Introduction

Financial Accounting

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Table of Contents

Introduction. 2

Discussion. 2

Conclusion. 5

References. 7

Introduction

Financial accounting denotes a combination of income expenses, asset liabilities and many more. A financial accounting must be indicated with many required documents of the company like board’s report company’s annual report to ascertain the financial condition of the company.

Discussion

Measurement and recognition

AASB 137 also provides that the auditors will also assess whether the company discloses in the financial statement that the contingent asset is reported or not and if not reported they may also take reasons and justification for this purpose. It is also provided in the provisions that the contingent assets are not recognised in the annual financial statements of the company all the time. There are many incomes in the business which may not result in recognised income. Contingent liability is another major area in the context of AASB 137 the term also contains many provisions. A contingent liability also has a similar type of definition to contingent assets it is also dependent upon certain future events It may also result in a potential loss or damage in the future times. If a company or enterprise can’t estimate the amount the company can disclose the amount in the financial statements of the company. A competent audit team will carry out the necessary inspection to check the assets condition of the organisation (Werner, Wiese & Maas, 2021). The applicability of the term contingent liability applies to all be it individual or company. A correct and proper method of accounting is required to maintain a record of contingent liabilities and if possible appoint professionals like Chartered Accountant Cost Accountant and Company Secretaries to ensure proper recording. If shortly any emergency arise the companies based on private company or public or Government Company maintain this liability to analyze current financial accounting. Every year Budget is passed by the government of India a proper contingent liability also helps in assessing the plans. In order to ascertain the financial statements users must determine fraudulent financial statements (Sawangarreerak & Thanathamathee, 2021). Major important accounting standards like GAAP and IFRS have also given their consent to companies to keep proper records of contingent liabilities Main aim behind these provisions is to structure and recording of current financing events and transactions and not to ignore any transactions and also to keep a record of every accounting records which will affect the future event of a company.

Internally generated goodwill

Financial accounting is a major part of handling business or carrying out any financial activities like ascertaining profit losses, dealing with income tax matters and making many important decisions. A sample of financial accounting, if attached with any required documents or report, gives a short analysis of obtaining correct financial statements and compares the result in a financial year. All forms of entities whether profit-based or not will make a proper analysis of financial statements (NANGOY, 2020). The sample is mainly nothing but a copy of the financial accounts that are required to be attached along with many documents. Accounting standard standards board 137 mainly deals with rules and provisions and rules regarding contingent assets and contingent liability it mainly deals with many important definitions and characters.

The primary goal behind the enactment of this provision is to ensure all the regulation and assessment methods are perfectly applied and used and also to prepare and make any rules regarding warranties and refund policies. It is also given in these rules that make certain acts for the help of the users and they will get familiar with the type and definition of contingent assets and many more. A contingent asset and contingent liability are both important factors in the sector of financial accounting and perfect knowledge is required here to understand these concepts. After the covid-19 pandemic stronger effect has been shown in the dependencies of asset return (Le et al., 2021). Many examples are also provided for the user of AASB 137 like the example of contingent assets and contingent liabilities with some examples of tribunals of court cases where a customer is the sole beneficiary but the case is unclear. As per AASB 137 is required to follow some obligations are recorded as liabilities or assets based on certain situations. Asset or liability is dependent upon many situations like inflow or outflow of the resources and also analyse the current or past obligation or situation.

Figure 1: Accounting cycle

Source: (Le et al., 2021)

This provision also discusses many important requirements regarding lease contracts and many more. It mainly applies to leases from their commencement date but AASB 137 will not apply after the initial stage but some exceptional cases like valuation of assets and categorisation of such assets as short term or long term. The contingent assets and liabilities also deal with many important provisions and concepts one of such provisions deal with erroneous contracts. It is for the interest of the company many effective methods are required to follow to stop financial fraud (Omidi et al., 2019). The contract is mainly focused on some costs associated with the business and is mainly unavoidable.

Treatment of assets by companies

In the context of financial accounting, assets are classified into many parts like current assets, fixed assets, intangible assets and also contingent assets. Each of the assets has its feature and different characteristics for its detailed study and discussions accounting standards prescribe many rules and regulations. AASB 137 deals with contingent assets and liabilities and AASB 138 deals with the aspect with intangible assets and liabilities. The different features and benefits associated with the financial statements are also clarified by these samples. The aim is to quickly assess and calculate the true financial position of the company, it is essential to attach this kind of sample along with the financial accounting. 

Conclusion

Based on the above discussion, it concludes that every company is required to disclose its assets and liabilities of every part contingent or intangible or current. This type of element helps in assessing the current financial position of the company and also saves from much financial crisis shortly.

References 

Le, T. H., Do, H. X., Nguyen, D. K., & Sensoy, A. (2021). Covid-19 pandemic and tail-dependency networks of financial assets. Finance research letters, 38, 101800. DOI: https://doi.org/10.1016/j.frl.2020.101800 

NANGOY, S. J. (2020). ANALYSIS OF FINANCIAL STATEMENTS BASED ON INTERPRETATION OF FINANCIAL ACCOUNTING STANDARDS NO. 35. DOI: http://dx.doi.org/10.31364/SCIRJ/v8.i9.2020.P0920810 

Omidi, M., Min, Q., Moradinaftchali, V., & Piri, M. (2019). The efficacy of predictive methods in financial statement fraud. Discrete Dynamics in Nature and Society, 2019. DOI: https://doi.org/10.1155/2019/4989140 

Sawangarreerak, S., & Thanathamathee, P. (2021). Detecting and analyzing fraudulent patterns of financial statement for open innovation using discretization and association rule mining. Journal of Open Innovation: Technology, Market, and Complexity, 7(2), 128. DOI: https://doi.org/10.3390/joitmc7020128

Werner, M., Wiese, M., & Maas, A. (2021). Embedding process mining into financial statement audits. International Journal of Accounting Information Systems, 41, 100514. DOI: https://doi.org/10.1016/j.accinf.2021.100514