Question 1

Gray (1988) applied Hofstede's cultural values in an accounting context and identified four accounting values.

Required:

Explain what is meant by the following two of Gray's accounting values:

1. Professionalism versus statutory control
2. Conservatism versus optimism

Question 2

The following balances appeared in the accounting records of Hunt Ltd for the year ended 31 December 2020:

2020 2019

Accounts receivable 2 900 000 2 400 000

Allowance for doubtful debts 87 000 72 000

Additional information:

The company has maintained its allowance for doubtful debts at 3% of accounts receivable over the past few years, based on the estimated recoverability of outstanding debts.The effect of COVID-19 continued to impact operations throughout the 2020 financial year, with a noticeable slowing down in receivables turnover.The Sales Manager noted that several customers had contacted Hunt Ltd to discuss extended repayment terms.The Financial Accountant has proposed that the allowance for doubtful debts be increased to 8% of accounts receivable to more accurately reflect its net realisable value.

Required:

Use the information above to answer the following questions:

1. Assume Hunt Ltd decides to increase its allowance from 3% to 8% of accounts receivable.Would this represent a change in accounting policy or a change in accounting estimate.Provide an explanation for youranswer.