TACC606NA Assessment Answers Australia

The many financial accounting theories, their development, and how they relate to accounting rules and practices are covered in this section. The conceptual framework, monetary components, accounting measurement methods, and accounting ethics are all covered in this course, giving students the chance to apply their accounting knowledge to Australian regulatory and reporting settings. Financial accounting is a challenging subject of study; thus, it is common for students to look for TACC606NA assessment answers online to complete their courses easily.

Additionally, this course will help students grasp behavioural and capital market research, sustainable reporting, international harmonisation, and hot-button accounting topics. The unit aims to help students improve their analytical, critical thinking, and communication abilities while developing professional judgement and application skills.

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What is Accounting Theory?

The area of accounting known as accounting theory is the systematic exposition of accounting's guiding concepts and procedures. The theory supports practices, explains them, and makes predictions based on them.

Hendriksen claims that accounting theory is a collection of general concepts that express logical reasoning.

• Give a broad framework for measuring accounting practice, and
• Organise the creation of fresh techniques and methods.

To comprehend current practices better, accounting theory may also be utilised to describe them. However, the main objective of accounting theory should be to offer a logically sound collection of concepts that serve as the foundation for assessing and creating competent accounting procedures.

What is the Role of Accounting Theory?

Accounting theory is extremely beneficial for enhancing accounting procedures, addressing challenging accounting problems, and helping to create an effective accounting theory. The benefits of accounting theory are numerous. Among the advantages are -

1. The external users' informational needs are served by accounting theory, which significantly impacts accounting and reporting processes. Accounting theory offers a foundation for-
• A review of current financial accounting standards and
• Establishing new procedures.

Every time a new practice application is required, accounting theory should advise accountants on the best practices to follow, given the situation. If accounting methods result from applying a well-developed accounting theory, then the practice has been examined for consistency, rationality, and utility.

2. Accounting policymakers who want to make the accounting information relevant might benefit from reading accounting theory literature. The policymakers can utilise and incorporate the study, empirical evidence, and inquiry while drafting accounting policies. Theories are useful because they inform decision-makers about the underlying problems and make clear the trade-offs involved in different theoretical methods.
3. Formulating an accounting theory follows both theory creation and theory verification. When accounting phenomena are seen, they demonstrate and validate a specific accounting theory by explaining and predicting them.

Classification of Accounting Theory

Several hypotheses have been put out in the accounting literature and still are. All accounting procedures and concepts are included in accounting theory. It is divided into three categories -

1. The structural theory - This theory is frequently referred to as Traditional or Classical thought in popular culture. It outlines financial reporting procedures, data collection, and current accounting practices. This concept pertains to how accounting and financial reporting are structured in data collection. As a result, this theory directly relates to accounting procedures.
2. The interpretational theory - This is called a semantic theory because it strongly emphasis giving interpretations and a stable foundation for analysing accounting procedures, formulating hypotheses, and resolving accounting-related problems. The emphasis of interpretational theory is on providing meaning and interpretations while accounting procedures are executed. This theory offers a useful framework for analysing accounting procedures, resolving accounting conflicts, and formulating accounting proposals.
3. Behavioural theory - It is also known as Pragmatic theory because it strongly focuses on judgement and the actions of the accounting group. This theory strongly focuses on the importance of information sharing for making decisions and the effects that information sharing has on individual and collective behaviour.

The importance of the information conveyed to decision-makers is emphasised, as well as how various people or groups will act due to the presentation of accounting information. Investors, creditors, consumers, and government agencies are typically considered the most significant users of accounting reports sent to individuals outside the business.

Application of Accounting in a Business

1. It aids in the preparation of plans for effective commercial and operational planning.
2. Accounting allows for the evaluation of corporate performance.
3. When accounting is used in a commercial enterprise, compliance with the rules and regulations of each state becomes simple. Accounting will address various issues, including pension funds, VAT, income, and sales tax.
4. Accounting gives organisations the capacity to plan for the future and set budgets.
5. Accounting provides data so that decisions may be made correctly and optimally. Accounting aids in coordination so that the business's target aim is reached across all of its departments.

Basic Principles of Accounting

1. Principle of Revenue Recognition - When recording information about your organisation, you must adhere to the revenue recognition principle. On your company's income statement, revenues are then noted at this time. If you choose to adopt the accrual approach, you must recognise your revenues in the period the services were provided. The period in which the cash was received must be considered when calculating revenues if you employ the cash method.
2. Cost Principle - You should maintain track of your assets when you purchase to monitor your expenditures later. The acquisition cost of any assets you purchase and their depreciation must be precisely recorded.
3. Matching Principle - It is necessary to match costs to revenues recognised in the same accounting period and to record expenses within the period in which they were incurred. If there was ever a period when income was recorded for the sale of products or services, the cost of those items should be recognised.
4. Full disclosure principle - Financial statements should include accurate and complete information to prevent deception. With this objective in mind, important clients or partners will be made aware of important information about your company.
5. Objectivity Principle - Always be truthful and impartial when reporting financial data. Ensure the information is supported by evidence, such as receipts, invoices, and vouchers. It helps in this scenario to be able to rely on financial results. For example, if you used to work for the same company that you are now an auditor for, your perspective might not be impartial since your relationship with this client might influence how you do your duties.

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