BSBFIA401 Prepare Financial Reports

Part 1:

The owner should select Units of Production for depreciating the motor vehicle as under this method, the depreciation is calculated on the basis of the usage of the asset. Thus, it helps to determine the depreciation of any asset more accurately than other methods.

As per double entry bookkeeping system, every accounting entry has two equal sides, which are knowan as debit and credit. Thus, any transaction to any account should require an equal and opposite transaction in a different account (Sangster, 2016).

Depreciation accounting mainly follows the matching principle of accounting. For estimating and recording depreciation, the firms have to follow the accounting standards – AAS4 and AASB116.

Part 2:

The general journals are used to record the financial transactions. The general journals are the primary stage where the financial transactions are get recorded. On the basis of the transactions recorded in the journals the subsequent flow of the accounting process begins. Generally, in the preparation of the accounting journals double entry system get used by indicating the debit and equal amount of credit mentioning the dates and descriptions.

The general ledger accounting process comes after the recording of the transactions in the general journals. On the basis of the debits and credits made in the general journals the ledger accounts get created for each of the accounts. The general ledger accounting is the second phase of the accounting transaction recording process. On the basis of the general ledger the trial balance and other financial reports get created.

The primary difference among the general journal and general ledger is that the general journal is the basic phase of transaction recording process and the general ledgers are the continuation of the accounting process of transaction recorded in the general journal.

Part 3:

Under the periodic system of inventory, the sales transactions made during the financial period does not get recorded rather the actual inventory held as on the closing date are get compared and the actual inventory held is shown in the financial statements prepared for the period.

In the perpetual inventory system, the inventory holding is updated on time on the basis of the purchases and sales made using technologies. The perpetual inventory system is considered as more efficient than the periodic inventory system. Under the perpetual inventory system any deviation in the actual inventory holding and recorded inventory holding can be identified and rectified on time on immediate basis. Whereas, in the periodic inventory system the physical inventory verifications are done on a particular time and if any deviation gets identified upon the physical verification, become difficult to reconcile and detect the reason of the deviation.

Legislations

A reporting entity which is required to prepare and report financial statements for any financial year must follow the applicable legislations in the preparation and reporting of the financial statements. The legislations are the laws that influence the preparation and reporting the financial statements at highest level.

Regulations

Under the regulations financial statements require to make sufficient and appropriate disclosures. The disclosures as per the regulations should be adequate that the users of the financial statement can understand and analyse the required information from the financial statement. The regulations are the mandatory requirement that an entity must follow.

Accounting standard

The accounting standards unify a particular event or transaction in reporting for various entities. There can be financial events or transactions that can be reported in multiple legal and ethical manner. To unify the same the accounting standards provides a particular method of reporting the same that the users of the financial statements can understand the same in a unified manner ((Dhaliwal et al., 2019).

Code of practice

The code of practices is the legal framework under which accounting professionals require to deliver their services to the clients. There are a set of rules under the code of practices which determines the ethical and legal framework under which the financial statement validation process flows.

Reference:

Dhaliwal, D., He, W., Li, Y. and Pereira, R., 2019. Accounting standards harmonization and financial integration. Contemporary Accounting Research, 36(4), pp.2437-2466.

Sangster, A., 2016. The genesis of double entry bookkeeping. The Accounting Review, 91(1), pp.299-315.

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