ACC203 Financial Accounting 2 - Free Samples to Students

Develop information gathering and communication strategies to enable the provision of professional advice to a client. The objective of this assignment is to learn to effectively research a technical aspect of accounting and communicate professional advice to a client, via a business letter.

You should address all the technical issues/discussion after the letter on separate pages.

• This mark covers the technical content of your advice and the explanation on each of the issues, the calculations and the sources used.
• This mark covers the generic skills of business letter writing; layout, clear meaning, structure and organisation, appropriate tone and grammar, spelling and punctuation etc.

Reference is made regarding the email sent to our office on 5th July 2018 relating to the above subject and hence wish to categorically state that the query and point of concern are well received and addressed as analyzed below.

The challenge Pewter Ltd is going through is on whether the relevant costs and concern are assigned to respective cost centres as well as whether they have been accounted for appropriately under AASB regulations and Company Act as well.

The first concern is on how the damage cost of Steve Irwin is accounted for and under what ledger of expenses is it expensed. According to AASB introduction clause on expense subparagraph a and b states that anything that reduces asset and value of a company is an expense. However, clause one on expenses states that they should be recognized when they are incurred hence in this case this damage is of speculation Schaltegger and Burritt (2017.Pg.18).

ASSB 137 outlines that provision on speculation should be placed based on the level of risks hence the need to account for this damage cost as insurance cost as stipulated in the company act. This cost of repair and other incidental cost relating to Irwin should be accounted as insurance expense that indeed reduces the profitability aspect of the firm by the value equivalent to the damage provision utilized Berry(2017.Pg.12)

All the same I wish to state that this act of environmental competition concern is however of great benefit to Pewter since it gives them an environment that is conducive for business since the goodwill earned Chen, Shroff, and Zhang (2017.Pg.24) by the act of repairing other competitors work equipment create assurance to investors and customers that their means of doing business is safe and friendly. I likewise wish to state that the net asset increase as stated is only possible if the cost incurred contributes to goodwill that is recognized as a result of the environmental concern of the market.

I therefore strongly advise the management to continue to provide insurance provisions that are accounted appropriately as insurance expense and not marketing since they are just incidental to marketing unlike to insurance hence an aspect that helps them save and guarantees them business continuity as avoidance of litigation. This could be a win to win situation to both Pewter and Japan Whalers only if the risk corresponds to compensation otherwise if not so no win to win effect is seen Esty and Winston (2009.Pg.7).

References

Berry, T., 2017. Estimating realistic startup costs. Retrieved on April, 28.

Chen, W., Shroff, P.K. and Zhang, I., 2017. Fair value accounting: Consequences of booking market-driven goodwill impairment.

Esty, D. and Winston, A., 2009. Green to gold: How smart companies use environmental strategy to innovate, create value, and build competitive advantage. John Wiley & Sons.

Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts and practice. Routledge.