Business Accounting and Finance Statements

Question: Discuss about the Business Accounting and Financial Statements. Answer: 1. Part a The scenario states that Ayesha and Dilara have been running a winery which has been inherited by them from their grandfather. The company makes wines to sell at a profit to different markets whereas both the girls have decided on mutual consensus that they would be running this company according for lifetime of profit variability. The concerning question about the type of business which is being done by both these girls have agreed upon can be defined upon a number of factors which promulgate and adjudicate the existence of a partnership between them. The Partnership act of 1932 defines different parameters of the company and states indicators which show that if the following things are being done than this formally abides the parties inside a legal bond by law. The partners have a mutual consent and share in the profits of the Business which are either calculated on a yearly basis or monthly depending on the Businesss terminology and legislatures. The partners or the entities are held liable if in any case the business suffers a case of loss of income or capital. The partners are liable to the business rules and all employees hired in the business for its conduction Every partner and the person involved in the business has the right to make decision for either the betterment or expansion If in cases of contradiction arises according to the Partnership Act 1932 than the held contradiction should be decided on the basis of votes between all partners and ruling should be done in the favor of the majority (Rimmer 2016). According to the entire business scenario provided in the given statements, all of these qualities between the two girls have been fulfilled to some extent and the situation has made it obvious that the further formalities which define partners would also be fulfilled. Part B The scenario has stated that the winery business has incurred a loss over the years because of the less experience of both the girls operating the winery and whereas the prevalent physical conditions of the winery have made it less appealing to their clients. The current business model is running on the 1 of 3 types of business and the only solution which can be made is that the some part of the company should be sold off to Polart. When the company would be sold off to Polart, the business would still be running on the ambit of a partnership because Polart would also be considered as an owner of the winery. There are different reasons to choose this model instead of giving Polart the complete proprietorship of the business which would be done in the scenario of the winery is completely sold off to the French wine maker. According to the Partnership Act of 1932, Chapter 3, Section 13 Mutual Rights subsection A, the partners which have been involved in the company would be held accountable for both profits and the loss which the company bears, which makes Polart an equal representative in the company for any reason his expert wine making skills prove to be insufficient to the business and hence brings variable loss (Rashid et al. 2012). According to the Partnership Act of 1932, Chapter 3, Section 13, Subsection D states that any partner which has been made in the business for the purpose of expansion of the business which actually fits in this scenario is entitled to receive an estimated interests of more than 6 percent of which the company earns at a yearly rate which is completely separate of the amount which the partner has made in the company in the form of capital (Loewenstein 2016). The above stated reasons and laws simply are enough justifications to why both girls need Polart in their business, because his expertise would not only bring in more clients to the company but the capital provided by him can be used to expand the winery and expand the production of the winery with better facilitations which would on an economic cycle bring in more revenues for the company than the existing state. 2. The overall scenario can be broken down under the situation of a company and how the hierarchy of the company basically operates in different forms. The boards of directors in the company are legal vectors and are primarily responsible for making valid decisions for the company. The process of involving different share holders in the company is said to increase not only the business revenue of the company but also give the shareholders a chance to earn more money because they have been entitled by the Companys Ordinance 1984 to be at a position of where they own different stakes and part of that company by purchasing the shares and hence by law have the right to make different claims when they feel too. The description of the situation has shown that how Leo has attained shares which are in total of 2 in a company which develops trains for local stores and other clients. The total price for which the shareholder has purchased the stocks quickly adds up to around 500,000$, the scen ario however later on explains the situation where the company finally mounts up the profit of 300 percent in the same year when Leo has purchased the stocks. However according to the rights of share holders under the Companies Ordinance 1984, titled Share Capital, Chapter 11, Section 108 which entitles the board of directors to pay off different preset dividends to the share holders from different amounts of the profit, which in the scenario have not been paid by the Official acting board of directors (Goo 2013). The Shareholder rights have not been specified in the ordinance but according to the objectives of moral grounds the following rights are held by Leo in this case Since Leo owns a different amount of stocks in the company and has not been appointed as the official Executive director, he only has the power of voting against or in favor of different terms which are proposed in the meetings of the company. His voting rights also include the written commitments and the oral proxy voting which can be done even when he is not physically present in the meetings The right to receive different amounts of dividends from the company depending on the annual profit income for the company at a preset rate (Dahlan et al. 2014). However these specific rights have been present to Leo there are different limitations which prevent him from taking legal actions if his share of the profit has not been made. The first limitation is that the board of directors can choose to either invest the profit back into the company or remove the dividends provisions by returning only a small amount of profit to the necessary or larger stake holders instead of small ones. The second limitation by Law Of Ordinance under the act of 1984 prevents Leo from filing a law suit against the company because it only allows the share holders which have almost 75% stakes in the company or an amount of vote which compiles up to around of the total votes in the official meetings (Glenn 2014). This can be calculated to how much Leo actually owns by considering the amount of shares cost he bought which are an estimated of 500,000$. The company annual profit has been shown to be around 300% and thus the annual profit can be multiplied with the total cost of Leos share (500000*300/100) to reveal the total amount of profit earned. This total amount is then divided by the amount of share Leo has purchased to reveal his percentage in the company which is calculated by (500000/1500000). The total percentage which has been calculate by all these considerations is that Leo owns only a 33% percent of the companys share and hence he has no legal obligation to sue the company. His only motivation to support at this time because he has been removed from the board by the official directors is to convince the board. 3. The boards of directors of the company have been identified as by the Corporations act of 2001 in Australia and the common wealth law of Australia to be entirely obligated towards the companys benefit and sustainable revenue generation of the company. The shareholders of the company are essentially responsible for making the company run on smooth levels and hence provide different reason in the annual board meeting if any of the directors have failed to fully execute their duties. The case which has been stated above has showed the company has two executive directors and one who is not an executive director of the company. However whenever there are meetings the CFO is entirely relied upon to present different financial statements to the boards which show all of the companys earnings and their profits gain and loss. This particular situation has depicted that the CFO has shown mismanagement in terms of violating the code of conduct of the company and the Corporation act of Austral ia under the complete ambit of law and therefore is entitled to be subjected towards different penalties. The CFO presented different statements which showed that the company was actually on the verge of earning more revenues instead of having different finances and hence which can make the investors and the entire panel on the meeting to decide and pay off more budget so that more profits could be expected. After few months it was found that the company was now in a position that it had no capital and revenues to pay off for all the loss they had been bearing of the few months. The Application of the Law The corporation act of 2001, Section 180 states that the board of directors and different people responsible for the decision making of the company are legally entitled to make the best decision for the company and should over look for each and every one of their decisions so that it does put a strain on their powers and exercises their power in good faith (Christensen et al. 2013). The corporation Act Section 181 also incorporated the laws that the board of directors is responsible for all the judgments which are resulted in the best policy making for the company. These judgments in the past have also been explained by different researches and marketing executives that the directors of the company are legally entitled not to have any kind of personal interest in any of their proposed judgment. The section 183 of the corporation act also depict that the directors must never benefit personally from any of the proposed policy and hence should not have outside interests in any of the in vestment plans of the company (Brochet et al. 2013). All of these premises have set out different standards and sets of responsibilities for the directors in the company as they have the right to be civic about each and every one of their powers and actions. The General Application The Australian penal code and the common wealth law Section 4 B states that the directors which are found in the direct breach of all the above made premises in the Corporation Act are than to be charged with criminal liabilities and hence in different cases the directors are often offered to pay the charges which have been compiled by the company CFO as the offence and shows loss in the company. In this current scenario the companys CFO would be entitled to different criminal charges because of wrong execution of his powers and presenting false documents which caused bad judgment to the companys finances and hence the company has to be on the verge of bankruptcy. Conclusion The above made premise helps the other directors and the non executive directors to completely understand their legal position in this matter and hence caused a legal notice to the CFO. 4. The policy behind this simple concept is the simple interest of basic barter because an auditor is usually appointed by the companies in order to make official reports of the company and verify that the company has paid all its liable taxes to the government organizations and hence this makes the auditor to be completely attached to the client company regardless of any other third party which has been attached to the company as well. The basic policy which can be laid down in this reference is also because the auditor is usually paid by the company to do his work (Aust 2013). This makes the company to become more transparent in front of all its legal stake holders and creditors and hence the company operates in a way which makes it viable for the auditor to work and make financial statements and the company operates to make their share holders happy by providing benefits. Third Party Proving According to the different International accounting standards (IAS) under the ambit of International financial reporting standards (IFRS) has narrated and influential prescription that the financial statements of the company have to be disclosed. The third party usually involves different people who can act out against the auditors; these third parties usually consist of different governmental agencies, creditors, stake holders. The common terminology where these third parties can prove that the auditors have made different mistakes by the grounds of either mathematic inconsistency, transaction errors which often make the question on their validity which also incorporates their invoices (Ahmed et al. 2013). The different tactics which can be used by the parities is the comparison between different liabilities and assets of the owned company in the previous years and the current years where the company has been operating. There are other different means which can also show the mistake s of the auditors is the collusive amounts of irregular transactions and these are often found on the auditors report and done to either hide different fraud or just the auditors mistakes. Agree or Disagree I strongly disagree with this particular concept because there are many other institutions and compliances of laws which are on the shoulders of the auditors and he has to put in maximum abidance of all these laws which are regulated by SEC which is known as Security Exchange Commissions. The third parties which often have influence on the auditors can often manipulate the different reports and financial statements as these reports are the official promulgation of showing how the company has been operating and when these reports are presented to other stake holders of the company this could leave an array of mistrust on both the company and the auditing profession in all because of fake documents (Aulakh Kirkpatrick 2016). According to different assurance standards, the information which contains finances of a different entity, which is examined by different vies, the particular view which is preferred is that the report should only be in its true and fair form and should be always efficient and productive towards its original purposes. These are the reasons which have compelled me with the culture of third party and first party manipulations and influences on the auditors to make them change and manipulate their work. 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