Management and Cost Accounting Accounting Issues

Question: Describe about the Management and Cost Accounting for Accounting Issues. Answer: To Mr. Con Pewter Managing Director Pewter Ltd Level 6 510 King William Adelaide SA 5000 Date: September 13, 2016 McKenzie and Associates 777, South Terrace Adelaide SA 5000 Sub: Re- Addressing of accounting issues in Pewter Ltd. Dear Sir, The present measure of recognition of the expenses of Pewter Ltd. is complicated in nature as it is difficult for the organization to track the individual long service leave taken by different employees in different periods. This is particularly intricate way of accounting the individual leaves of the employees need to be identified, which may be applied by the employees in any time during a particular financial, year. In order to track and maintain the long service leave in a more systematic manner the company needs to create a provision for maintenance of the long service leaves. Pewter Ltd. should create this provision in the very beginning of the month, this will allow the company to credit the provision for the long service leave account in the income statement. In case the company is seen to be maintaining the amount of the provision for then long service leave higher than the actual, amount of the provision for long service obtained from the employees the excess amount needs t o be carried forward in the next year as this can be adjusted with then required balance for the next year. In case it has been observed that the company is maintaining the provision, which is less than the actual expense incurred for the long service leave then Pewter Ltd. need to adjust the deficits with the next year. This maintaining of the provision of the long service, leave account by the company will ensure that it does not need to make the changes in the expenses in the income statement with the individual employees. For example, the journal entry for long leave would be Profit Loss A/c Dr. To Provision for long service leave In the second situation, the company shows the net amount for the average fees received per square meter and the sales of the product shown as the sales revenue in the company. The company cannot do this practice as the units differ. The sales revenue is shown in form of the rent is given as per the square meter of the company, while the sale revenue for the sales of the product on displayed window is based on the no. of the units of the products sold by then company. Hence, it can be observed that due to the varying unit of in both the cases the company needs to maintain two separate accounts. This is particularly helpful in terms following the practice as suggested by the AASB guidelines. According this practice the company the will be able to maintain the revenue in two different overheads. One overhead will be used for tracking the cost of sales of the company and on the other overhead, the company will be responsible for tracking the loss. The maintaining of the aforementioned s ystem of the overhead will also be useful for the taxation purpose as the tax authority will be able to track, the various types of the different sources of the revenue of the company. The company will be further able to allocate the different type of the sources of the profit in the areas which are traceable in nature. Moreover, the in case Pewter Ltd. makes any form of loss then it will be able to project the amount of unsold inventory through a separate journal entry and the effect of the same shall be demonstrated in the profit and loss account. The journal entry shown as a purpose for the purpose for reference of the company is shown below as per the AASB guidelines: Cost of goods sold expense A/c Dr. $ 50000 To Purchases $ 35000 To Inventory $ 15000 In the third situation, the changes in the deferred tax liability and the changes in the deferred tax assets need to show the effect of the changes as per the previous year. The main purpose of the creation of the separate account for the deferred tax liability and deferred tax asset is to show the relevant changes in both the provisions created for the asset and liability of the company. In case the deferred tax liability of the company is seen to be more than the actual liability then it will be imply that the company is involved in the fabrication of the financial data to its shareholders. In case it is observed that, the deferred tax asset is shown to be less than the actual asset, which is in the possession of the company, then that case the company is not able, to show the actual amount of the profit to its shareholders. Moreover, it is suggested that the company maintains the separate account for DTA and DTL for recording of the deferred tax entries for presenting the fair val ue in the tax authority. This is mainly due to the reason for the adherence of the guideline as per suggested by the AASB norms and considered as a part of the fair value accounting. The maintenance for single account as a current tax liability is not considered as a fair value accounting practice. Additionally, the maintenance of two separate accounts will be useful for the tax authority to track the actual tax liability and the asset which has been charged for particular financial year this will, be further successful for the purpose of the charging the tax on the basis of the individual DTA or DTL. The journal entries shown for the purpose of the individual accounts as per the AASB are shown below as follows: The journal entry for the deferred tax liability is: Profit and loss A/c Dr. To Deferred Tax Liability A/c The journal entry for the deferred tax asset is: Deferred Tax Asset A/c dr. To profit loss Ac We hope the aforementioned recommendations will be useful in addressing the present issues at Pewter Ltd. With Thanks Regards Name: McKenzie and Associates Bibliography DRURY, C.M., 2013. Management and cost accounting. Springer. Small, R., Yasseen, Y. and Jansen, J., 2016. Accounting for deferred taxation: accounting technical. Professional Accountant, (27), pp.14-16.