XBRL

Introduction
For decades, various companies and organizations have been depending on internet for long heralded solution which would bring with it faster, better and cheaper data available to the organization. This would in turn enable the organizations in decision making as well as financial and business reporting. This seems to have found a solution through an emerging technology which is web based called eXtensive Business Reporting Language (XBRL). This technology enables both preparer and consumers of financial reporting to be web-based, easier, efficient and cheaper. XBRL is an open type of technology in a standard form which is used for reporting and analyzing both business and financial information. It’s also a software agnostic or one which is independent used as accounting framework for neutrality (Matthew, Alexander and Rajendra 40).

Advantages of XBRL
It’s an information sharing tool which is universally acceptable due to its ability to transfer information in various languages. These tasks are even possible through various computer platforms as well as multiple standards used in accounting. Its enables real time analyses of information since investors and other business people can access business information and data electronically using XBRL. Second, it’s beneficial to a variety of users to perform various tasks accurately and efficiently. It facilitates analysis of business information for investors, eliminates manual inputs of data by company employees, and finally, government agencies uses XBRL to gather business information efficiently (Beaver and Melkon 655).

Thirdly, XBRL may be used in a variety of functions not only in financial reporting. It’s as well used by businesses to share vital market and investment information at various situations effectively. It’s an excellent tool in preparation of tax returns in preparation as well as reporting. It’s also the best tool that can be used by business to share non-financial tools like inventory reserves, production volumes and merchandise shrinkages. Finally this technology can be used to provide validation, context, reusability and persistence in a faster and accurate manner. It as well improves every spreadsheet controls through electronic means hence significantly eliminating any possibility of human errors prevalent in input processes. However this technology has also various drawbacks which need attention as well as discussed below (Nicolaou 312).

Disadvantages of XBRL
This technology enhances near real – time disclosure of information which is better for transparency and accountability but also may emphasize mostly on short-term objectives at the expense of long-time goals. This real-time disclosure may as well result to undue volatility relating to stock prices and also impulsive decisions by customers, investors, business managers and suppliers (Matthew, Alexander and Rajendra 44).

Secondary, various users cite potential for errors with this technology and its inconsistency as the greatest drawback. When companies uses an incorrect tag from the available taxonomy, all the end users of such information will be relying and basing their investment and business decisions on wrong and incorrect information. Thirdly this technology may be prone to increase in information abuses where electronically enabled personalities are bound to abuse these accesses to information. Lastly since the technology is taxonomies extensible, some companies may over use these taxonomy extensions making results instance documents which become hard and difficult to conduct comparability with statements from other companies in the same industry (SEC 35).

Conclusion
It’s paramount for companies to utilize to greater extents the XBRL Technology in means and ways that are beneficial in sharing information internally as well as externally. In so doing, internal controls, information security and taxonomy selection of elements in an accurate manner should be enhanced to prevent abuses as well minimize possibility of errors. Companies should as well consider auditors role while expanding on ways to integrated auditing in XBRL technologies.

Work Cited
Beaver, Wallace and Melkon, Scholes. The Association between Marketing Determined and Accounting Determined Risk Measures, The Accounting Review, 1999, 12(2): 654-682
Matthew, Bovee, Alexander Kogan and Rajendra, Srivastava. Financial Reporting and Auditing Agent with Net Knowledge and eXtensible Business Reporting Language (XBRL), Journal of Information Systems, 2004, 2(1): 12-79
Nicolaou, Lord. Demand for Data Level Assurances in Electronic Commerce, Academy of Management Journal, 2009, 40(2): 308-338
SEC. Information Systems and Artificial and Emerging Technologies in Financial Reporting, Journal of American Accounting Association, 2011, 30(3): 33-98

Surname 4

Global Finance

The SUN has been determined as 319388245.
The Acme Company has its European subsidiary based in the Euro zone. The subsidiary must Acme plans to construct a new manufacturing facility in 14 years. If Acme estimates that today’s cost of the new plant is SUN Euros (use all 9 digits) and annual inflation is A% (A = the first digit of SUN), how much will the manufacturing plant cost in 14 years? Give a detailed explanation on your calculations.
The value of the manufacturing plant in 14 years can be calculated using the formula
V = P (1+ A) n , where V is the value of the plant after 14 years, A is the present value of the plant= SUN, A is the inflation rate, and n is the number of years.
Therefore
V = 319,388,245 (1+0.03)14
= 319,388,245 (1.03)14
= 483,103,377

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In the above formulas,   i is the interest rate per compounding period;   n are the number of compounding periods; and   R is the fixed periodic payment.
In this case FV = 319,388,245 = P (1+ 0.01)26 -1 /1
= P (1.01)25 /1 = 1.282P
Therefore P = 319,338, 245/1.282
= 249,009,886
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The formula for the accumulated amount on a fixed deposit is calculated using the formula
A= P (1+r) n �
�W�h�e�r�e� �A� �i�s� �t�h�e� �a�c�c�u�m�u�l�a�t�e�d� �a�m�o�u�n�t�,� �P� �i�s� �t�h�e� �i�n�i�t�i�a�l� �d�e�p�o�s�i�t�,� �r� �i�s� �t�h�e� �i�n�t�e�r�e�s�t� �r�a�t�e�,� �a�n�d� �n� �i�s� �t�h�e� �t�i�m�e� �i�n� �y�e�a�r�s�
�I�n� �t�h�i�s� �c�a�s�e� �w�e� �w�i�s�h� �t�o� �d�e�t�e�r�m�i�n�e� �n�,� �t�h�e� �t�i�m�e� �i�n� �y�e�a�r�s� �t�h�a�t� �i�t� �w�i�l�l� �t�a�k�e� �f�o�r� �t�h�e� �d�e�p�o�s�i�t� �o�f� �¬ �1�,�0�0�0�,�0�0�0� �t�o� �g�r�o�w� �t�o� �¬ �1�,�8�5�0�,�0�0�0�.� �
�T�h�i�s� �c�a�n� �b�e� �d�etermined by rearranging the formula to A = P nlog (1+r).Therefore, n= A/ plog (1+r)
= 1,850,000/ (1,000,000 X log(1.08)) = 5.53 years.

References
Warren, C. S. (2013). Managerial accounting. Mason, Ohio: South-Western, Cengage Learning.
Needles, B. E., Powers, M., & Crosson, S. V. (2010). Financial and managerial accounting. Mason, OH: South-Western Cengage Learning.

GLOBAL FINANCE 4

Running head: GLOBAL FINANCE 1

General Accepted Accounting Principles and International Financial Reporting Systems (GAAP AND IFRS)

General Accepted Accounting Principles are the basic rules of operation, assumptions and essential characteristics that’s completes the framework necessary for construction of all the accounting financial statements. International Financial Reporting Standards are composed of international set of accounting standards that stipulate how financial statements should be reported. They are guidelines issued by the International Accounting Standards Board (Bruce, 2011).

In consideration to contingencies, both GAAP and IFRS have similar accounting principles that they use. The disclosure is required for all the possible unrecognized losses correspond with any meaningful and probable gains. All the assets like, land, building and other capital instruments are classified either as equity or liability depending on insurer’s substance as well as contractual basis in IFRS. If there is presence of mandatory redeemable preference shares, they are classified as liabilities. In GAAP, classification of liabilities differs slightly. This system permits certain redeemable instruments to be classified as mezzanine equity this implies that they are categorized outside permanent equity but also away from organizational debt.

When land, building and accounting output contracts are considered, both systems show a deduction on the equity. In depreciating these asses, both systems require that, the equipments should be depreciated even while they are idle. However, if they are held for sale, they are not depreciated (Donald & Terry, 2011).
Consideration of contingent liabilities, IFRS is supposed to be recognized at a fair value only when they represent a current obligation. While under GAAP, contingent liabilities are not generally recognized under any circumstance. GAAP has numerous reservations with regard to contingent gains which are not recognized as opposed to IFRS which provides some recognition with regard to contingent gains.

In classification of current liabilities, IFRS requires that those liabilities held by a business relating to a disposable group be classified as held for sale and presented separately from any other item related to liabilities in the balance sheet. However under GAAP, all liabilities are shown on the balance sheet without separation regardless of the classification they are all accounted for in the balance sheet. In both principles, the classification of liabilities either as current or noncurrent depends with whether it’s expected be settled during the normal operating cycle of the business. If otherwise stated, the principles require that, liabilities classified as noncurrent. Lastly, IFRS requires those liabilities that will not be settled in the foreseeable future be reported as noncurrent while GAAP does not necessary stipulated time period for recording of noncurrent assets only in reporting (Ernst & John, 2011).

Leases
IFRS accounts for all the leases regardless of how they are treated whether as capital leases or operating leases. The same is applied in consideration of the overall substance involved in the transaction under review. When GAAP is involved, accounting for leases involves a rule based test which takes reference of ownership transfer, lease term in comparison with the real economic life of the involved asset. In accounting for leases, it also considers the present value of minimum lease due for payment compared with the actual value of the same asset. When considering a more substance oriented IFRS approach, they is usually a greater flexibility with regard to leases when treated as operating in this case, lease payments are considered and treated as major expenses that reduces income (Bruce, 2011, p 39).

References
Bruce, B (2011). The Convergence and Transition of International Accounting Standards, Retrieved on 9th April, 2012 from: http://www.duanemorris.com/articles/static/bowden_njlawyer_0210.pdf
Donald, E., & Terry, D. (2011). Intermediate Accounting, John Wiley & Sons
Ernst, Y., & John, W. (2011). International GAAP 2012: Generally Accepted Accounting Practice Under International Financial Reporting Standards, John Wiley & Sons

Accounting Practices 4

Running head: Cheshire’s Commercial Paper

Bank Loan; accrued interest

Treatment of the Commercial Paper
Cheshire Foods issued short-term commercial paper worth $ 5,000,000. However, $ 2,000,000 of the commercial paper is liquidated in November 2011 after the company realizes that it has temporarily excess cash. The remaining part of the commercial paper is due January 2012 and Cheshire intends to replace this short-term obligation with a long-term issuance of bonds. In Cheshire’s balance sheet as at September 30, 2011, the $ 2,000,000 that is liquidated in November 2011 should be treated as a current liability. General accounting principles define current liabilities as the obligations in a business that should be liquidated using the existing current assets in the business. The obligations that will fall due in the subsequent accounting period are not classified under current liabilities. Thus, any obligation that requires a business to use its internal resources that are classified as current assets is a current liability.

Current liabilities also include obligations that lead to the creation of current liabilities or obligations payable within a year (Kieso, Weygandt, & Warfield, 2011, p. 722; Nikolai, Bazley, & Jones, 2009, p. 139). When preparing a balance sheet at the end of an organization’s financial year, any obligations that should be paid within a year from the date of the balance sheet should be included in current liabilities’ section. This accounting principle applies to portions of long-term liabilities that fall due within one year of the balance sheet (Stickney, 2009, p. 383). Based on this accounting principle, the $ 2,000,000 commercial paper that is liquidated two months after the balance sheet date should be classified as a current liability. Cheshire Foods should use its current assets to fulfilling this obligation. In fact, Cheshire uses its excess cash to liquidate the $ 2,000,000 commercial paper in November. This excess cash is a current asset.

Accounting for current liabilities that fall due within a year applies even in cases where an organization uses income for its long-term liabilities to replenish its current assets. In this case, Cheshire Foods used its income from long-term bond issues of $ 10,000,000 to replenish the $ 2,000,000 among other things. This means that the income in December 2011 is used to replace the excess cash that was used to liquidate the $ 2,000,000 commercial paper. This transaction will not change the classification of the $ 2,000,000 commercial paper as a current liability. Cheshire Foods uses part of proceeds from issuing long-term bond to pay for the remaining $ 3,000,000 of the short-term commercial paper. The remaining $ 3,000,000 matures in January 2012 but paid using the income earned in December 2011. The $ 3,000,000 commercial paper should not be included in the balance sheet prepared on September 30, 2011 as a current liability. This is because Cheshire Foods does not need to use its current assets to pay for the $ 3,000,000 commercial paper.

Although the $ 3,000,000 commercial paper falls within a year after the balance sheet date, the proceeds in December’s bond issue will have catered for this obligation. The $ 3,000,000 commercial paper would have been included in the current liabilities on September 30, 2011 if Cheshire Foods did not have a plan to issues the long-term bonds and use the proceeds to cater for its short-term financial obligations. However, this plan is already in place when the accountant is preparing the September 30, 2011 balance sheet and thus, it can be ignored.

GAAP outlines various standards of financial reports and classifications of various items as well. Under GAAP, current liabilities are those obligations that fall within one year and have to be paid using current assets or through the creation of other obligations. This definition is outlined under section ASC 210 – 10 – 20 of the financial standards. However, the obligations stated in this case do not include the kind of obligations that an organization is expected to use to provide services or use its products to settle. GAAP does not recognize such obligations as financial obligations. GAAP and GABS definitions of current liabilities only include financial obligations GAAP’s definition of current liabilities excludes those obligations that fall within one year but an organization intends to meet those obligations using its long-term assets (Epstein, Nach, & Bragg, 2009, p. 718).

GAAP’s definition of current liabilities implies that if an organization has a plan to use any of its long-term assets to meet its any obligations that fit GAAP’s criterion of current liabilities, such obligations should not be classified under current liabilities in its balance sheet. GAAP’s definition of current liabilities excludes obligations that are expected to be refinanced (Epstein, Nach, & Bragg, 2009, p. 718). Referring to GAAP’s classification of current liabilities, the $ 2,000,000 commercial paper falls under current liabilities in the September 30, 2011 balance sheet. Section ASC 210 –10 –20 outlines that a company should disclose any obligations that fall due within a year as current liabilities.

GAAP literature of the classification of current liabilities excludes obligations that fall due within a year of the balance sheet but are due for re-financing or a company intends to use its long-term asset to pay for those obligations. In Cheshire’s case, the $ 3,000,000 commercial paper mature in January 2012 but is due for re-financing using the proceeds from the issue of long-term bond in December 2011. Therefore, the $ 3,000,000 commercial paper does not qualify to be classified a current liability under GAAP definition of current liabilities. Thus, Cheshire should exclude this amount from its financial reports of current liabilities. FABS outlines its definition of current liabilities at ACS 470–10–45–14b&17: “Debt–Overall–Other Presentation Matters–Intent and Ability to refinance on a Long-Term Basis.”

FABS’ definition of current liabilities is consistent with FAAB’s definition of current liabilities. It excludes obligations in an organization that are due within a year after the balance sheet date that are expected to be refinances or paid off using long-term assets. FABS’ code ACS 470–10–45–14b&17 further indicates classification of obligations that are due for refinancing as non-current liabilities. This means that whether Cheshire Foods decides to use GAAP codification or FABS codification of current liabilities, the treatment of its $ 5,000,000 commercial paper will be similar. $ 2,000,000 of the commercial paper will be classified as a current liability in the balance sheet on September 30, 2011 while $ 3,000,000 of the commercial paper will be excluded from current liabilities section. This classification of the two obligations is not affected by initial agreements when the $ 5,000,000 commercial paper was issued. Companies are expected to prepare their financial statements according to the stipulated standards irrespective of their agreements with their stakeholders.

References
Kieso, D, E., Weygandt, J, J., & Warfield, T, D. (2011). Intermediate Accounting, Volume 1. New Jersey: John Wiley & Sons
Nikolai, L, A., Bazley, J, D., & Jones, J, P. (2009). Intermediate Accounting. Connecticut: Cengage Learning
Stickney, C, P., Weil, R, L., Schipper, K., & Francis, J. (2009). Financial Accounting: An Introduction to Concepts, Methods, and Users. Connecticut: Cengage Learning
Epstein, B, J., Nach, R., & Bragg, S, M. (2009). Wiley GAAP Codification Enhanced. New Jersey: John Wiley & Sons

Cheshire’s Commercial Paper 5

Financial instruments

Abstract
Banking institutions and regulatory bodies strongly recommend the use of financial instruments due to the benefits and the role they assume in the stabilization of the financial system. Financial instruments, minimize counter party risk, and determine the capital ratio of a financial institution. Financial instruments have undergone several changes due to the quick growth in financial markets. The increase in volatility and changes in the financial markets have tremendously altered the nature of financial institutions. The accounting rules and the standard of financial instruments have not kept pace with this increased complexity of financial instruments. Traditionally, financial instruments such as loans, derivatives, and securities was captured in the balance sheet, but the increase in the accounting losses has led to the development of the ongoing changes in the accounting models (Fabozzi, 2002).

The financial accounting standards board has attempted to address the financial instruments for over two decades. Modern financial instruments have been subject of discussion by various standards regulatory bodies such as International Financial Reporting Standard (IFRS) and the pronouncements of the international Accounting Standards Board). These bodies are principle-based standards because they set broad rules that are detailed and rule based.

Executive summary
Financial instruments are meant for practicing accountants, this paper will put all the literature concerning financial instruments in a logical and coherent manner. Financial instruments include the guidance set and issued by the Financial Accounting Standards Board. It does not cover particularly transactions that are technically financial instruments. Cash is the most common and pertinent form of financial instrument because accounting for cash is straightforward. The expansion in the number and the size of financial institutions has led to an increase in financial instruments. New financial instruments have been introduced in the form of innovative schemes. In this case, different kinds of instruments have been made available to the financial system to match the requirements of investors and to make the sector health and vibrant.

Financial instruments, package financial capital in readily tradable state. Their form diversity of forms is a reflection of the nature of risk they manage. Financial Instruments can be categorized according to whether they are securities, derivatives of other instruments or so called cash securities. Asset classes can vary, they can be equity-based or debt-based can categorize them. If it is a debt security, it can be divided into two: short-term or long-term. The financing of a company via the sale of stocks is referred as equity financing. Debt financing can be carried out as a measure of avoiding delegation of shares or ownership of the company.
This paper will provide a brief preview and description of what financial instruments are, and their history and the role of financial institutions.

Introduction
A financial instrument is a document, a check, draft, share, bond, or a bill of exchange, with a monetary value, that is legally enforceable between two or more parties regarding the right to payment. Financial instruments are legal documents embodying monetary value. Cash instruments and derivatives can financial instruments. A financial instrument may be found in a hard copy, or virtual document. Financial instrument can be categorized as equity based which ownership of an asset or it may be debt based that represents a loan made by an investor to the asset’s owner. There is also a foreign exchange instrument, that is unique and a third type of instrument. Financial instruments can be understood as traceable and tradable packages of capital with unique characteristics and structures that permit for a wide array of capital flow among investors. IAS 32 and 39 defines financial instrument as a contract that gives rise to financial liability or equity instrument belonging to equity, it can also give rise to a financial asset of individuals equity (Fabozzi, 2002).

Financial instruments can be categorized based on whether they are derivative instruments or cash instruments. Cash instruments are financial instruments with the value determined by the market directly. Cash instruments can be divided into securities that are readily transferable and loans or deposits where the lender and borrower should agree on the terms of transfer. Derivative instruments are those financial instruments deriving their value from characterization from underlying entities like index, asset, or interest rate.

Financial instruments are requisite tools especially in the ever changing financial environment. The globalization of the financial markets, industry, and advancement in technology and tax asymmetries has created the need for various types of financial instruments. Financial instruments utilize the following principles: means of payment, store of value and transfer of risks. The two characteristics of financial instruments are standardization and communication of information (Alexander, Sheedy, & Professional Risk Managers International Association. 2008).

Research methodology
In this essay, I have employed descriptive and analytical methods. The research methods describe the existing financial instruments that are available in the market and it seeks to explain the perception of the investors towards the financial instruments. The study undertakes a critical examination of the various financial instruments and their utilities in the market. The research analyzed the various financial instruments and identified their value. The essay will seek to explore how various financial instruments are designed and ho investors should undertake an evaluation of the imminent risks that are involved in financial instruments in the market. It will also provide an explanation on how various financial derivatives are structured and how it can elevate investor understanding of the instruments.
The description of the just value of the financial instruments can be found in the IAS 39 Financial Instruments: Recognition and Measurement, which treats issues of recognition and the assessment of the financial instruments. This standard sets the recognition principles.

History of financial instruments
History of financial instruments indicates that the measurement of financial instruments highly depended on whether the instrument is long term of short-term. The predecessor to the International Accounting Standards Board’s, the International Accounting Standards Committee (IASC), pioneered financial instruments in 1988, this subject has remained active on the global standard-setting program ever since. Unable to reach consensus on measurement issues, the IASC limited its initial standard the presentation aspects.

This was disclosed during the release of International Accounting Standard 32 (IAS 32), the Financial Instruments: Disclosure and Presentation in 1995. After several efforts, IAS 39 Financial Instruments: Recognition and Measurement was produced in 1999 to solve the issues ignored in IAS 32 (Butler, 2009). The International Accounting Standards Board (IASB) achieved this when it took the place of IASC in the year 2001. In 2002, the national standard setters, audit firms, regulators, and issues identified in the IAS 39 implementation embarked on amendments to the plan. As guidance process, IASB suggested amendments to IAS 32 and IAS 39 by issuing a revised version of the two standards in 2003. Further work led to the changes to the standards. In August 2005, IASB prolonged the revelation aspects of IAS 32 by issuing International Financial Reporting Standard 7 (IFRS 7) Financial Instruments: Disclosures. What was “left” of IAS 32 was focused on presentation matters (Butler, 2009).

Technical standard evaluation
Financial instruments are addressed in three standards namely IAS 32 that deals with differentiating equity from debt and with netting, IAS 39 that has the requirements fort measurement and recognition, and IFRS 7 that is concerned with disclosures. These three standards of financial instruments are aimed at establishing needs for all accounting aspects such as netting, recognition, de-recognition, hedge accounting, measurement and disclosure. Accounting standards are wide-ranging and cover almost all segments of financial instruments such as receivables, investment in bonds, payables, and shares and derivatives .The world has witnessed a dramatic surge in the sophistication of financial markets; this has been necessitated by the globalization of the market. The changing financial environment has led to constant innovations of financial products. Using of derivative instruments is a common practice in the financial industry. There has been the need therefore for the accounting fraternity to come up with ways of addressing financial instruments.

There are two main standards of addressing financial; instruments devised by the International Accounting Standards Committee namely: International Accounting Standards (IAS) 32 called the Financial instruments: Disclosure, Presentation, and IAS 39 called financial instruments: recognition and measurement. The other standards that are relevant in the discussion of financial instruments are the IAS 21, titled The Effects of Changes in Foreign Exchange Rates and SIC 12, Consolidation – Special Purpose Entities (Walmsley, 1997).

Before the introduction of IAS 32 and IAS 39, there has never been a comprehensive guidance regarding to IFRS for addressing financial instruments especially derivatives. IAS introduced new demands for de-recognition, recognition, and measurement of financial instruments of an entity. It also introduced some changes to the presentation demands of IAS 32. The following chart represents an overview of the standards of financial instruments.

The above standards on financial instruments can only be applied on financial instruments safe for those excluded from the boundaries of IAS 32 and IAS 39. There are certain contracts and instruments that are excluded from the scope of financial instruments standards despite possessing the needed characteristics of financial instruments. The items that are excluded from financial instruments are illustrated in the table below.

A financial instrument is a contract that leads to financial asset of one entity and a financial liability of another party (KPMG, 2004).

Direction of FASB, IASB and other regulatory bodies
The regulatory bodies and the FASB and IASB enhance the usefulness of financial statements for accounting users by simplifying the categorization and the measurement as per the requirements of financial instruments. IAS 39 puts in place the principles for the measurement and recognition of financial assets, financial liabilities, and contacts that deal with the buying and selling of non-financial items. Regulatory bodies are tasked with improving the established standards. IASB and FASB have demonstrated their intention to work together towards enhancing the financial standards and to minimize the complexity of accounting for the sake of financial instruments.

The accounting standards of financial instrument have been considered very controversial thus, attracting unnecessary publicity. Current development of financial regulations and critically analyze them.Financial Regulation: Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions, and guidelines, aiming to maintain the integrity of the financial system. Either a government or non-government organization may handle this.Specific objectives of the regulators are usually:
To enforce the law
In cases of misconduct such as markets following the insider trading
For providers of financial services licensing
To protect customers and investigate complaints
To maintain confidence in the financial system

At present, the set of (IAS/IFRS issued by International Accounting Standard Board (IASB) includes 4 standards regarding disclosure, presentation, classification, recognition and valuation of financial instruments such as IAS 32 Financial Instruments: Presentation, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures, IFRS 9 Financial Instruments: Classification and Measurement (KPMG, 2004).
IAS 32 – Financial instruments: Presentation that treats all the types of the financial instruments, recognized and not recognized similarly, and it must applied for the contracts for the sale and the purchase of a non-financiers element that can be discounted in cash through another financial instrument or through a change of financial instruments, as the contracts would be financial instruments. According to the IAS 32, the financial instrument is any contract that leads to a financial asset of an entity, as well as to a financial instrument of equity ownership or of debts of another society (Sangiuolo, & Seidman, 2008).

International Accounting Standards Board, provides free access to the unaccompanied standards for a certain year, this may be consolidated. Regarding the promulgation of the principles touching on financial instruments, the monumental role was played by the FASB, which initiated a project on financial instruments accounting. The International Accounting Standards Board (IASB) the predecessor of International Accounting Standards Board (IASB) has played a great role in the formulation and the dissemination of accounting principles for financial instruments. IASB issues two accounting standards, which are important; these are the IAS 32 and the IAS 39 (Gupta, 2008).

International accounting standards advance with the times. Here, changes in accounting standards again: The International Accounting Standards Board (IASB) first issued IFRS 9 Financial Instruments in November 2009, which dealt with the classification of financial assets and aspects of their measurement; The AASB initially provided the AASB 9 Financial Instruments in 2009. Then the IASB re-issued IFRS 9 in the year 2010, setting out the needs for the classification, and aspects of measurement, recognition and de-recognition financial assets and financial liabilities. Many needs for financial liabilities were transacted forward without being amended from the original IAS 39. Some changes were however carried out to fair value option for financial liabilities to attend to the issues of their credit risk. The AASB re-issued AASB 9 Financial Instruments, which incorporates IFRS 9 Financial Instruments. (KPMG, 2004)

Conclusion
The international financial market is extremely volatile because of the influence of a numerous objective and subjective factors. Because of these, in their fight for maximizing the profit, the credit institutions confront permanently with all sorts of risks. IASB had to tackle following pressure from investors, regulators, and financial institutions concerning the effect of liquid markets on the determination of fair value. Simply placed, the measurement and the recognition financial instruments is tantamount to hitting a moving target.

It is important to know that the risk is generated by numerous operations and procedures. From these cause, at least in the financial field, the risk must be considered as a complex web of risks, in the sense that they can have common causes, and producing a risk can generate a chain reaction that would lead to other risks. Therefore, these operations and procedures can permanently generate an exposure to the risk. The risk management is the key function of the financial institution, which acts on the international financial market. For doing this, it must be used some important instruments that can lead to avoiding risks or dimensioning them. The rise of highly leveraged shadow banks, combined with government relaxation of rules for traditional banks, permitted a rise of advantage in the financial system as a whole. This made the financial system to be vulnerable to the international financial shocks. Speedy growth of certain financial instruments eased the concealing of advantage and risk-taking.

References
Alexander, C., Sheedy, E., & Professional Risk Managers International Association. (2008). The professional risk managers’ guide to financial instruments. New York: McGraw-Hill.
Butler, C. (2009). Accounting for financial instruments. Hoboken, N.J: Wiley.
Fabozzi, F. J. (2002). Handbook of financial instruments. New York [u.a.: Wiley.
Gupta, P. (2008). Financial instruments standards: A guide on IAS 32, IAS 39 and IFRS 7. New Delhi: Tata McGraw-Hill.
International Accounting Standards Board. International Financial Reporting Interpretations Committee., International Accounting Standards Committee Foundation., & International Accounting Standards Board. (2009). Financial instruments: A guide through the official text of IAS 32, IAS 39 and IFRS 7 : includes the report on illiquid markets by the Expert Advisory Panel. London, U.K: IASC Foundation.
KPMG. (2004). Financial Instruments Accounting. Retrieved on 10th November 10, 2012 from: http://www.kpmg.co.uk/pubs/2004_IAS39E.pdf
Sangiuolo, R., & Seidman, L. F. (2008). Financial instruments: A comprehensive guide to accounting and reporting. Chicago, IL: CCH.
Walmsley, J. (1997). New financial instruments. New York: Wiley.

Financial instruments 6

Learning from Your Business Working Experience

Introduction
Working as an accountant is one of the most exciting duties in a given firm. One can be utterly perfect in answering questions concerning books and book keeping. When it comes to practicality, this is where one realizes things are not the same. Finance department is extremely crucial organ of a firm. This is the office whose duties are organizing all the financial dealings as well as accounting affairs of a business. An accountant is one of the personnel working in this office. As an accountant, it is your responsibility to prepare and present appropriate accounts, together with provisions of financial information to the financial manager. This study covers the experience in practice of an accountant in the finance department office. It will emphasize on vital aspects of an accountant which, among others, includes professionalism, teamwork, time organization and management, and problem solving. These aspects are not only crucial to an accountant, but also to all other employees, because they assist in smooth running of an organization.

Experience as an accountant
The finance department’s mandate is to track all money that the company receives and spends at a certain time. It also maintains the financial records in a way that considered acceptable to auditing firms. In order to run a business smoothly, a strong financial knowledge is essential. An accountant need to carry out these duties. This is the personnel charged with providing financial information, which helps the managers, tax authorities and investors to make decisions concerning resource allocation. It is the accounting profession’s desire to meet public expectations and to maintain high quality in their work (Hein 119). He or she should be exceptional in communication skills, interact with the public, have strong computer skills and possess strong analytical skills. Beside the academic qualifications, an accountant possesses other qualities that help in meeting the organization’s goals.

The accountant should maintain the highest level of professionalism. Inexperienced employees always endeavour to meet the expectations of their bosses. Apart from gaining skills in college, such behaviors as dressing codes, arriving to work on time, and general conducts, pose challenges to them. Work experience enlightens them as they continue practicing each day. The seniors guide their juniors on how to behave in the workplace. Guide in writing speeches and proper communication helps an inexperienced accountant to adopt in the new environment. Having just the basics in accounting is not enough. An accountant always tries to learn something in the line of duty each day.

Use of modern computer skills and embracing new technology enhances smooth running of the business. Sustainability of accounting makes the accountant to be realistic thus improving the accounting skills. While presenting a report an accountant should exude highest level of management. Sometimes a professional accountant may be required to participate in a project implementation, where the organization expect him or her to make sure the project is successful. Therefore, it is necessary to equip yourself with knowledge of the factors that make a project succeed or fail (Gelinas 628). As a result, proper training and skills improves the performance of the accountant, making him more effective and valuable to the firm.

The quality of the accounting work is essential in this profession. This includes competency in performing services needed by the firm’s clients; improving on accounting, tax and auditing; urge to recognize client’s special needs in advance; ability to deal with circumstances that are likely to pose risks to the business and public; and desire to engage serious clients and avoid those clients who do not meet the ethical standards of the firm (Hein 121). The complexity of the accounting practice, which involves complex financial dealings, requires the accountant to be fully aware of risks that might be faced by the firm while carrying out the state laws. The personnel, as well as the clients, consequently need to hold extremely high integrity.

Teamwork is equally important in the accounting profession. This is the way the accountant should interact with fellow accountants and other workers in the office structure. A team is a combination of different characters and has a team leader. Experience teaches an employee about challenges encountered while working with others. It is essential to hold some leadership skills in order to lead a team. The profession dictates one to listen to ideas of others before making own decisions. An experienced accountant will have an understanding that each member of a team is accountable and, therefore, expected to maintain high standards toward achieving goals. Employees in the same department require each other in order to meet the firm’s obligations. Courtesy helps in interacting with others in the office environment. This can be achieved through management of anger. It is only through experience that one learns how to work with others as a team. More so, the success of a business comes when other departments are willing to provide assistance when needed.

An accountant should know how to organize and manage time. He or she should learn how to honor multiple priorities and deadlines. Work experience helps an accountant to develop strategies which will make work efficient. Arriving in the office late is unacceptable. The external auditors would like to see all the business records having been properly arranged and neat. Being there when one needed and negotiating various projects on time raises the credibility of a firm. As a result, the returns of the firm increase and, therefore, provide room for expansion.

An accountant should know how to solve problems. Working experience teaches an accountant solve problems before they interfere with everyday running of the organization. Reliability and integrity play a major role to the accountant in offering solutions. With the help of the seniors, an accountant will be able to evaluate various problems encountered in the organization and offer correct solutions on time. Sharing of information helps the inexperienced accountant to gain abilities to offer excellent services to the firm’s clients and creation of special projects. The best accountant should not give his opinion without consulting those who have worked in this business for quite a long time. Decisions made today may affect the firm in the future.

Conclusion
An accountant should hold the highest integrity while carrying out duties allocated. To succeed in the accounting profession, one should be prepared to learn new tactics each and every day. Another important aspect in practicing this profession is team work. This helps the inexperienced accountant in learning the office values and norms, thus having an easy time in attending to your duties. One may be pretty smart in balancing the books, but working with other employees in the same department will require patience. Experience varies from one firm to another. It is equally pertinent to embrace new technology as it makes it easy to tackle problems which may require immediate response.
Work Cited

Gelinas, Ulric J, Richard B. Dull, and Patrick R. Wheeler. Accounting Information Systems. Mason, OH: South-Western/Cengage Learning, 628, 2012. Print.
Hein, Clarence D. The Adventures of an Accountant: An Autobiography. Minneapolis. Mill city Press 119-121, 2009.
Simons, Marilyn. What Do You Learn From Work Experience? 22nd October, 2012. Web. http://work.chron.com/learn-work-experience-7125.html

Insert Surname7

Homework 2 Auditing: Accounting

Question One
Internal controls are adopted by entities purposely to provide realistic assurance concerning the attainment of identified goals and objectives. They enhance effectiveness and efficiency of business operations, promote reliability of accounting and financial reporting and ensure that an organization complies with certain laws and regulations. Most business entities adopt audit risk model in their internal control system. The model is used by firm’s auditors to manage or monitor the overall risk.

The model manages three components of audit risk namely inherent risk, control risk and detection risk. Control risk is an element of audit risk model which cannot be control by auditors. This can only be assessed but not changes can be effected. Practically, auditors can only reduce control risk to minimum levels when using audit risk model. Like Bojangles, most auditing firms believe that no material errors should go through accounting system and that control zero must be zero. In order to achieve this, auditors must check all transactions and analyze every asset and liability. Of course, this is not practical. As pointed out by American Institute of Certified Public Accountants (2002), control risk at low levels is possible and acceptable. Therefore, Bojangles’ assertion is inappropriate.

Question Two
It is crucial to understand client’s business in auditing practicing as this leads to effective and efficient audit. Knowledge on client’s business enables auditor tailor their work to meet clients’ facts and circumstances affecting their businesses. This understanding is critical in helping the auditor undertake their tasks and evaluate findings while they are well informed. Auditor’s knowledge on client’s business also enhances establishment and maintenance of positive relationship with the clients. According to Granberg and Hoglund (2011), deep understanding of client’s business enables an auditor identify high risk areas which warrant more audit effort. Additionally, understanding client’s business prior audit work enables auditors get to know about organization’s internal structure (Granberg & Hoglund, 2011).

Question Three
It is highly recommended that auditors have a written audit plan before carrying out their task. Written audit plan acts as a guide to auditors. A written audit plan has an audit strategy, project plan, audit program and other suitable documentation that aid in making key decisions concerning audit scope and objectives. This plan provides an opportunity for auditors to effectively supervise audit process. It helps auditors determine whether the identified objectives will lead to an important report. A written audit plan enables an auditor determine whether relevant audit risks are addressed. The document also helps an auditor ascertain whether available evidence is sufficient and suitable for audit process.

Question Four
Internal control system is influenced by both qualitative and quantitative estimates and decisions made by entity’s management regarding analysis of cost-benefit relationship. A business entity is in business for profits. Therefore, it is critical that benefits of any engagement supersede costs incurred. Though internal control system is vital in enhancing efficiency and effectiveness of business operations, it is important to consider its cost in relation to the overall output. Therefore, the cost incurred in putting up internal control system should not be more than the benefits that are anticipated to be derived from the system. Cost-benefit analysis is considered when designing internal control systems (American Institute of Certified Public Accountants, 2002).

Question Five
There are numerous factors that influence auditor’s decision when assessing the levels of control risks. By examining the financial position of the client, auditors can determine the level at which control risk should be assessed. For newly established firms control risks should be assessed as low. Knowing the history of an entity also helps an organization determine the level at which control risks should be assessed. The type of industry in which the entity is operating influences this undertaking. Old industries carry lower levels of control risk. By definition, an assessment of low control risk means that internal control systems are operating effectively. In the event that control risk is assessed as low, the auditor can assume more risk by pursuing less testing thus negatively impacting the remainder of the audit work.

Question Six
Payments by checks are likely to lead to material misstatement thus undermining auditor’s efforts to assess control risks. Unlike direct deposits, it is hard to detect material misstatement by organization’s internal control, and this impact negatively on assessment of control risk. When checks are used to pay employs, short delay between the time of deposit and the time the deposit appears on the bank statement.

When checks are signed and delivered by different people, fraud risks are likely to occur. This means that an auditor has identify and take into account deficiencies when assessing control risks. The nature of audit procedures must be changed to obtain more reliable information.
When payroll employees take vacations, an organization is likely to experience fictitious employees. Obviously, this will make control risk higher.

When payroll employees are rotated, there are high chances that fictitious employees will be encountered. In effect, this raises the level of control risk.
Payroll checks pre-numbered is likely to lead to issuing of checks which have not been recorded. This in effect leads to high level of control risk.
If payrolls are audited on periodic basis by internal auditors, there is high possibility that errors are not detected. This results in low control risks.
This action may result in either over reporting or underreporting thus impacting negatively on auditor’s efforts to properly assess internal control risk.
If internal auditors conduct occasional surprise checking of paycheck distribution, fictitious employees are likely to be experienced in an organization. This reduces effectiveness of auditor’s assessment of internal control system.

Question Seven
There are circumstances which require an auditor to compare the bank statement dates checks deposited with the dates recorded in the ledge for remittance. One of these circumstances is when an auditor suspects or realizes that a cashier serving entity’s clients has a tendency of misappropriating cash receipts for their own use. Cashiers often do so by lapping checks received from customers vial mail or other electronic means. With this behavior, cashiers may use current remittances to cover up remittances that have been already embezzled. In order to uncover this unethical practice, auditors may decide to pursue this course (American Institute of Certified Public Accountants, 2002).

References
Allen, D., Hermanson, R., Kozloski, M. & Ramsay, J. (2006). Auditor Risk Assessment: Insights from the Academic Literature. Accounting Horizons, vol. 20: 2, pp. 157-177.
American Institute of Certified Public Accountants (2002). AU Section 39: Consideration of Internal Control in a Financial Statement Audit. Retrieved October 6, 2013 from http://pcaobus.org/Standards/Auditing/Pages/AU319.aspx
Granberg, L. & Hoglund, L. (2011). The Auditors’ way to acquire knowledge about a company’s environment. Retrieved October 6, 2013 from http://www.diva-portal.org/smash/get/diva2:434617/FULLTEXT01.pdf

ACCOUNTING 6

Running head: ACCOUNTING 1

Recent Developments in Accounting Information Systems

Introduction
E-commerce has turned out to be a practical fact that includes global markets that are not constrained by geographical borders. There is a mounting growth in the use of internet as an intermediary to carry out e-commerce operations. E-commerce has become a trading model for enterprise resource management and business activities by using network of information and digital technologies. Accounting information system consists of processes and methods that companies use to uphold information related to financial transactions. Prior to e-commerce era, this system involved journals, paper ledgers, and other financial reports.

Accountants were responsible for active use of journals and ledgers to uphold accurate financial records when they were running business operations of their respective organizations. The outburst of information technology has formed new phenomenon in shopping activities. Consumers can simply buy products via the internet and in few minutes, the products are delivered to them. This calls for changes in the accounting principles, automated process that uses computers, servers, and accounting software have been adopted (Deshmukh, 2006, p. 3).

Accountants will work in an ever-increasing networked environment with a number of the organizations being on the net. Majority of professional accountants gains access to internet at both work and home. Accounting systems are required to integrate and interrelate with the increasing and fasters flows of business intelligence regarding customers, new products, technologies, and competitors. Accountants are being called upon to play significant role in deciding the fate of costs, revenues, budgets, and production with more accuracy. With the advancement of e-commerce, buyers have been given the opportunity to interact frequently with on-line sellers. Competitive pressures and customers calls for organizations to offer better information and accounting services through the internet. These services include first-rate post-purchase customer services. Accountants are required to offer more information for these services by accounting for them, auditing them, and perhaps managing detailed individual customer records (Qin, 2007, p. 496).

E-commerce era has brought several changes in the accounting information system. It has become a tendency for organizations to make use of e-commerce accounting information system in order to uphold the competitive nature of business environment. Accounting is a service activity and in the era of e-commerce, its functions do not change. This means that accounting will still provide quantitative information concerning economic units intended to be constructive for economic decision-making (Qin, 2007, p. 497). The improvement of information technology has seen the automation of accounting processes. The latest developments are Peachtree, QuickBooks, TaxJar Pro, Online Transaction Entry (OLTE) and Online Real-Time (OLRT) Processing. Business operations such as payroll, sales, point of sale, and expenses are carried out over the internet. In addition, operations involving spreadsheets, client database, banking data, workflow, file storage, office applications, and project management are also sent and processed through the internet.

Peachtree
Peachtree is online accounting software that allows businesses to carry out online transactions in order to manage their accounts. It has a feature where bank deposits and receipts can be entered and printed. Peachtree is a GAAP compliant that employs double entry accounting making it very accurate. With Peachtree, accountants can easily recognize common mistakes and doubtful transactions. The module and screen level audit trails in this system facilitates the tracking of data entry and editing functions. Peachtree has a strong inventory management that helps to control costs and reduce errors. Peachtree assists in reserving inventories that applied for on purchase and sales orders. In addition, Peachtree integrates numerous services with third party add-on solutions. This will allow accountants to carry out on-line backup with ease. Peachtree is comes as a relief to accountants because it helps them to emerging issues form increased e-commerce (Strauss, 2012, p. 362).

QuickBooks
QuickBooks is an ideal accounting package that makes easy the management of business expenditures and income. It can be used to handle customer relationships effectively because of features such as memorized transactions, reminders, and To Do items. It stores information regarding the company in four ways; lists, centres, registers, and forms. Lists offer the home for storing information regarding suppliers, customers, accounts, items, and inventory. Forms offers framework for all transactions. QuickBooks contains accounts payable and accounts receivables that can allow accountants to track purchase and sales orders. These functions ensures that there smooth transactions running in the organization. Accountants will not feel the pressure of e-commerce because QuickBooks is very accurate (Strauss, 2012, p. 362).

TaxJar Pro
TaxJar Pro is the most computerized tool for accountants that serve e-commerce customers. It offers exhaustive view of sales tax gathered for e-commerce businesses. By showing the place where sales were made, tax, and state filing due dates, TaxJar Pro will save for accountants. This tool helps business to carry on with e-commerce without increasing focus on the ways of handling complaints arising from e-commerce activities. The use of TaxJar Pro enables accountants to arrange sales according to their reporting period. This means that accountants will no longer require to go through spreadsheets and reports in order to establish what was delivered to where. This tool is very effective and it will facilitate the process of accounting in the e-commerce era.

Online Transaction Entry (OLTE)
Transactions are recorded directly to computers in OLTE. Human errors that occur when data is being recorded can easily be eliminated by use of specialized data entry devices. The data entry devices facilitate direct entry of data to the information system in the same place and time that the business occurs. OTLE merges the traditional sub processes of business to a single operation. It facilitates the use of computer input device to enter transactions to data entry journals instead of the source document. In addition, OTLE combines manual preparation of sales receipts and entry to cash register. There will be no need of having more than two accountants entering business event data because it can be performed by comfortably by one accountant. This eases the process of delivering accounting information to the relevant authorizes and it will ease delivery processes (Gelinas & Dull, 2010, p. 73).

Online Real-Time (OLRT) Processing
This system collects business event data as they occur, update the master essentially, and offer results arising from business event in a short time. Transactions are entered and the master files updated as transactions takes place. Every transaction goes through processing steps before the next transactions are processed. Under OLRT, the accounting records are always up to date and the detection of transaction errors is instantaneous. OLRT facilitates unremitting and mutually dependent transactions. When sales orders are received, they come continuously. Once they are approved, picking goods, shipping, and invoicing customers becomes easy. This will ease the pressures billed on accountant in the e-commerce era (Bizzell et al., 2011, p. 304).

Significance of recent developments in accounting information systems
E-accounting liberates information locked away in accounting systems. This is possible since it will decrease lag time between accounting process and decision support process. E. accounting is mainly concerned with accurate accounting information. A number of accounting systems are reliant on complex web of batch processes to help keep functional modules such as GL ledgers. The procedure increases lag time involving accounting transactions by offering single-point in time information update. With the advancement of technological innovations and attractiveness of e-commerce, there is a high demand for improving the accounting systems of different companies in order to offer well-timed information and increase their competitiveness and suppleness in the market.

The recent developments in the accounting field enhances the computerization of manual business practices, eliminates duplication of entries, and regular access for control. As e-commerce grows, transaction issues are becoming more apparent and it will damage accounting practices. The change calls for new practices that can reflect on the increased accounting needs of most of the organizations (Gelinas & Dull, 2010, p. 26).

Automating and standardizing the accounting processes will reduce the challenges that a number of organizations are going through. Online accounting practices computerize many business processes and this will eventually reduce the amount of paper work that companies will need to manage. As an alternative to herding documents, the operations of accountants will turn out to be orchestrating workflow. The automation will allow organizations to reap the benefit of perfect and stable practices such as approval hierarchies. With e-accounting, accounting department will work together with internal business leaders by enhancing data access and offering business units that contains data analytic tools. This will augment enhanced decision-making and empower executives in the accounting departments to conduct significant operations with well-timed information and high efficiency without jeopardizing data integrity (Gelinas & Dull, 2010, p. 26).

Digital accounting ensures that data is accurate as possible. Manual processes are prone to errors, time consuming, and expensive. Organizations obtaining data from one system before moving them to other systems are likely to be faced with errors. Online accounting system with the discussed tools contains integrated controls that can identify duplicate entries. In so doing, it will prevent errors from occurring. For example, goods and services that are purchased will match up with the invoice received or the payment made.

Automated accounting practices uses finely tuned controls to make sure that overall financial integrity of the organization remains intact. The recent developments in the accounting sector offers protection to the integrity of customers’ data by reducing the possibility of data loss and security breaches. The recent accounting systems uphold secure segregation of customer’s data and have strong disaster recovery plans. With the rising customer base and mobile workforce, accountants and other business leaders needs to access data anytime anywhere. Instead of passing accounting files backward and onward, accountants will be able to use safe access to the accounting system through remote connections (Deshmukh, 2006, p. 10).

The technology that is adapted in accounting is able to repeal the traditional accounting limitations. The data and information that is provided by automated accounting system is valid. The system is in a position to gather data from several resources using data mining technology. This technology makes use of single database depository, which stores information required by the accounting system. This will offer real time information to the management for decision-making. The response to accounting information is instant. The technology is able to process huge volumes of data and performs multi-tasking in order to obtain the desired results. The developments in the accounting system generate alerts or notifications. Instead of running a report in order to identify id a problem has occurred, online accounting system informs when there is an imminent problem. The notification systems also set off workflows such as dispatching dunning letters or reordering inventory.

E-accounting enhances business performance because it will give organizations the scope to respond to the ever-changing business conditions and allow the finance team to produce real-time reports and move attention to more strategic creativity. The development of accounting information systems promotes ease of access (Deshmukh, 2006, p. 10).

The recent developments in the accounting field increases process efficiency. The current process has crucial process latency because of a number of factors including mailroom systems, data re-input, and external mail systems. E-accounting bypasses all these hitches; it is a step forward towards thorough processing of data. With e-accounting, transactions are notified to the carriers instantly after the process is initiated by brokers. The recent developments increase cash flow frequency because it comes with the capacity of settling funds more commonly with sizeable reduction in whole transaction times. In essence, e-accounting cuts transaction cycle times to days from weeks. E-accounting reduces cost of processing in accounting transactions by reducing data input requirements and by removing fiduciary settlement process of parties directly involved in transactions. With e-accounting, huge amount of savings in the fiduciary staffing costs will be realized. Substantial savings also in data input costs for the carrier would be realized. These recent developments reduce re-work. The process enhances accuracy and reduces errors thus reduced re-work. E-accounting necessitates the element of review as well as increased system validation. These changes will lead to improved accuracy of information therefore reducing queries, errors, and re-work (Strauss, 2012, p. 103).

Conclusion
Internet retailing has grown steadily in the past few decades and it has put more pressure on accountants who are required to perform accurately and offer quick response. The explosion of IT has created new shopping experience. Consumers are able to buy products through the internet; within a short time, the products have been delivered. With the old accounting principles, this might not be possible thus, the need for new accounting tools to sustain the pressure of e-commerce. E-accounting will liberate information locked away in accounting systems because it will decrease lag time between transactions. The emergence of e-accounting tools has made the process simpler for accountants.

Online Real-Time (OLRT) Processing, Online Transaction Entry (OLTE), TaxJar Pro, QuickBooks, and Peachtree are the latest accounting tools that are making the lives of accountants bearable in the era of e-commerce. The adopting of e-commerce calls for automation and standardizing of accounting processes. This will reduce the challenges faced by a number of organizations. Online accounting practices automate several transaction processes enhance reducing the amount of paper work that has to be managed. As an alternative to herding documents, the operations of accountants will turn out to be orchestrating workflow. This makes it possible for accountants to cope with the increasing pressure brought by e-commerce.

References
Bizzell, A., Clinton, D., Prentice, R., Stone, D., & CPAexcel. (2011). CPA Exam Review: Business Environment and Concepts 2011. Sedona, AZ: CPAexcel.
Deshmukh, A. (2006). Digital accounting: The effects of the Internet and ERP on accounting. Hershey, PA: IRM Press.
Gelinas, U. J., & Dull, R. B. (2010). Accounting information systems. Australia: Southwestern/ Cengage Learning.
Qin, Z. (2007). Introduction to E-commerce. Berlin: Springer Berlin.
Scupola, A. (2009). Emerging E-Services in Accounting: A Longitudinal Case Study. Hershey, PA: Idea Group Inc (IGI).
Strauss, S. D. (2012). The small business bible: Everything you need to know to succeed in your small business. Hoboken, N.J: Wiley.

ACCOUNTING AND E-COMMERCE 10

Running Head: ACCOUNTING AND E-COMMERCE 1

Summary of Finance Day 1

The perspective of finance 1 is to understand how accounting information is created and used and the impact of finance and accounting in an organization. Accounting and finance has various financial, managerial, and tax role. It also has special situations like the valuations. The financial roles include the external reporting, the financial statements and the regulatory function. The managerial accounting tackles issues related to operations, budgeting and pricing.
In differentiating cash from accruals, in cash, transactions are recorded when cash is transferred while in accrual, transactions are recorded when cash is earned. Cash is recorded in the period paid irrespective of the timing of the physical transaction while under the accrual basis; expenses are recorded in the same period as the revenues. In the accruals, the research and development is handled differently.

Assets are goods that can be readily converted into cash while liabilities are what the organization owes other parties. Equity is the value of the business after liabilities have been settled. In accounting, double entry refers to the reflecting of any transaction on both and credit sides and these two sides must always balance if there are no errors. All accounting is governed by various standardized including GAAP/GAAS, SEC, IFRS, IRS among others public and private companies. Financial statements includes the statements of financial positions, statements of operations, cash flow statements and owners equity. All these information can be obtained from footnotes that include regulatory details disclosures, policy compliance, and other sources include the annual reports and management discussions and analysis forums.

Summary of Finance Day 2
The function of finance 2 is to refocus on finance one but advance on the roles of accounting and finance, the basics and the challenges of interpreting information. Apart from explaining the roles of accounting and finance, finance 2 identifies how to compare financial information as being through period to period, company to company and through significant changes. Some financial analysis includes the current ratio which is given by the current ratios over the current liabilities over a given period of time. Quick ratio is obtained by inventories from the current assets then dividing by the current liabilities. The net working capital is obtained by subtracting current liabilities from the current assets.

Other analysis includes the return on assets, return on equity gross margins and the earnings per share. Activities analysis rations on the other hand includes the assets turnover ratio, average revenue ratio and the inventory turnover ratios. Capital structure ratios are given as debt to equity ratio which is obtained from dividing total liabilities by the total stockholders’ equity.
Management accounting involves strategy management and the operational management. There are various forms of business including the sole proprietorship, partnership the LLC, LLP, S-corporations and the C-corporations. The internal drivers of valuation include performance, innovations and the competitive advantage while the external drivers include the economy, the shareholders activism and the market conditions.

Summary of Intellectual Property
Intellectual property refers to patents, copyrights, trademarks and trade secrets. The validity of intellectual properties depends on the type of the right involved. In the case of a patent, what is patented includes new and useful ideas, inventions, ornamental designs and plants that have not been invented by another person. The duration that the person having the right can stay without the patent being infringed is 20 years from the date the filling of the patent is done.

Copyright on the other hand includes the original work of authorship and is valid during the life of the author in additional to another 70 years. Trade secrets entail any commercially valuable information and other protected information and it is valid as long as the information remains a secret and valuable example of trade secret includes the Coca-Cola beverages. Trademarks identify the source of the service or the good and it is valid and enforceable as long as it is used in trading.
Copyrights in the United States started to be enforced in 1870 by the United States copyright office. The advantages of copyrights registration include the fact that one is able to file suit, it becomes available to the public records, ownership is created and it helps in claiming damages in case infringement is done. Patents include utilities, designs, plants and provisional’s.

Summary on Leadership
Management is defined as the acts of coordinating the efforts of the workforce in order to accomplish some desired goals and objectives using the available resources. Management comprises of various processes that include planning, organizing, staffing, leading and the control of people or entities within an organization with the sole aim of accomplishing some set objectives. Management skills are many and depend on the environment and the applicability. Some of the skills that the management ought to possess include the political skills which are used to build power base as well as establishing connections. Conceptual skills are used in the analysis of complex situations. Other management skills include the interpersonal skills that help in communication, and mentoring the organization’s workforce. At the same time, diagnostic skills are management skills that are used to visualize the best way to respond to situation. Technical skills help in enhancing expertise in a given field.

By definition, a leader is defined as a person who leads others or one who influences others. A leader may have various traits including integrity, communication skills, persuasive, visionary and one who is able to adapt to various situations. The differences between a leader and a manager lies in the role that each of them plays. In terms of responsibilities, managers execute existing processes, direct and evaluates while leaders creates visions, culture and foster growth. The manager manages risks while a leader takes and evaluates risks. In terms of strategies a leader creates, shares and enrolls strategies while the manager executes set strategies. A manager follows set directions and rules while a leader get involves in setting strategies and also solicits information from various stakeholders.

Summary of Project Management Day 1
The difference between a project and a process is that a process is done more than once and requires resources. A project is different in the sense that it is unique, has specific deliverables and has a start and a completion date. A project is defined as a temporary undertaking that is aimed at creating a unique product. The components of a project include the objectives and goals which are measurable, tasks, scope and specifications completion date, budget and unique undertaking.
A project requires planning, organization, staffing, controlling, and directing so that it can be successful. Other characteristics of a project include the fact that they are complex and multidisciplinary in nature. Some of the skills required for project management include leadership, conflict resolution skills, good planning, negotiation and creativity. Resources that is required for project management includes finance, materials, equipments and information/technology. The main constraints in a project management include money, time and resource.

Summary of Project Management Day 2
Projects have constraints and the three main ones include money, performance and time. The project budget is constrained by the amount of funds to finance the business, time affects the schedule while performance is constrained by the quality and performance of the project. It should be noted that the goals of PM (project management) is to meet expectations within the given time using the allocated budget. Despite all these facts, projects sometimes face risks and uncertainties. These may include time, resources availability, the costs of the resources, timing of the solutions and the competitors’ actions. To manage these risks and uncertainties, the project manager and the team ought to always stay proactive in the project, should develop plans with contingencies, should also develop objectives in the short and long run and should utilize time optimally.

A project has a lifespan since it has a start and a completion date. There phase’s starts from the determination of the mission need where a concept is generated. After concept is validated, its validation is done. In general terms, a project starts from inception where feasibility study is done, then planning and design to production and finally to sale stage. Project planning is done so as to reduce uncertainty and improve efficiency. At the same time, it provides a base for monitoring and also defines all work that ought to be done. In a project, work is broken down into manageable portions through the use of a work breakdown structures that contains stages, tasks, sub tasks and work packages.

Summary of Quality Control/Assurance
Engineering skills are needed in the provision of quality output of products. In understanding quality, it is important to identify the engineering processes, TQM, the quality systems and processes as well as the process control and tools. A business process can be defined a collection of related structured activities that products a specific product or service. Generally it is expressed in the form of flow charts. Some of the business processes includes the management processes, the operational and the supporting processes. Processes are important because they provide the required instructions to complete a task and create the foundation of the process control. Processes helps in improving performance and quality.

The revolution of quality started in the early 1900s when there was inspection. In the early 1920a and 1950s, Taylor and Shewart came up with the quality control and statistical theory while Demming and Juran identified the quality in Japan. Total quality was introduced in 1969 in Japan while total quality management was invented in the mid 1980s and 1990s. As the evolution of quality excelled, quality awards and excellence models were introduced in the early 1990s and Malcolm Baldridge brought the concept of business excellence in 1988.

TQM seeks to improve the quality of products and services through continuous refinement and feedback. It tries to address the nature of the customers, their needs and expectations, whether the product meets the customer expectations, the process used to meet the customer satisfaction and the correct action to be taken to improve the processes. Quality management system is a set of policies, processes and policies that are required for the planning, and execution of a core business in an organization. It integrates several internal processes to provide an apt approach. It also enables organizations be able to measure performance.

Quality requirements are contained in a quality manual and it entails the organization structure, responsibilities, procedures, processes, and resources. The quality control concept entails algorithms, mechanisms and architectures that control specific output. The tools that are used in the process control include the statistical tools, process capabilities, FMEA, quality circles, TQC processes, Japanese 6s and the 5 Why’s. It is vital to note that quality challenges arise as a result of culture differences, understand, commitment and imply leadership in an organization.

Summary of Risk Analysis
Decision making is the process of making conscious choices between various alternatives that produces the most benefits. There are various types of decision making which include the decision making under certainty for example linear programming, decision under risk for example, the queuing theory, simulation and the decision making under uncertainty like in game theory and stochastic programming. Linear programming is widely used because of its objectives which include cost minimization, production maximization, wastage minimization and profit maximization. It is also used because of the common constraints which include the resources like people, time, money and materials, integer constraints and the non negative constraints.

There are various types of the linear programming solutions including the unique optima, the alternate optima, the infeasible solution and the unbounded solutions. In solving the linear programming solutions, one ought to determine the feasible region through graphing all he constraints. Feasible solutions are the points that satisfy the constraints. Then, the next step is to use the objective function to evaluate the feasible solutions and then determining the optimum solutions. The solutions of a linear programming usually consist of four possibilities which may include an infinite number of feasible solutions, as single feasible solution, no solution or an unbound solution. Important qualities of the feasible solution include the convex, compact and the continuous. The convex is any point on the interior line of segment connecting two feasible regions while the compact is the feasible region of a linear function that contains the boundary. When there are holes or gaps in the linear program, then the linear program is said to be continuous.
For linear programs with multiple objectives, the solutions is termed as the =set of noninferior solutions. To generate the noninferior set, methods like the weighting method, constraints method are used. It should be noted that in decision theory, risk and uncertainty, simple decision trees and general decision trees analysis are used.

Summary of Sales/Business Development
Before starting a business, understanding the business in which the organization is, knowing the customers as well as the products that they need as well as identifying a plan to help the organization growth is vital. Before the business is started, an entrepreneur needs to develop proposals, negotiate business deals and contracts as well as managing the customers. Various departments are responsible for the success of a business including the marketing department which is tasked with the role of determining the type of business to start the location and the means of attracting the customers. The sales department is tasked with the role of creating a viable relationship with the customers.

This requires the use of a business plan that will indicate the plans for startup and gives the business goals, strategies and the way in which the business will be financed. A business plan also provides the marketing and operational plans as well as the progress of the company.
A business plan is important because it helps in prioritizing investments as well as its ability to act as a communication tool. It also acts as an organization change agent and helps an organization be able to function around a common plan. It contains an account plan, the sales process and the value propositions of the organization. An account plan is a customer specific plan that aids in understanding the specific customers needs and acts as the first step towards a sales process. A sales process provides a framework that helps in identifying opportunities for the business as well as providing a communication platform. The sales process is vital as it aligns the sales team. There are various ways in which a business can be started. This includes starting from scratch, purchasing an already operating business, buying a franchise

Summary of Theory of Constraints
Theory of constraints (TOC) is defined as a thought process and a system of thinking that can be used in understanding the complex problems generally in resource allocation and also in decision making. TOC relies mostly on intuition and provides the general overview of solutions instead of local optimization. TOC allows an individual to solve various problems in an unconventional way and focuses more on processes and it is not limited to manufacturing. Understanding TOC is vital to the management as it helps in resource allocation, decision making and problems identification. Unlike the traditional analysis of analyzing and solving problems, TOC contains simple processes and helps in decision making through obvious constraints that includes policy constraints. Some of the benefits of TOC includes reduced lead times, cycle times and inventory levels as well as improved the due date performance, and revenue.

The TOC processes include the identification of the system goals and constraints, deciding on how to exploit the system constraints, leading, elevating/implementing the system constraints. It should be noted that there are various types of constraints including the physical constraints, the market constraints and the policy constraints the policy constraints involves the mind, measure and the method constraints. In understanding the theory constraints, the role of the plant manager is to indicate the system goal and the impact of the constraint on the throughput. At the same time, the manager ought to understand and compute the impact of the constraint on the inventory and the operating expenses so as to make informed decision of the viability of the constraint to the plant.

Identifying the most important topics learned in the session and their utilization
From the various reading, the five most important topics that were learnt include quality control/assurance, leadership, project management, business development and intellectual property. From the readings, one was able to find out that quality is the most basic thing that may enhance product sustainment in the market. In the engineering department, quality is vita since it ensures that the final product is up to the expected standards. Quality also ensures that a given product is maintained throughout the production period and that such that the end product meets the customer expectations. Customer satisfaction is only enhanced when various engineering products are produced with the highest degree of quality. Quality should be enhanced both in the internal and external processes. In an engineering setting, quality can be used in the production department to ensure that products are of high standards.

At the same time leadership is vital in the engineering department since without leadership, programs and processes may not function up to the expected standards. With leadership, protocol is followed and project time is well focused on. Leadership is used to ensure that the engineering processes are coordinated properly as well as in business setting to ensure smooth flow of business. Project management is also vital to learn since it helps one to identify the various steps that are followed when a project starts up to the time when it closes down. This is vital especially because it helps one to identify the various requirements in every stage as well as the expected output. When one wants to start a certain project, project management is vital since it helps in guiding the project from the start to the completion date.

Sales and Business development is also vital as it helps in ensuring that the proper requirements for business startup is availed as well as the necessary resources. Intellectual property is another topic that helps one identify the various businesses that have been patented, requirements for one to register a product or service as we as how one can patent his property. The importance of intellectual property is that one is able to know how to protect a product that is new in the market or an innovation.

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Reporting Practices and Ethics

Financial reporting is a critical component of financial management in both for-profit and non-profit organizations. Finance managers are responsible for ensuring accurate, comprehensive, and up-to-date finance reporting in compliance with the organization’s standards, the generally accepted accounting principles (GAAP) and the general ethics of financial reporting. Disclosure of the financial status of an organization is important to the public in general and the organization’s shareholders in particular. Inaccurate financial reporting can jeopardize the progress of an organization and even threaten its very survival. Here the general guidelines for healthcare financial reporting including the GAAP, elements of financial reporting and their significance are presented.
Generally Accepted Accounting Principles and General Financial Ethical Standards
Generally accepted accounting principles are rules of conduct in financial management that have evolved over time through continuous testing, modification and use. They include the economic entity assumption, monetary unit assumption, time period assumption, accrual basis accounting, revenue recognition principle, matching principle, cost principle, going concern principle, relevance, reliability and consistency, conservatism principle, and materiality principle.

Economic Entity Assumption

This principle requires each economic entity to have its own financial records (Gopal, 2009, p. 27). An economic entity is any organization including schools, churches, businesses, and governments. The financial accounts for numerous entities may be combined during reporting but accounts for each entity must be maintained separately. In addition, the financial records of each economic entity must exclude the owner’s assets and liabilities. Examples of economic entities in healthcare include hospitals, managed care centers, healthcare management organizations, specialty care managers, and nursing homes (American Institute of Certified Public Accountants, 2011, p. 263).
Monetary Unit Assumption
The organization’s accounting records must contain only transactions measurable using monetary units. Such transactions must be presented in a stable currency. For example, transactions done within the United States would be recorded in U.S. dollars (Gopal, 2009, p. 27).
Double Entry
This principle requires that two entries (debit and credit) be made for each transaction to reflect the change in assets and liabilities respectively (Berger, 2008). For example, when two people contribute $100,000 to begin a business, the transaction is recorded twice under the categories cash (assets) and capital (equities) (Gopal, 2009, p. 29).
Time Period Assumption
Every organization is required to have arbitrary periods over which to disclose its financial performance. Such periods may be annually, monthly, daily or any other period (Gopal, 2009, p. 30). After establishing the accounting period, the company can then report its transactions according to GAAP. The accounting period is normally one year. A balance sheet showing the financial status of the organization and a profit and loss account showing the financial outcome for the year are prepared at the end of each financial period.

Accrual Basis Accounting Principle, Revenue Recognition Principle, Matching Principle and Cost Principle

GAAP prefers the use of accrual basis accounting in place of cash basis accounting to capture transactions conducted within the established accounting period while adhering to other principles including revenue recognition, cost and matching. Revenue recognition principle provides that revenue should be recorded upon delivery of goods or completion of a service (Gopal, 2009, p. 31). The cost principle requires that assets be reported at their value during acquisition, meaning that their depreciation or appreciation does not count. The matching principle requires that the expenses involved in generating revenue as well as the revenue they generated should be recorded simultaneously to ensure accurate profit calculation and reporting (Gopal, 2009, p. 30).
Going Concern Principle
This principle assumes that the organization will remain functional indefinitely such that it will maintain its assets and pay debts upon maturity (Gopal, 2009, p. 29). This assumption allows for the recognition of current and long-term assets and liabilities. According to the American Institute of Certified Public Accountants (2011, p. 267), healthcare organizations should categorize their assets and liabilities as current (short-term) and non-current (long-term).
Relevance, Reliability, and Consistency
Financial statements must be consistent and reliable in order to be effective in decision-making. A person should be able to describe the organization’s financial status by looking at its financial records. Reliability means that the information can be verified while consistency refers to the use of same accounting formats and methods (Gopal, 2009, p. 34).

Elements of Financial Management

Financial management can be simplified by following four main elements of financial management: planning, controlling, organizing, and decision-making. Planning involves the identification of the organization’s goals and objects and the steps to take in order to achieve these objectives (Baker, & Baker, 2011, 5). Controlling is ensuring that all organizational activities are occurring as planned. The financial manager should obtain feedback by comparing the plans with activity reports to identify areas that might need a change. Organizing involves allocating resources effectively to ensure organizational objectives are achieved according to the plan. The fourth element, decision making, occurs simultaneously with the other three elements—planning, controlling, and organizing. At each level, the financial manager must use information to evaluate and choose the best strategy to get things done.
The main goal of adhering to financial reporting and financial management standards is to promote transparency and minimize fraud, waste, and abuse. Fraud contributes to the rising cost of healthcare worldwide. For example, healthcare fraud and abuse costs the United States nearly $80 billion annually (Valverde, 2012, p. 130). Fraud in healthcare may occur in many forms including inaccurate billing, double billing, and pharmacy fraud. However, fraud and resource wastage can be greatly reduced if financial managers and other healthcare leaders adhere to the principles of financial management and financial reporting.

References

American Institute of Certified Public Accountants, Inc. (2011). Working draft for AICPA audit and accounting guide: Health care entities. Retrieved September 9, 2013 from http://www.google.co.ke/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCsQFjAA&url=http%3A%2F%2Fwww.ey.com%2Fpublication%2Fvwluassetsdld%2Faicpa_proposedrule_healthcareentities_6april2011%2F%24file%2Faicpa_proposedrule_healthcareentities_6april2011.pdf%3FOpenElement&ei=oqUtUqK-O5Kw7Ab9_4CoDg&usg=AFQjCNHvX_Ab8yUgiW0fz1vnVOp7amBv9A&bvm=bv.51773540,d.ZGU
Baker, J. J., & Baker, R. W. (2011). Health care finance: Basic tools for nonfinancial managers. Sudbury, Mass: Jones and Bartlett Publishers. Retrieved September 9, 2013 from http://samples.jbpub.com/9780763778941/78941_02_CH01_001_010.pdf
Berger, S. (2008). Fundamentals of health care financial management: A practical guide to fiscal issues and activities. San Francisco: Jossey-Bass.
Gopal, C. A. C. R. (2009). Accounting for managers: Starting from basics : an exclusive & comprehensive book covering revised UGC syllabus. New Delhi: New Age International. Retrieved September 9, 2013 from http://ebooks.narotama.ac.id/files/Accounting%20for%20Managers/Chapter%202%20%20%20Generally%20Accepted%20Accounting%20Principles.pdf
Valverde, J. (2012). Corporate responsibility and pharmaceutical fraud. Pharmaceuticals Policy & Law, 14(2-4), 129-156.

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