Reflective Learning Journal
The purpose of this reflective learning journal is to record and analyse your experiences of learning business accounting as both a process and a product. In your journal you will need to document your thoughts and provide information about what you are learning, how you are learning and your reflections on what you have learned about business accounting concepts and principles. You also need to demonstrate your understanding of the Australian Conceptual Framework for accounting standard setting and the implementation of accounting standard in business practices.
Assessment criteria: The reflective learning journal will be assessed based on the following criteria:
Content: You should focus on one week’s learning materials introduced in weeks 2-6. Please note: don’t try to cover every topic. You can choose to reflect on one particular topic that you are interested, such as cash management.
The topics covering in the reflective learning journal may include, but should not be limited to
double entry accounting, accounting equation, accounting cycle, adjusted trial balance, the use of special journals or subsidiary ledgers, sales and purchases transactions, perpetual and periodic inventory system, inventory costing methods, inventory valuation, internal control, cash management and budgeting, receivables and doubtful debts management.
Introduction: The character and the functioning of the firm's function of accounting are defined by the board or the company’s conceptual framework. A conceptual framework is necessary for the ascertainment of the hypothetical and conceptual issues which are adjacent to the firm’s financial reporting system and hence will need a proper and logical foundation which will be helping the firm to strengthen the maturity of the accounting standards.
Conceptual framework prevails in many of the cases but it is specifically designed for financial reporting. It can be called as the statement that is used by the firm to keep data record and assess the philosophy of the firm’s past and maturity of the new ones. Thus the main and foremost function of the accounting is to supply useful information and the basis of the economic decision making.
Conceptual framework’s application
It helps to create benchmarks of concepts and objectives. A firm which is using the conceptual framework should always take into the consideration IASB or FASB standards in order to increase the functionality. The framework should also help to mould the minds of the statement users and make changes in the financial reporting. It should also help the company to compare data from the others. It also helps to solve the problems quickly by the use of the existing basic theories (Singleton-Green, 2016).
It was questioned by the accountants about the mobility of the conceptual framework in the production of financial statements. This was answered by the past history that how the use of conceptual framework has been used by the firm to grow. The accounting standards and the conceptual framework do not work together. They make affects on the income and financial statements of the firm which leads to a contradiction of the transaction details (Baluch et. al, 2011). The standards were made as a reaction to the disgrace or failure or by observing the environment. Their main focus was to improve the approach by introducing new policies.
It could have also been argued that the conceptual framework is having fewer rules and regulations. The management should be led with utmost care and the use of the conceptual framework is thus made necessary. This system will be more rigid and the magnetism of the financial statements will be much more similar compared to the others (IFRS Foundation, 2010).
The main objective that is needed by the IASB can only be accomplished by the application of the conceptual frameworks thoroughly. These systems have been very useful to the people who are using the financial statements or the new start-ups which are trying to grow in the market. A better and more creative image of the accounting standards has been presented by the use of the conceptual framework. After analyzing the current position of the firm’s financial statements it has been seen that the individual should be provided with the necessary reports that can be utilized by them to ascertain the index of the conceptual framework of the firm (IFRS Foundation, 2013). All the data relating to the liabilities, assets, capital maintenance and expenses should be taken into account while assessing the conceptual framework.
Challenges of the conceptual framework
Conceptual framework proves to be a boon with many advantages but to have a limitation as well. It is well known that the pillars of the conceptual framework are fully based on mind thoughts and this may not seem very practical and successful to other people. For example, the statements of a company can be manipulated in such a way which seems theoretically correct in nature but is practically fraudulent. A conceptual framework has a complicated construction which may appear difficult to many and this can have an impact on the decisions made from person to person while analyzing the reports (Gibson, 2010). The foundations of the conceptual can be seen to depend indirectly on the monetary provisos. Concentration has to be equally divided between both financial and non-financial data by the accounting regulations but it is impossible for the economic apprehensions to impact the decisions of the people while standing alone. As a summary of all the earlier mentioned statements and facts, it is obvious now that one conceptual framework plan is not capable of taking over the market and different people have distinguished thinking and so they require different forms of a conceptual framework to be brought into action. Though Enron, Arthur Andersen were on-time in presenting their company’s financial statements then also they suffered a downfall. By this, it is clear that these companies used their financial statements in a fraudulent way and manipulated them for maintaining the reputation of the company and so it can be concluded from this that conceptual framework has certain limitations (Seilber, 2015). After these incidents, the IASB and FASB have planned to make the conceptual framework and the accounting standards stricter and sent all the rules for change and renovation with the gathered data which includes discrepancies also (Cooper et. al, 2011). These changes have caused the conceptual framework to maintain a higher level which summons the trade-off betwixt reliability, comparability, etc. A perfect sync between the accounting principles will be a boon to the world economy in many ways which are as follows:
If the above rules are implemented then it would be seen that international monetary results and money-related management decisions can be made with minimized threats. By setting the above standards it would be seen that the whole world has an equal platform for the accounting policies (Deegan, 2014). All the regulators and auditors will be delivered exactly similar data which would increase their work efficiency.
A conceptual framework has a wide range of advantages and has offered a stiff but precise platform. This platform can be thought of as one to classify and to safeguard social and economic status. Discrepancies which exist in the accounting standards can only be removed by the rules set up by conceptual framework. Easy maintenance of the accounting standard can be done as conceptual framework eliminates the misstatements of accounting standards. It has also been a boon to the preparers, auditors and also to the users of the financial statements.
Baluch, C., Cohen, R., Soto, H., Tucker, P., Volkan, A., and Wright, G. (2011) Fair Value Accounting: Current Status And A Proposal For Convergence. The International Business & Economics Research Journal. [onliine]. 10(4), p. 17-29. Available from: https://www.researchgate.net/publication/265411225_Fair_Value_Accounting_Current_Status_And_A_Proposal_For_Convergence [Accessed 27 April 2018]
Cooper, C, Coulson, A and Taylor, P. (2011) Accounting for human rights: Doxic health and safety practices – The accounting lesson from ICL. Critical Perspectives on Accounting. [online]. 22(8), p. 738-758. Available from https://pdfs.semanticscholar.org/29fe/f2147778ed83c4ee682b6e457a70b344a28a.pdf [Accessed 27 April 2018]
Deegan, C. (2014). Financial Accounting Theory (4th ed.). McGraw-Hill: Sydney. Everingham, G.K, Kleynhans, J.E & Posthumus, L.C. (2007) Principles of Generally Accepted Accounting Practice. Juta and Company Ltd.
Gibson, C. (2010) Financial Reporting and Analysis: Using Financial Accounting Information. Cengage Learning.
IFRS Foundation. (2010) Conceptual Framework for Financial Reporting 2010 [online]. Available from http://www.ifrs.org/News/Press-Releases/Documents/ConceptualFW2010vb.pdf [Accessed 27 April 2018]
IFRS Foundation. (2013) A Review of the Conceptual Framework for Financial Reporting: Discussion Paper DP/2013/1. Available from: http://www.ifrs.org/Current-Projects/IASB-Projects/Conceptual-Framework/Discussion-Paper-July-2013/Documents/Discussion-Paper-Conceptual-Framework-July-2013.pdf [Accessed 27 April 2018]
Seilber J. (2015) FASB removes concept of extraordinary, retains guidance on unusual item [online]. Available from: http://www.pwc.com/us/en/cfodirect/assets/pdf/in-brief/us2015-01-fasb-extraordinary-unusual-items.pdf [Accessed 27 April 2018]
Singleton-Green, B. (2016) Discussion of “articulating accounting principles: Classical accounting theory as the pursuit of ‘explanation by embodiment. Journal of Applied Accounting Research. [online]. 17(2), p. 136-138. Available from https://www.emeraldinsight.com/doi/abs/10.1108/JAAR-03-2016-0028 [Accessed 27 April 2018]
Tysiac K. (2015) No more extraordinary items: FASB simplifies GAAP [online]. Available from: http://www.journalofaccountancy.com/news/2015/jan/gaap-extraordinary-items-201511630.html [Accessed 27 April 2018]