate basis in the financial accounting. Therefore, it can be said that the result of the management accounting is incorporated into financial accounting.

Answer to Question No. 3

Sustainability report is the report that is published by the organization that reflects their social, economic and governance performance to the internal as well as external stakeholders of the organization (Pre-sustainability.com, 2016). The key performance indicators of the sustainability report have been discussed hereunder:-

• Environmental performance would be included in the sustainability report of the organization. This would state the environmental commitments and obligations that the organization has catered to while operating the business. An example of the performance to be stated would be installation of environmental friendly equipment by the organization, adoption of any norm by the organization for the protection of the environment.
• Social performance would state about the social commitments that have been met by the organization while carrying on its business activities. It would mean organizing awareness programmes for the development and welfare of the society, creation of employment or job opportunities etc.
• Governance would mean the mechanisms that are adopted by the company for effective and fair control of the company. The measures that have been adopted by the company in order to ensure that all the classes of the company have fair representation.

The different stakeholders for the report would be the investors of the company, the creditors of the company, government and the employees of the company.

Answer to Question No. 4

Law refers to the rules and regulations that have been directed to be adopted by the regulatory framework. If a person follows the prescribed rules and regulations it would be considered that he is abiding by the applicable law of the country.

Ethics is the judgement of correctness of a situation by an individual by applying his wit and conscience. The law is formulated on a general basis and the ethical judgement is based on individual perception. Therefore, this judgement may vary from individual to individual.

Since, law is formulated on a general basis there is a probability that law and ethics may overlap in certain situation. In many situations individuals are faced with dilemma where legally something might be correct but ethically it would not. This situation arises due to the fact that law is based on a general basis however, ethical approach is judged keeping in mind all the facts and circumstances. In such situations acting legally would result in making it ethically incorrect and vice versa. Therefore, complying with the law would not always mean acting ethically because numerous factors have to be considered and analyzed in order to understand the ethical that are involved in any given situation.

Answer to Question No. 5

The following situations have been discussed with respect to ASXCGC corporate governance principles and recommendations:-

• A member of the board of director can be involved in the employment of the personnel. However, in order to comply with the governance it has to be ensured that the member does not exercise his power to give any special preference to any personnel at the time of recruitment of the personnel.
• The auditor of the company can be the brother-in-law of the company’s director. However, this fact should be disclosed at the time of appointment of the auditor and the auditor should procure the work based on his professional skill and knowledge.
• The information about the company can be made available on the website of the company. However, it has to be ensured that unbiased access is present to all the stakeholders of the company and the information present should not hamper the confidentiality of the affairs of the entity.
• In the given case, the chairman has to provide the basis for which the excessive remuneration that has been suggested by him for the CEO would seem reasonable. All the proposals can be considered as complying with governance if they are genuine and have reasonable grounds.
• In order to comply with governance it has to be ensured that all the activities in the company are carried on a fair and reasonable basis. In the given case, the member of the board of director has a conflict of interest for the meeting therefore, it would be appropriate for the board member to skip the meeting as it would result in the awarding of the tender in an unbiased and just manner.