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Accounting and Auditing Research

Accounting helps in communicating the financial information of a business entity through treatment of the various accounting entries incurred or earned in a given time. This is usually done in financial reports which are derived by accountants and they help to determine the financial position of a given business and compare it with others done in the past. Deriving financial reports help the business to determine the viability of a given project carried out in the firm and how profitable they are. Financial reports alsol help to plan and manage the business financial position.
Case 1
Step one – define the information needed
The first case is about the issue of extended warranties on appliance firm, and how the related revenue and expenses should be treated in the final accounting statements. The extended warranties refer to the commitment of the appliance firm to incur repair costs in case of a technical default on the appliance within a given duration. The claimed warranties give rise to expenses while the unclaimed warranties usually amount to revenue. It is essential for the appliance firm to know how to recognize revenue and expenses in the financial statements (Collings, 2011).
Step three – use appropriate research methods
For one to attain desired conclusions, information used in analysis has to be correct in nature. The information being sought relates to extended warranties and how they should be reflected in the final accounting statements. The information obtained is in line with the International Financial Reporting Standards.
Step four – view the results and manage information
Firms should adhere to the stipulations provided by the International Financial Reporting Standards when undertaking their operations. This is done to enhance competitive pricing through efficient cost structures. The appliance sale should thus take note of the International Financial Reporting Standards on the extended warranties (Collings, 2011).
Step five – communicate the search results
Collings (2011) opined that, in line with the International Financial Reporting Standards, a sale of goods with the right of return should be recognized initially as net of the provision made by issuing the warranty. On the other hand, the expense should be included in the profit and loss statement when incurred. In case of the unclaimed warranties, they should be recognized when earned. This is after the stipulated time has lapsed in the warranty agreement. The appliance store should be aware of various aspects. According to the International Financial Reporting Standards, a sale of good with the right of return should be recognized initially as net of the provision made by issuing the warranty. In this case, the amount that might be in the warranty agreement should be deducted from the revenue obtained after the sale of goods (Collings, 2011).
Case 2
Step one – define the information needed
In the second case, it is important to be aware of different modes of settlement. Bo should be aware of the non negotiable notes and commitment letters. This understanding will enable the company to be aware of the appropriate treatment in the financial records. It is critical to differentiate how different forms of settlement are recognized as revenues in the financial statements (Kravitt, 1997).
Step three – use appropriate research methods
In conducting the research, the secondary research approach was adopted. Most of the information was acquired from the International Financial Reporting Standards governing cash receivables.
Step four – view the results and manage information
For a firm’s financial statement to be considered as relevant, the firm should ensure they follow stipulated guidelines presented by the International Financial Reporting Standards. Therefore, the accountant of Bo should take note of the accounting policies in order to enhance the view portrayed by the financial reports (Kravitt, 1997).
Step five – communicate the search results
The second case revolves around the issue of cash and cash receivables. A non-negotiable note is a financial instrument that has its price fixed, and is rarely adjusted. The security’s ownership is also not easily transferable (Kravitt, 1997). It is important to note that, in general, the accounting requirements provide that accrual basis should be used in accounting. For instance, the non negotiable note will be received over the life of the construction mortgage. This will be recognized once payment has been received. The second option of the non negotiable instrument will be treated similar to the first one. On the other hand, a commitment letter can be conditional or unconditional. The treatment of the commitment letter should be to recognize revenue once it is earned. According to International Financial Reporting Standard, cash receivables with different characteristics should be treated differently. However, there is a regulation that mandates such segregation (Kieso, Weygandt, & Warfield, 2011).
Case 3
Step one – define the information needed
Social security for many in the working population is an asset that grows with the working lifetime. It is mainly considered as an asset since the investment is expected to generate future cash flows. Mr. Sam Jones should also be aware of the required form of assets that can guarantee loans. In this case, not all assets qualify to be regarded as collateral for a loan (Gustman, Olivia, Samwick & Steinmeier, 1997).
Step three – use appropriate research methods
This is a secondary research question. Most of the information was derived from the International Financial Reporting Standards that govern the loan on collateral instruments.
Step four – view the results and manage information
Loans are usually collateralized by assets. In the case of Mr. Sam Jones, it can be noted that, even though retirement benefits are regarded as assets, they are not fit to be used as collateral for loans. Thus, Mr. Sam should be enlightened at the same (Baxter & Robert, 1999).
Step five – communicate the search results
According to Epstein and Jermakowicz (2008), the International Financial Reporting Standards asserts that security benefits do not qualify to be regarded as collateral. Mr. Sam Jones should thus understand that, to cover his financial statements, another asset would have to be used other than the social security benefits.
Accounting and auditing research is based on the international Financial Reporting standards which are applied anywhere in the world. The set standards help to set the same basement for comparing financial implications of different entries in an accounting environment. They follow a set of regulations that are governed by the international body.

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