Structure of an Ideal Accounting Information

Accounting is among of the most basic business utilities. For right accounting, it’s crucial to aptly record all the transactions which businesses undertake consequently. Concise & clear accounting details mainly contribute to intelligent and advanced decision making. There can be various features of accounting information which every accountant should strive to achieve.

Accounting Information
To start with, extensiveness of the info is very important as it should express an all-inclusive image to the future users. For investment as well as other purposes, it is essential to complete the accounting info. In order to completely judge accounting info, it must be free from any omissions or errors.
The relevancy of the communicated info is one more crucial feature of a perfect accounting info, whereby it must serve its projected purpose completely. All the figures & numbers must be exact. The correctness of operations & info should be up to date & spot on.

Clarity is an additional critical feature which accountants should strive to achieve. Irrespective of how timely, accurate or timely accounting information might be, it’s of less worth if lacks the clarity. With precision there also comes understanding & comprehension. The technique used for sharing information is also important. When anticipated users require info, it must be communicated thru the appropriate medium in order to realize its worth.

The suitability of significant info is of major importance. In industry, there are financial & operating times during which the required info must be gathered and distributed. In order to smoothly operate company's progressions, timely distribution of applicable business info must be compulsory. This is the sole way with which comprehensive company choices will be made, disappointment in which might cause major losses or losing out very vital business openings.

Company decision making must be based upon the info offered. It’s hence of great significance that all the decisions made should be based upon credible & valid info. With this, the info increases the confidence in the consumers. Accounting info is beneficial when it is able to precisely communicate what is required. The size of the information doesn’t matter till the time it is short, to the point & fulfills the projected purpose.
In addition, it’s important to highlight that accounting info must not be expensive than the worth it produces for the business.

For a useful and operational accounting information, it’s supreme that it is able to meet the above conditions. With transparency & accurate record keeping, accountants could find it a lot easy to draft better quality commercial reports.

Accounting Basics - Current Liability

One of the major purposes while learning accounting basics is to recognize accounting definitions & terms & explore such items in depth using practical models. In the following article we’ll try to explore the theory of current liability as well as its image in the financial reports.

The Definition - Current Liability
accounting basics current liability
A current liability is a liability that is due inside a very short period of time, normally 1 year or less than that. This is paid by cash or any other present asset.

There may be a number of main aspects to take into account from the above definition:

Firstly, present debt is liability, i.e. the sum which a business owes to creditors or financiers, hence it must be paid back.

Secondly, such a liability is due inside a short period of time, a year or less which means that present debt must be paid inside a definite period of time that is short.

Thirdly, such a liability must be paid by cash or any similar present asset, meaning that current asset & current liability are closely associated.

Cases and Replication in the Financial Terms

In order to better understand this definition which is one of the basic concepts in the field of accounting, the cases of current debt could be:

Accrued salaries which are the amounts due to the employees & workers for the work completed.

Accounts payable which are the amounts due to the dealers for the raw materials, goods, services, inventory delivered.

Short-term loans which are the loans that are due inside 1 year or less.

Additional added liabilities & present debt.

Seeing the relationship of the financial statements with current liability, note that such an item is replicated on the liability side of balance sheet & the whole quantity of current debt must be calculated and replicated inside the balance sheet.

Such an amount is crucial since it specified how much a particular business will need to repay to creditors inside 1 year & whether it’s able to satisfy its financial duties. Also the worth of the current liabilities will be matched with the worth of present assets so as to investigate if the business will be having enough present assets that will be able to cover current debt.

Brightsizing: How it affects organizations

Management, according to Mary Parker Follett, is the art of getting things done through people. Over the years, several theories and trends have built this field to its existing standard. However, theworth of a management trend depends on several factors like company culture, education of workers, existing contracts and laws, industry etc. In simple words, a management trend is considered good when the application of the trendpositively benefits the company in one or more aspects. Downsizing, delayering, restructuring, re-engineering etc. are some of the new trends that have significantly affected the management circles. However, there has been a new trend that poses dangers for organizations - Brightsizing.

Paul McFedries defined brightsizingas corporate downsizing where brightest workers are made to let go. He also stated when a company lay off employees with the lowseniority;it’s the younger workers most of whom are often well trained and highly qualified.

Downsizing, as a matter of fact, ispracticed when the company is in a crisis. Therefore, as it is, layoffs are not a good sign; and brightsizing makes the situation worse.In layoff decisions, several organizations follow the policy that the employee with the greatest seniority, among equally qualified candidates, would be given greater priority. But this trend is dangerous to companies, and companies must be protected from it.

Although, companies blame brightsizing on union contractsthat enforce layoff practices based on seniority,the trend is common in non-union companies as well.
When faced with a situation that demands layoffs, it is important to rightsize rather than brightsize with the organization’s best interests in mind. By rightsizing, it means to retain people based on market needs and trends, technologies,and innovative ideas. It is necessary to focus attention on the future of the organization and layoff people who cannot contribute to it regardless of their time of stay in the company.

Management, by definition, means to get things done through people; and if organizations lay off people who can get things done, due to brightsizing, the company is headed towards destruction. Hence, it is important to evaluate an employee based on performance first and then the other factors and retain the best lot. For brightsizingcripplesany organization.

Concept of Evergreening: Tweaking around the Laws of Patent

Have you ever wondered that why these cancer drugs are so expensive? A breast Cancer drug named Kadcyla has been recently developed which may cost $90,000 per patient per year. We usually assume that the anti-bodies or other elements which have been used to manufacture these drugs are really expensive; in short we assume that manufacturing cost of these drugs is really high.However, in reality this does not happen at all and it is a small part of trick being played by the management of these companies.
Tweaking around the Laws of PatentThese drugs are discovered after lots of research and development done in their labs and hence a huge amount of costs or overheads are involved in this section. In order to compensate forthese overheads, the prices of such drugs are inflated.

Now, Pharmaceutical companies can usually charge such amount over the span of 20 years because this is the usual tenure of their patent and then after this period is over, any other company can copy the compound and deliver the same at much cheaper price. In other words, any pharmaceutical company can monopolize the market for the span of 20 years but that’s not it, they try their best to extend this period of monopoly by using some other trick too.

The famous concept of Evergreening is used when a company wants to increase the protection of the patent or the monopoly tenure into the market. The elements used to create that compound (drug) are tweaked a little and thus the new compound, which is just different in terms of nomenclature (but carrying the same properties of the previous compound), is submitted again in the form of a patent. This is the best way to manage their markets when a company has invested a lot in the Research and Development of that drug.

This kind of practice are mostly performed in case of life-saving drugs, reason being that their sale is already infrequent and the high cost of these drugs adds more to it. Hence, monopoly of 20 years is not enough. Please note that in most of the countries like Korea, Canada, Australia and India, this is being opposed but then it is difficult to take a stringent against it because anything this may discourage these companies to innovate. They use such methods to maximize their profits and this is the same reason due to which they innovate.

Managing the medical markets is not conventional as compared to other industries because here you are dealing with the lives of people and thus any selfish step taken by the management would rip off the reputation of the market which can be followed by lots of CSR (Corporate Social Responsibilities) activities. Hence, this concept can be used but it is best if it is not being used on life-saving drugs.

What do you do if you noted overprovision or underprovision for previous years' tax

When reviewing by way of financial statement or even tax schedule, you could possibly note overprovision or underprovision for past years' tax. What will you do as being an auditor?

Initially let us fully grasp, what will lead to the accounting entries for overprovision or underprovision for tax: 

overprovision or underprovision of tax

The over or under provision possibly resulted from:
  • tax correspondences (i.e. notice of assessment) through tax authority displaying a revised tax payable
  • tax agent or client a computation error in prior year tax computation
  • tax agent or client turn out to be conscious of new evidences which might recommend that previous tax computation should be revised
  • clarification of new ruling getting published not too long ago
Why it's important for an auditor to know the nature of overprovision or underprovision?
By knowing the nature of overprovision/ underprovision, we are able to cross check to existing year tax computation to produce certain that the basis of computation has been corrected such that latest year tax computation is in line with proper ruling/ basis. As an illustration, throughout the year, tax authority might disagree with claiming professional fee as deductible expense. Therefore, it can lead to underprovision in respect of past year tax. In latest year tax computation, management need to deem the exact same nature of profession fee to become non-deductible expense. This will likely avoid the underprovision  tax inside the future.

In brief, it's important to know the nature of any over or underprovision of tax, and check out that the basis of existing year tax computation has been updated such that it can be in accordance with most up-to-date tax ruling.

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