BSBFIA401 Prepare Financial Reports-Occupational Health and Safety Act

Chose one each from the given list of accounting principlesor qualitative characteristics and illustrate them with an example. Your response should be approximately 150 – 250 words for each. You will be required to present/ explain your example to another student in class. You will then swap roles and also you can pose questions to the presenter in order to clarify their understanding of the chosen principle or characteristic.

Accounting principles Qualitative characteristics

Matching principle Relevance

Historic Cost Principle Disclosure

Comparability Materiality

Consistency Principle Reliability

Rodney has been providing demolition and excavation service for the past seven years. On the 1 October 2012, Rodney bought a new excavatorfor $88,000 including GST from Farm Machinery P/L. Its registration number was JDH 123 and he decided to keep the excavator in shed number 1.

Additional costs associated with this purchase included:

Cab air conditioning $990 (inc GST)

Delivery fee $1,100 (inc GST

Registration $600 (GST free)

Insurance $550 (inc GST)

He made a deposit of $10,000 and financed the remainder by negotiating a loan from the Farmer’s Union.  The balance of the loan was due on the1 March 2013.Because the efficiency of excavator reduces over time it was decided to depreciate the excavator using the reducing balance method at a rate of 15% per annum.

January 2013 proved to be a good season for excavation work with perfect weather and large amount of road work in Melbourne.  On the 1February 2013Rodney received a cheque for $330,000 which included GST for the services he had provided.

Rodney had coveted a cool new red Holden Storm HBD ute for years and with his higher than expected cheque decided that he could afford one.  On the 1 April 2013 he purchased his ute registration number “Cool Wally” for cash from Nhill Cool Cars for a sum of $38,500 including GST. To protect its shiny duco Wally decided to park the ute under the carport rather than out in the paddock.

Additional Costs associated with this purchase included:

Air Conditioning $770 (inc GST)

Tow Bar $550 (inc GST)

Registration $500 (GST free)

Insurance $440 (inc GST)

The estimated residual value of the ute after 5 years was expected to be $6,200.  It was decided to depreciate the ute on a straight line basis.

On 1January 2015 after Rodney’s new girlfriend had told him that she was too embarrassed to be seen in a red ute, Rodney traded in his red ute for a yellow one. Nhill Cool Cars offered him a trade in of $25,000 on his old ute.  The new yellow ute’s cost was $44,000 including GST and cash was paid for the balance.

Additional Information:

20 May 2013 An electrical fault on the ute was repaired under guarantee (no cost)

15 July 2013 Ute was serviced By Nhill Motors at a cost of $198 including GST

22 October 2013 Excavatorreceived its annual service from Farm Machinery P/L at a cost of $440 including GST

29 October 2013 Dent in ute after Rodney came home late one night from the pub and hit the gate post was repaired by Dents R Us at a cost of $1,100 including GST

20 April 2014 Ute serviced by Nhill Cool cars at a cost of $220 including GST

15 October 2014 Excavator received its annual service from Farm Machinery P/L at a cost of $770 including GST

Required

1. Please show workings as indicated.
2. Record all the transactions in the general journal
3. Complete the asset register cards for the Excavator.

Occupational Health & Safety Act 2004 (Vic) / WHS Codes of practice:

The main objective of this Act is to form a legal framework to revoke the Occupational Health and Safety Act 1985 and also to provide matters for involving a process of change and amendments by considering changing norms of society(Botha and Cronjé, 2015). Act aims to ensure safety, well-being, health and welfare of all employees at work. It also ensures that the health and safety of the public are not disturbed by the conduct of employers. Formulation and implementation of policies and principles of health and safety Act (section 4) are supported by team work by the involvement of employers and employees (Reese, 2015).. The intent of parliament is that administration of the Act should be according to the principles of health and safety protection set out in section 4. This Act came into functioning on 1 july2005.

The Australian Consumer Law (ACL)

Australian consumer law is made to protect the right and interest of every consumer in Australia. This law deals with fair trading practice and protects the interest of the consumer. This law replaces many former consumer laws, and it is applied across Australia (Zohar, 2014). Australian consumer law is scheduled to Competition and Consumer Act 2010, and it is jointly regulated by Australian competition and consumer commission (ACCC) and state and territory consumer protection agencies. In some relevant matters, Australian Securities and investment commissions (ASIC) are also involved (Collier, 2015).

In 2005 government of Australia feel to bring reforms in consumer law then in 2006, a task force is made which in 2008 present the draft of development and implementation national consumer law. This law protects consumer from misleading, unfair conduct of businesses. Goods and services which consumer purchased are mandatorily covered by consumer guarantees (Kloss, 2013). This means businesses must fulfil all the necessary rule and regulation of ACL.  .

Accounting principles: Matching Principle

The matching principle is practice for recording accounting transactions in which firms recognize revenues and their expenses related to accounting transactions in the same accounting period. In accordance with this principle business is required to show an expense on their profit and loss account in the accounting period in which related revenue is recognised. This principle provides business a systematic allocation of incurred expenses in the accounting periods to avoid misstating of earnings.

Cited principle is combination of accrual accounting and revenue recognition principle which states that transactions must be recorded as they occurred irrespective of their associated cash transaction and earning should be recognised while accounting transaction no at the time of receiving of cash ((Dimitropoulos and et al. 2014)).

 For example:

If a company had made advertisement expenses for promotion of sales by signing a contract with celebrity then entire cost paid will not be recorded in same year as this promotion will provide long term benefit to business. As a consequence, advertisement expenses will be deferred into multiple years as per matching principle.

Qualitative characteristics: Materiality

Materiality concept states that only those financial information could be added to the financial statement which would be capable of changing the decision of stakeholders of the enterprise. The materiality of financial information varies from entity to entity. Other principals are ignored if the information is not material and same is not included in financial statement (Landsbergis and et al. 2014). Materiality is depending upon several factors like sum of total amount of immaterial financial information, size and nature of the organization.

For example – Fire has occurred in a factory of the organization and stock is destroyed due to the same. After a long fight with the insurance company, the organization says it is an abnormal loss of $5000. Net income of the organization is $1000000, so in this case material concept says that it is not relevant information because the amount of loss is not affecting much to the organization (Weygandt and et al. 2015). On the other hand, if the same situation will arise in front of an organization whose net income is $50000 then it is material information for the entity and their stakeholders.

The depreciation on excavator is applied by applying reducing method at the rate of 15% per annum. The depreciation for the year will be calculated in following manner:

Total cost of asset 83000

Depreciation 83000*15%*9/12

                        9337.5

Depreciation for  year 2014

(83000-9337.5) *15%

 = $ 11050

Depreciation for  year 2015

($73662.5-$11050) *15%

 = $ 9391.87

It has been provided that depreciation on UTE will be done on straight line basis.

Depreciation = (Total cost of asset –Salvage Value) / Estimated Useful Life

 = (37100 – 6200) / 5

 = 6180 per annum

 As UTE has been purchased on 1^st April2013, depreciation which can be claimed in this financial year is

  6180/12*3

   $ 1545.

The reason behind the same is that it has been in acquisition for three months only.

Selling Price of UTE $25000

Book value of UTE $26285

Profit / (Loss) on sale $1285

Calculation of Book value of UTE

Purchase Price  $37100

Depreciation for 2013  $1545

Depreciation for 2014  $6180

Deprecation for 2015  $3090

(Six months depreciation

 can be claimed)

Book Value $ 26285

References

Books and Journal

Botha, D. and Cronjé, F., 2015. Occupational health and safety considerations for women employed in core mining positions. SA Journal of Human Resource Management, 13(1), Pp.1-12.

Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons.

Dimitropoulos, P.E., Asteriou, D., Kousenidis, D. and Leventis, S., 2013. The impact of IFRS on accounting quality: Evidence from Greece. Advances in Accounting, 29(1), Pp.108-123.

Kloss, D., 2013. Occupational health law. John Wiley & Sons.

Landsbergis, P.A., Grzywacz, J.G. and LaMontagne, A.D., 2014. Work organization, job insecurity, and occupational health disparities. American journal of industrial medicine, 57(5), Pp.495-515.

Reese, C.D., 2015. Occupational health and safety management: a practical approach. CRC press.

Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & Managerial Accounting. John Wiley & Sons.

Zohar, D., 2014. Safety climate: Conceptualization, measurement, and improvement. The Oxford handbook of organizational climate and culture, Pp.317-334.