Assignment: Financial Accounting and Reporting
Description
Learning Outcome 4: Develop information gathering (research) and communication strategies to enable the provision of professional advice to a client.
Objective: 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.
Background to the case study:
Assume that you are a graduate accountant working for McKenzie and Associates a public accounting firm situated at 668 George Street, Melbourne, VIC 3000. The manager of your firm, Ms. Maria McKenzie has asked you to draft a letter in response to an email received from a client Mr. Con Pewter, the Managing Director of Pewter Ltd, raising a number of issues regarding his company. see the copy of the email on the next page.
The maximum length of the letter is 1,250 words (excluding any calculations).
Part A: Technical component- This mark covers the technical content of your advice and the explanation on each of the issues, the calculations and the sources used.
Part B: Communication Skills Letter Writing- This mark covers the generic skills of business letter writing; layout, clear meaning, structure and organisation, appropriate tone and grammar, spelling and punctuation etc.
The assignment is designed to test the following skills:
1. Your knowledge and your ability to research the issues and then apply the information appropriately using judgement to correctly identify the relevant standards and legislation that relate to the issues raised by the client.
2. Your written communication skills business letter writing
Please note: Any work which has been copied or shared between students will result in a Fail grade for both students concerned. Therefore, please make sure that the answer to this individual assignment is your own work and not copied or bought from any source. In completing this assignment make sure you follow the guidelines for assignments especially those relating to the presentation of written work, late assignment policy and academic integrity.
Please check the marking rubric for each part to ensure that you have followed all the guidelines for presenting your work.
Dear Maria
Thank you for your phone call this morning, as agreed I am emailing you regarding the accounting issues we briefly discussed. By the way to assist the accounting team in our decision-making process could you please make sure you reference any relevant sources relating to your advice, for example, AASBs, Corporations Act, and relevant websites.
1. At our recent board meeting, several directors raised concerns about spending too many man hours (and dollars I must say) on accounting for future tax consequences. Their biggest argument was that as long as the tax man is happy and we are not cheating on our tax returns, then we are simply wasting money in accounting for temporary differences and deferred tax assets (DTAs) and deferred tax liabilities (DTLs) (which I must admit is a mystery to me). Do you have any problems if we do not account for the DTAs and DTLs and just account for the current tax liability?
2. Our company has recently entered into a long-term and a radical agreement with several of our retailers in Australia. Under the new agreement, at the start of every quarter, we will ship a variety of our products (suitable for that state and that time of the year) to our retailers. All retailers have agreed to set aside a section in their stores to exclusively display our products including the display windows at the front of the store. In return we have agreed to pay a fee to each store on a monthly basis for allowing us the access to this window space and space on the shop floor to advertise and sell our products. The average fee is around $600 per square metre, per store per month. At the end of the quarter, the store will return all the unsold products to us and we will send out a new shipment to prepare for the next quarter. The stores will also transfer the revenue from total sales to us after deducting the display fee noted above. The board unanimously
agreed to recognise the sales revenue at the start of the quarter (when the goods are shipped). At the end of the quarter when the excess inventory is returned to us by the stores, we can always make the necessary adjustments i.e. reverse both the sales revenue and cost of sales as well the amount owed by the stores and the incoming inventory. After all, the net effect would be the actual sales of the period. The board also agreed that the fee we pay to the stores should not be recorded separately because that is the cost of doing business. So we will only record the net amount received as sales revenue. This should simplify matters, shouldn't it?
Please respond by letter (not email) as I would like to present this to the Board. I look forward to hearing from you in the near future.
Regards
Con Pewter
Managing Director, Pewter Ltd
Level 6, 510 King William Street,
Adelaide SA 5000
Hint: Remember that your firm plans to charge the client for your advice; as a check ask yourself if you would pay for the advice you have drafted!