Advance Financial Accounting Business Organization

Question: Describe about the Advance Financial Accounting for Business Organization. Answer: 1: In a business organisation, there could be different parties, who play important roles in business operation and management. In this context, it can be said that the owners, managers and other staffs in an organisation are to be considered as internal parties of a business organization, as these parties are directly related with the operations of business. Business regulators and legal frameworks of a country make it mandatory to remunerate these parties. But in case of the outsiders of the business organisation, there is no such laws or regulations, which permits to remunerate the outsiders or external stakeholders of a business organisation. There are different views regarding remunerating the stakeholders of a business organisation. Some of the theories state that as the external parties are also the stakeholders of a business, they are to be given credit for operations of a business. Customers are also to be taken as important external shareholders and they are to given incentives[1]. The customers are to be remunerated by gifts and discounts. Such incentives could help the business managers to minimise the cost of operations. Suppliers are also to be considered as an important external party to a business organisation and incentives are to be provided to them as discount. These incentives could increase sales and facilitate supply of goods. Therefore, probable losses could be decreased by those incentive schemes. 2: In the books of Bells Beach Tourist Operations Journals Date Particulars Amount ($) Amount ($) Dr Cr 7/1/2013 Airframe A/c Dr 12000000 Engine A/c Dr Fittings A/c Dr To Bank A/c 12000000 [Being Aircraft purchased with the following compositions] 6/30/2014 Depreciation on Airframe A/c Dr 1142800 To Accumulated Depreciation on Airframe A/c 1142800 [Being depreciation charged on airframe] 6/30/2014 Depreciation on Engine A/c Dr 700800 To Accumulated Depreciation on Engine A/c 700800 [Being depreciation charged on engine] 6/30/2014 Depreciation on Fittings A/c Dr 12000 To Accumulated Depreciation on Fittings A/c 12000 [Being depreciation charged on fittings] Workings Depreciation on Airframe $ Cost of airframe 6600000 Scrap value 150000 Estimated life (years) 15 Depreciation per annum on straight line basis 430000 Depreciation on Engine $ Cost of Engine 4800000 Estimated life (hours) 20000 Working hours in current accounting year (hours) 2920 Current year depreciation 700800 Depreciation on Fittings $ Cost of Fittings 60000 Estimated life (years) 5 Depreciation per annum on straight line basis 12000 Total depreciation for the current accounting year Particulars Amount ($) Total depreciation 1142800 3a: Rate of interest implicit in the lease 25% Present value of the minimum lease payment (350,000 35,000) 315,000 3b: In the books of Burt Ltd Journals Date Particulars Amount ($) Amount ($) 30-06-2016 Depreciation Expense A/c Dr 180731 To Accumulated depreciation 180731 Lease liability A/c Dr 350000 Interest A/c Dr 350000 To Bank A/c 700000 30-06-2017 Depreciation Expense A/c Dr 180731 To Accumulated depreciation 180731 Lease liability A/c Dr 350000 Interest A/c Dr 262500 To Bank A/c 612500 3c: Financial position as on 30/6/17 Liabilities $ Assets $ Lease liabilities 244384 Lease assets 932923 3d: In the books of Burt Ltd Journals Date Particulars Amount ($) Amount ($) 30-06-16 Rental expense A/c Dr 350000 To cash A/c 350000 30-06-17 Rental expense A/c Dr 350000 To cash A/c 350000 4: Active market: Active market is to be defined as high liquidity market, where trading is made on heavy volume[2]. Existence of active market in case of intangible assets: As defined above, in active market, liquidity of assets are quite high and therefore, it can be said that intangible assets could not be traded in an active market. As mentioned in the problem, brand names and development expenditures are not to be traded in high volume. In such cases, the intangible assets are to be considered as fixed non liquid assets of a company[3]. Moreover, the intangible assets are valued at the fair value, but in active markets, the assets are sold at market value. In this context, it is also to be mentioned that in active market, homogeneous products are sold. Whereas, in case of intangible assets, this criteria could not be met and therefore, it can be said that in active market, there could not be an existence of intangible assets such as brand names and development related expenditures. References: Horngren, Charles T,Financial Accounting(Pearson Australia Group, 2013) Shying, Mark and Ram Subramanian,Accounting Handbook 2013(Pearson Australia for CPA, 2013) (2016) https://www.asx.com.au/asxpdf/20150818/pdf/430kvhrl8cpg0l.pdf