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ACCG101 Accounting And Governance

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ACCG101 Accounting And Governance

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ACCG101 Accounting And Governance

0 Download4 Pages / 938 Words

Course Code: ACCG101
University: Macquarie University is not sponsored or endorsed by this college or university

Country: Australia


Assignnent Question (10 marks):
You are requ ired to choose a su itable company with su fficient disclosures and write a business research report to address the following two questions. You 1nay choose the company from:
“By referen ce to the annual report of your selected co1npany, you are required to address the” following two aspects in the business report:
(I) Review the inven tory disclosure of your selected co1npany which may include:
-inventory system (perpetual or periodic);
“-cost assu1npti on (Fl FO, LIFO or average cost);”
-the impact of cost assumpt ion to the state1nent of profit and loss and “-evaluat ion of inven tory, etc.”
(2) Discuss factors that accoun tan ts should consider when setting up accounting policy relating to inventory for the en ti ties they work for?
“The total mark of this assignment is 60 (refer to marking rubrics), then your marks Viii”
“be converted to lOo/c to,vards your overall assess1nent.”


For any organisation the most catching aspect is to make widespread and accurate disclosures. The disclosures need to cover a to z details regarding the particular account that it deals with. The inventory tends to be the most crucial element of any financial statement. The reason for the same is level of risk that is involved. Many areas are bound to get affected if any misstatement is materially stated in the financial accounts. The current report is made on a company listed on Australian Stock Exchange, named Woolworths Group Limited. The company deals in chain of supermarkets. It got established in 1924 and has captured around 80% of the whole market. The company has provided in its public annual report every disclosure regarding the inventory valuation and the method of the valuation that it follows. The sections presented after it are providing complete information for the same (Parkinson, 2018). The impact that is imprinted on the profit statement of the organisation is discussed along with the evaluation technique. Following all this discussion a theoretical note is made on the various factors that the management accountants must consider while any accounting Policy Regarding Inventories Is To Be Set Up. 
Disclosures Regarding Inventory
Inventory System- Whether Periodic Or Perpetual
In periodic inventory system the inventory accounts and calculations are not made continuously but on certain periodic basis. While in any perpetual basis inventory system the system is being continuously monitored and calculations are also made on a regular basis (Bagchi, and Paul, 2018). The Woolworths Group Limited is disclosing quarterly information about all the accounts of the company. The disclosures in the notes are also made for the quarters. The annual report of the Woolworths Group Limited is presented annually apart from the quarterly information. This states and suggests that the Woolworths Group Limited is following a periodic inventory system. 
Cost Assumption Method
The cost assumption followed is the weighted average cost method. The company in a view to bring the inventory to its present state and value works to include all the supplier rebates, other costs and the settlement discounts. The costing is done on estimate’s basis by including the ordinary working estimated selling price and deducting from it all the estimated expenses of sale. After working out everything, the valuation is done on cost basis (Cartea, and Jaimungal, 2016). This cost assumption not only reduce the costing of the business but also improves the business efficiency in managing inventory.
Impact Of Cost Assumption Method On Profit And Loss Account
The profit and loss account is being impacted largely by the cost assumption. The direct effect comes on the gross profit of the Woolworths Group Limited as it is linked to the operating. The inventory cost amounts to $4,233 million for financial year 2018.  This cost is reduced by 12% since last two years.
Cost Evaluation Method
However, the cost evaluation done by the Woolworths Group Limited has been on weighted average cost basis. Evaluation of inventory refers to the overseeing of the inventory and managerial performance in business success. The weighted average cost method is the better version of the LIFO, FIFO method.
Factors To Be Considered While Setting Up Accounting Policy By The Managerial Accountant
It is not a child’s play to frame accounting policies when it comes to any element of the financial statements, and especially inventory. A lot of things are to be sphered by the management in order to reach a concluding pace for designing the policies. The policies must help in a correct valuation of the Woolworths Group Limited’s inventory. The losses that are occurred normally and abnormally should also be also covered by the method of inventory (Li, Wang, and Chan, 2016). The management policies and accounting policies relating to inventory are formulated after keeping the following factors in mind (Alles, Kogan, and Vasarhelyi, 2018).

The product manufacturing cycle time or the operating cycle followed
The level of how much the inventory is perishable
The market of the product and demand for the same
The cost at which the inventory is intended to be carried
The storage and warehousing risk
The kind of theft and threat opportunity

After evaluating the inventory disclosure requirement, it could be inferred that no matter in what industry the business of the organisation is set up or from how longer the organisation had been conducting operation, it is important for it to completely disclose all the elements regarding the inventory by following the particular adopted inventory method. The main points that are to be disclosed in the disclosure include the details of the tenure of the inventory accounting, cost assumption, and the level of impact on the profit and loss account. Moreover, it is important for the managerial accountant to keep every factor in mind before the transcription of any accounting policy.
Alles, M. G., Kogan, A., and Vasarhelyi, M. A. 2018. Feasibility and Economics of Continuous Assurance 1. In Continuous Auditing: Theory and Application (pp. 149-167). Emerald Publishing Limited.
Bagchi, S.S. and Paul, R., 2018. Aligning Aggregate Planning with (s, S) Inventory Model in a Stochastic Demand Environment. International Journal of Strategic Decision Sciences (IJSDS), 9(1), pp.29-44.
Cartea, A. and Jaimungal, S., 2016. A closed-form execution strategy to target volume weighted average price. SIAM Journal on Financial Mathematics, 7(1), pp.760-785.
Li, M., Wang, Z. and Chan, F.T., 2016. A robust inventory routing policy under inventory inaccuracy and replenishment lead-time. Transportation Research Part E: Logistics and Transportation Review, 7(1),, pp.290-305.
Parkinson, M.M., 2018. Case Study 4: Woolworths Group plc. In Corporate Governance in Transition 8(1), pp. 203-221.

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