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financial accouniting Paper

Financial Accounting

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Financial Accounting

1. a. The accounts receivables of any entity are essential as they form part of sales or issue of services by an entity. The account receivables presented in the financial statements of Alacer Gold Corp Australia for the period ended 31 December 2011 stood at Aus$21,460, 000 in comparison to the previous financial period of 31 December 2010, which stood at $17,566,000. This is an indication that the organization has increased the sales made on credit by its customers. In addition, this could also be attributed to a reduction in the efforts to collect accrued debts by the organization (Alacer Gold Corporation, 2012).

b. The balance for trade receivables, which the organization expected to collect, stood at Aus$26,460,000(Alacer Gold Corporation, 2012). This is the amount, which was owed to the organization at the end of the financial period by the clients of the organization.

c. The entity expects to collect its receivables accrued by its clients. Such amounts are due after 30 days of receipt by the customers. Other receivables accrued to the organization by the clients include the margins receivables by the participants in the organization as indicated in the financial statements for the period that ended 31 December 2011. Such amounts are usually due to the organization at the order of business of the second day.

d. Other receivable amounts are the receivables from related parties. Such amounts are usually recognizable their fair values and with consideration of their amortization costs.

2.

Advanced Productions

3256 Buffalo Avenue,

Buffalo, New York,

6TH September 2012.

TO: Chief Executive Officer

From: Controller

Subject: INTERNAL CONTROL WEAKNESSES

I have been able to identify various internal control issues, which could accrue unwarranted liabilities to the organization. These issues make the process of collection and safety of the funds of the organization in jeopardy. The main issue is the manual and intensive payment process, which are made by the various employees tasked with deposit of the amounts. In addition, the manual issue of receipts and invoices by the organization is a major loophole for the propagation of fraud and theft of the funds as well as other resources.

Maintenance of the accounts receivables for the sales, as well as the related, subsidiary ledgers, should be separate. This is because the charging of the receipts for the receivables, the recording of the cash receipts and deposits should be separated. Furthermore, it is also essential to establish procedures to be used in cases of bad debts written off. The organization could avoid and reduce the propagation of fraud and theft by digitization of all logs for monies received and paid. Use of digitized logs for entry of sales data is essential as such reduces the possibility of fraud and theft (Elliott, & Elliott, 2008).

The entity receives cash payments via mail. This is an express avenue for the propagation fraud. In the modern business environment, an entity should device new means for its clients to make payments in comparison to the outdated form of making payments. If such a method of receipt of payments form the clients is upheld there is a dire need for better internal controls for receivables. There should be at least two people present when the mail with the payments is received and opened to ensure supervision of receipts of payments. The deposit slips after banking should be reconciled with the amounts recorded as received as mail. Such records should also be verified by a higher authority within the organization to ensure that the amounts received and recorded tally.

In addition, the transfer of cash from one individual to another should be reduced. This could be enhanced by immediate deposit of funds received via mail. This reduces the possibility of fraud provided by keeping the cash as well as checks within the reach of unauthorized individuals in the office. In addition, James could be tempted to commit fraud or theft against the organization. This is because he is solely responsible for granting sales allowances. He could propagate such by overstatement of the amounts allowed to the customers. This could be corrected by ensuring the presence of a higher authority to ensure that such duties are executed responsibility and with due diligence. In addition, such could also be factored automatically within the sales to ensure that when a payment is received it is automatic within the books of the entity of the sums to be allowed to the customers. The ability of an individual to determine the allowable costs is an avenue for propagation of theft and fraud.

Yours Sincerely,

Controller of Advanced Production.

3.

a. The stock at hand belonging to Alacer Gold Corporation is valued in relation to the market trends of the valuable commodity in the international market. Gold is a delicate product whose price varies mainly based on the global market price trends. The stock for the period ended 31 December 2011 stood at US$74,313, 000 in comparison to the previous year’s financial statements, which stood at US$17,388,000 (Elliott, & Elliott, 2008). This is a substantial increase for stock by the organization. This could be attributable to a decline in the sales of the organization or possibly an increase in the production process due to demand for the products. The determination is done through show of the physical weight of the stock. This is because the commodity price is determined by its weight.

b. There are various alternative costs flow assumptions used by an entity all of which is dependent on the product sold by an entity. They are mainly First-In-First-Out (FIFO), the Last-In-First-Out (LIFO) approach and the Weighted Average of the goods. The Weighted Average is usually used in where the goods which an entity deals in cannot be separated form one another after storage. In essence, identification of such elements is difficult, impossible or might prove as irrelevant for record purposes and price determination. Hence, an entity resorts to the sale of the product based on the weighted price of all the products produced within the specified period.

The FIFO is used on elements, which can be easily identified and stored differently. This is essential as the oldest or first stored goods are sold first to ensure the healthy flow of gods in the sale process. This enables the entity to discard the oldest goods, which could accrue losses if not sold. The Last in First Out (LIFO) assumes that the latest received goods are the best leaving other goods, which have been accumulated for sale. However, this approach is not practical and is mainly used for tax deferral purposes (Elliott, & Elliott, 2008).

c. Information about stock is usually presented in a precise manner identical to which information about the inventory is recorded in the daybooks for the stock. Such is usually in accordance with the financial reporting standards and the accounting standards. Inventory is presented as opening stock for the stock and the closing stock at the end of the period. The difference is the value of the stock used for the financial period. The addition of the stock value arrived at and the purchases value results in the cost of goods sold. This amount is subtracted from the sales to arrive at the gross profit for the period (Elliott, & Elliott, 2008).

d. Bad debts are defined as accounts receivables, which are not realizable. They usually expire after the end of a financial period. Bad debts are not realizable, doubtful debts have a possibility of repayment. There are various types of accounts receivables.

e. The main two types of common receivables are notes receivables and the accounts receivables. Notes receivables represent the claims to assets in a legal manner. On the other hand, the accounts receivables represent the amounts due to an entity form the sale of products on credit to clients (Elliott, & Elliott, 2008).

References

Alacer Gold Corporation. (2012). “Alacer Gold: A Leading Intermediate Gold Producer and Explorer” 2011 Annual Report.

Elliott, B., & Elliott, J. (2008). Financial accounting and reporting. Harlow: Financial Times Prentice Hall

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