Beruflich Dokumente
Kultur Dokumente
NAME:
FARAI G MUTYASERA
STUDENT ID NO:
R0101296
PROGRAMME:
COURSE:
LECTURER:
MR RUZENGWE
ASSIGNMENT 1
Question1 : Identify
the
VISION/MISSION
and
played by ACCOUNTING in the achievement of the Objectives specifically addressing the LEGAL and CONCEPTUAL frameworks.[state these specific provisions/ frameworks]
Econet Wireless (Private) Limited is the cellular network operator and main subsidiary of Zimbabwe Stock Exchange-listed Econet Wireless Holdings Limited (EWH), a company with interests in telecommunications and other sectors of the Zimbabwean economy.
Econet is the largest telecommunications company in Zimbabwe, with an overall market share of about 73% with 3.5 million subscribers. Econet has subsequently upgraded its network capacity and currently sits on a core system capacity of 5.3 million and has already secured funding for a further upgrade to 5 million. The telecommunications industry in Zimbabwe is regulated by The Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) established in terms of the Postal and Telecommunications Act [Chapter 12:05]. The company`s mission, vision and values are espoused as follows: Vision To provide telecommunications to all the people of Zimbabwe Mission To serve Zimbabwe by pioneering, developing and sustaining, reliable, efficient and high-quality telecommunications of uncompromising worldclass standards and ethics.
Accounting is defined as The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information (AAA) . In our society, each person or institution with financial objectives has a corresponding need for information concerning the financial consequences of his/her economic activities; information which provides a sound framework for decision making on action distributing to the purposeful direction of those economic activities. It is the task of accounting to fulfill these needs in an organised manner, by the provision of financial information.
Accounting methods are used in the preparation of statements concerning the assets, liabilities and operating results of a company which invariably portray the financial position or rather the financial state at a given date as well as performance over the specified accounting period. It is a very important function in an organization and indeed in Econet and it has the mandate to keep track of business decision implementations through its functionary duties of data collection, data recording and data reporting and evaluation. The information derived from the accounting processes gives complete financial information about the company and conveys its financial standing. It also shows which products and assets of the company are most profitable and those which are weak. Accounting is a language, a means of communication among all segments of the business community. It assumes a reference base called the accounting model of the enterprise.:if you dont speak the language of accounting or feel intuitively comfortable with the accounting model, you will be at a severe disadvantage in the business world. Accounting is the fundamental tool of the trade ( George G Baty). As such, Accounting is often called the language of business because it provides much of the information that is need to evaluate a companys financial performance and this information is relevant to owners, managers, and investors , employees , Government, lenders, suppliers, customers, competitors and indeed to all other stakeholders defined organisation. The shareholders who have invested their private funds into the enterprise demand an account both of the use to which their funds have been put and of the benefits accruing from that use. This is a measure of accountability which allows the shareholders of Econet who provided the funds to exercise control over managements utilisation of these resources. simply as any person(s) that are directly or indirectly affected by the activities of the
In turn business managers need information to make sound operational decisions whilst investors look for organisations showing good financial returns, lenders watch for changes in the organisations ability to meet its financial obligations, Governmental agencies are looking at the tax payments and compliance issues as well as policy analysis whilst brokers and business analysts need financial information to form an opinion on investment recommendations. Even employees are keen to monitor the financial viability of their organisation to asses job security and viability of increased remuneration as well as career growth prospects. An essential feature of financial information in the business is that it gives a true and fair reflection on the condition described: very often a high or even absolute degree of accuracy are demanded. It was in response to this special requirement of providing a true and fair view that accounting was developed and as such all users of accounting information can be rest assured that the information presented to them is accurate and reliable. The utility concept constitutes the key to the successful application of accounting. It emphasises the usefulness [or utility] of accounting in meeting the essential requirements of financial information regarding the activities of entities. In judging the effectiveness of accounting one must ask to what extent it succeeds in giving a true and fair reflection of the conditions described. Now for reporting purposes, accountants group these stakeholders into two main user group: External users who are outside the organisation like Governmental agencies, Lenders, Investors (Owners), Creditors, Suppliers, Customers, Trade associations and all other stakeholders not privy to the day to day running of the entity. The other group of users is termed Internal users and these are those stakeholders who are inside the organisation like a Board of directors, Chief executive officer (CEO), entrepreneurs, Chief financial officer (CFO) , Vice presidents, employees and Line managers like Business unit managers,
Plant & Store managers. These are people who are on the ground and responsible for steering the organisation towards meeting its set goals and objectives. These are the people responsible for the state of the organisation at any given date and its performance over stipulated accounting periods. Now, accounting information and financial reports designed for external users is called Financial Accounting whereas Managerial Accounting provides accounting information to internal users that is most useful in the management of a company and Econet has adopted the same model in attempting to be the telecommunications service provider that serves all the people of Zimbabwe. As alluded to earlier, various interest groups are serviced by financial information emanating from accounting processes. The field of accounting that focuses on providing information for internal consumption and internal decision making is support as is Management of accounting. Management measurement, accounting defined Process identification,
accumulation, analysis, preparation, interpretation and communication of financial information that is used by management to plan, implement, control and evaluate within an organisation. This branch of accounting is concerned mainly with the provision of economic information required by management in carrying the managerial function of planning, implementation and control. It is important that information is accurate, adequate and timely to be of significance in supporting operational decisions. Management Accounting Management accounting tracks the assets, liabilities, owners equity, revenue and expenses of the organization. It provides current operating information for management. It encompasses not only cash earned by the organization but also the investment activities, financing activities, lending activities, non-cash charges and recognition of and expiation of the useful
life of assets used in the operating of the entity. It also encompasses intangible recording and recognition of items that may not have a value yet, are not specific in nature such as organizational costs and patents. Management accounting reports assist managers in calculating and projecting operational problems, budgets and compensation. Management accounting is based is characterised by the following key notions: Provides data for internal use. Is not mandated by law. Is not subject to Generally Accepted Accounting Principles (GAAP). Emphasizes relevance and flexibility of data. Has more emphasis on the future. Focuses on parts of the business. Draws heavily from other disciplines like finance and economics. Is a means to an end And from these the following roles can be extracted Role of Management Accounting
Breaking down of cost/expenditure into functions and processes to facilitate cost control at each operational level. Developing standards for all operating areas and evaluating actuals with the standards. Analysing overall business and operational data. Suggesting alternatives to improve productivity. Identifying areas of wastages, leakages and inefficiencies or invisible losses. Ensuring optimum utilisation of available resources. Deploying informatic tools for an efficient management information system. Contributing to Total Quality Management . Assisting in decision-making process at all levels of management.
Financial Accounting The main purpose of financial accounting is to prepare financial reports that indicate tye organisation`s financial state and perfomamce over a period of time to external stakeholders such as investors, creditors and tax
aothorities (ZIMRA in Zimbabwe). Financial accounting procedures are based on Generally accepted principles of accounting guidelines. Financial accounting is premised on these concepts, separate entity concept, going concern concept and the fixed time period assumption. It also takes cognisance of the historical cost principle, revenue recognition, matching principle and the full disclosure principle so as to give a true and fair view of the organisation`s financial state at a given date in time and performance over an accounting period.
Provides data for external users. Is required by law. Is subject to GAAP. Must generate accurate and timely data. Emphasizes the past. Looks at the business as a whole. Primarily stands by itself. Is an end in itself.
From the given characteristics the following roles of financial accounting emanate:
Financial accounting generates some of the key documents which includes, profit and loss account showing the method of business traded for a specific period and also the Balance sheet which provides a statement showing mode of trade in business for a specific period.
Role includes recording financial transactions thereby collecting money from all sales, wages, etc. Helping the managers in business to manage more efficiently by means of preparing standard financial information which includes monthly management report presenting the costs and profits against budgets, sales and investigations of the cost
In Econet a robust information system which utilises electronic data processing systems, as well as operating procedures to collect and process data and disseminate information in the organisation is consolidated as an Enterprise Resource program and it facilitates in providing information that has the necessary attributes of
Relevance select information of interest to the user. More important for management than financial accounting. Reliability necessary for the user to have confidence. Should be complete and free of bias i.e. show all aspects of the situation. Understandability Info to be presented as simply as possible in format easy to assimilate. Perspective Info should be set in context e.g. by disclosure of comparative figures. Timeliness Out of date info not useful for control, appraisal and decision-making. Accuracy - The information should be sufficiently accurate and precise for the purpose of its provision Cost Effective - The information should be produced at optimum cost. The cost of producing the information should not exceed the benefit to be obtained from the information Adequacy - The information should be adequate for taking effective action or control the organisation or provide valuable details relating to its environment. Adequacy means that one should not delay decisions on the grounds of seeking perfect information. In real life perfect information is rarely available. Management have to accept that in any situation some varying degrees of uncertainty will always exist. This permanence of uncertainty is not a valid excuse for not making or delaying decisions where they are required The directors are responsible for the preparation, integrity and fair presentation of the consolidated annual financial statements of Econet Wireless Zimbabwe Limited ('the Group') and the companys abridged annual financial statements. The consolidated annual financial statements for the year ended 28 February 2010 for instance, were prepared using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The afore mentioned financial statements were prepared in accordance with the disclosure requirements of the Companies Act (Chapter 24:03). The financial statements should be
and are prepared based on appropriate accounting policies which should and were applied consistently, as modified, where necessary, by the impact of new and revised standards. The application of these accounting policies must be and in Econet, are supported by reasonable and prudent judgements and estimates. The going concern concept is adopted in the accounting processes.
Accounting plays a major role in the company`s system of internal controls. These are designed to provide reasonable, but not absolute assurance, which is almost impossible to attain, as to the reliability of the consolidated and company financial statements which should give a true and fair view of the company`s financial position and performance over the accounting period. Accounting processes also provide a system to adequately safeguard, verify and maintain accountability of assets. These controls are monitored throughout the company by management and employees with the necessary segregation of authority and duties. Processes are in place to monitor internal controls to identify material breakdowns and implement timely corrective action. This is of paramount importance in a bid to provide quality service to the customer and ensuring safety for the employees. The day to day bookkeeping on the accounting principles, helps in keeping record of daily transactions and this also goes a long way in preventing any frauds. The concepts adopted in Econet Accounting processes and
procedures: The going concern concept: Which stipulates that the business will continue to exist indefinitely and will remain in operation long enough to carry out all its current plans. Historical cost concept which is reflected in Econet`s financial statements based on original costs of items, ignoring inflationary increases.
which applies
to a measurement
having supporting evidence and assuming Freedom from subjective valuation and bias in making accounting decisions Prudence concept premised on the notion of preference in financial reporting to be pessimistic (understate) rather than optimistic (overstate) in order for readers to be hurt less when they have relied on prepared financial statements Realisation concept which stipulates that revenue is recognized only when the earning process is complete and service has been rendered. The Accruals concept which makes provision for recognition of revenue in an accounting period when earned and expenses when incurred, even though cash has not been received or paid. Matching accounting concept which reports expense on a cause effect basis against the reported revenue it relates to. Periodicity concept which accounts for, measures and reports the results of economic activities according to accounting periods e.g. week, month, quarter, year, etc. Consistency concept Uniformity of accounting procedures used by an accounting entity from period to period. This enables projections and comparisons to be made over time and uniformity of measurement concepts and procedures used for related items within the companys financial statements for one period. Materiality concept Holds that insignificant items should not be allowed to confuse the message contained in a financial statement but all-important information should be fully disclosed Substance concept which says that the strict legal form of a transaction can be ignored if it impedes the disclosure of a true and fair view, and can be substituted by the economic substance or commercial effect of the transaction
Question no 2 [50 marks] Identify and Discuss both the Conceptual and Legal Frameworks applied in the preparation of the Financial Statements critically evaluating your role in both statements[bring your responsibilities to specific decisions/transactions thus impacting ] on your organisations wellbeing
In Zimbabwe the authority for establishing and publishing accounting standards rests with the council of the Institute of Chartered Accountants and the institute is an associate member of the IASC. The accounting bodies provide for instructive guidelines to be followed in preparing financial statement. It is a legal requirement that public listed companies publish their annual financial statements. The legal framework encompasses statutes which deal with corporate entities. The Companies act (Chapter 24:03) specifies the nature of accounting information that must be published to shareholders. The Corporation Tax Act makes it a legal requirement for companies to submit accounting information for the purposes of taxation. The legal framework also provides for the justification of a company to be an entity with the rights afforded it by law to own assets and be liable in its own right to the laws of the nation. The accounting statements, including the Balance sheet and Profit and Loss Account are both premised on the accounting objective of recording transactions accurately and systematically in accordance with certain principles or rules. The conceptual framework Historical cost concept; all transactions are recorded at the original cost to the business ,Going concern concept: where a business is assumed to operate indefinitely and
fundamentally on Business entity concept: the business is a separate entity from its owner Balance Sheet The Balance sheet is a statement detailing an organisation`s assets, liabilities and shareholders` equityand as such it shows the financial position of an organisation at a point in time and the Balance sheet should clearly indicate that it is as at a give date. The financial position of an entity is
affected by the economic resources it controls, its financial structure, its liquidity and solvency, and its capacity to adapt to changes in the environment in which it operates and this information is all laid out in the balance sheet.
It is a Legalrequirement in Zimbabwethat Companies must comply with the requirements of the Companies Act.CAP.24:03 which states among other things that companies must state the financial position of the company. The Balance sheet formulation hinges is based on the three main concepts which are: The Business Entity Concept Double Entry /Duality Concept. The Balance Sheet Equation Concept And in its preparation it takes use of other accounting concepts such as the historical cost concept and consistency concept. Under the accounting entity concept it is a requirement that records concerning transactions of any entity, be they assets or liabilities should clearly define or reflect their specificity in relation to the entity. This is the business entity concept which provides for the separation for accounting purposes, the company from its owners and as such we are able to extract financial information for the company without making reference to the owners. It is also generally assumed that the enterprise will continue in operational existence for the
foreseeable future. This means in particular that the balance sheet assume no intention or necessity to liquidate or curtain significantly the scale of operation
DUALITY CONCEPT is the foundation of the universally applicable double entry book keeping system on which accounting processes are premised. It stems from the fact that every transaction has a double (or dual) effect on the position of a business as recorded in the accounts. For example, when an asset is bought, another asset cash (or bank) is also and simultaneously decreased OR a liability such as creditors is also and simultaneously increased. Similarly, when a sale is made the asset of stock is reduced as goods leave the business and the asset of cash is increased (or the asset of debtors is increased) as cash comes into the business (or a promise to pay is made and accepted). Every financial transaction behaves in this dual way.
This therefore pre-supposes the equality of assets and interests in those assets (equity+loabilities0 in the formulation of the balance sheet. The assets represent items of value acquired for the purpose of utilisation in the entity`s continuing activities whilist liabilities are debts owed by the company by way of trade or through acquisition of business assets. Liabilities are as such legally enforceable claims. Equity is the net worth of what the business owns and what it owes to to the owners of the company. This principle gives rise to the balance sheet equation concept which stipulates that at any point in time, that is, at a given date, a company1s assets have to equal or balance the total sum of its liabilities and shareholders` equity.
Assets = Liabilities + Shareholders' Equity The concept behind the balance sheet supposes that iIn order to acquire assets, a company must pay for themwith either debt (liabilities) or with the owners' capital (shareholders' equity). Therefore, the formula holds true. Assets are economic resources that are expected to produce economic benefits for its owners. Assets can be buildings and machinery used to manufacture products. In the case of Econet, the fixed asssets are the network infrastructure, base stations, microwave radios and optic fibre transmission cables, voice and data switches as well as vehicles and buildings. As Network planning Engineer I contribute in developing new coverage areas into which revenue generating base stations and all requisite infrastructure are expanded into. As network planning engineer I am also mandated with the maintenance scheduling of the network infrastructure that is key in the continued use of the assets and impacts on the going concern concept. The assets are classified into fixed and current assets
Current assets are assets that are usually converted to cash within one year. Cash is the most basic current asset. In addition to currency, bank accounts without restrictions, checks and drafts are also considered cash due to the ease in which one can turn these instruments into currency. Cash equivalents are not cash but can be converted into cash so easily that they are considered equal to cash. Cash equivalents are generally highly liquid, short-term such as money market funds. Accounts receivable represent money clients owe to the company and is a current asset. A company`s inventory is the stock of materials used to manufacture their products and the products themselves before they are sold and adds to the current assets. For Econet the inventory includes all network infrastructure accessories. Fixed assets are those tangible assets with a useful life greater than one year. Generally, fixed assets refer to items such as equipment, buildings, production plants and property. On the balance sheet, these are valued at their cost, making use of the Historical cost concept. Depreciation is subtracted from all except land and once a depreciation methodology has been adopted it should be made use of consistently taking from the consistency concept.
Fixed assets are very important to the company because they represent long-term illiquid investments that a company expects will help it generate profits. Profit and loss Account The profit and loss Account is a financial statement which shows the performance of an organisation over an accounting period. Performance is the ability of an entity to earn a profit on the resources that have been invested in it. Information about the amounts and variability of profits helps in forecasting future cash flows from the entity's existing resources and in forecasting potential additional cash flows from additional resources that might be invested in the entity Legally in Zimbabwe Companies must comply with the requirements of the Companies Act.CAP.24:03 which states among other things that companies must state the financial performance of the company The Periodicity Concept. -The Revenue Recognition Concept. -The Matching Concept -The Accruals concept The revenue recognition or realization concept recognizes revenue at the time of sale of merchandise if in retail and at time of rendering service like in Econet`s case. Realization occurs when earning process is complete and the following must be satisfied. A transaction has been consummated that is, the selling price is determinable, the cost of sale is known, and Future costs can be estimated accurately. Realization also applies to the recognition of a gain on the sale of a security. In my position at Econet, In the case of customer consultancy services that I perfom, at the end of the job I have to close a job sheet opened at the initiation of the job. Closure of the job sheet implies the service has been rendered and the client can be charged for the services rendered. The periodicity concept accounts for, measures and reports the results of economic activities according to accounting periods e.g. week, month, quarter, year, and as such it provide for the performance of the company to be analysed over a period of time. Although the life of a business is assumed to be indefinite according to the going concern principle, for accounting, measurement and reporting it is divided into smaller periods. In my position I have to present my job sheets montly for billing purposes on work services rendered to customers
The matching concept provides for reporting expense on a cause , that is, effect basis against the reported revenue it relates to. Net Income is measured by the difference between revenue and associated expenses over the same period and expenses are incurred in order to earn revenue. The need to match revenues and expenses on a cause - effect basis results in accruals and deferrals of revenues and expenses. Example is matching of sales commission to sales The accruals concept stipulates that revenues and costs are accrued (that is recognised as they are earned or incurred, not as the money is received or paid), matched with one another so far as their relationship can be established or justifiably assumed. The Profit and loss should also be drawn on the Prudence concept, that is, revenue and profits are not anticipated, but are recognised by inclusion in the profit and loss account only when realised in the form either of cash or of other assets the ultimate cash realisation of which can be assessed with reasonable certainty; provisions made for all known liabilities (expenses and losses) whether the amount of these is known with certainty or is a best estimate in the light of the information available.