Question 5 (Scenario Based)

Under each of the following case studies/scenarios, identify and explain the appropriate accounting concept(s) and/or convention(s) that the company has adhered to and/or breached.

(212 + 212 + 212 + 212 = 10 Marks)

1. Mathew is a senior accountant, currently working with Mazoon Company. For many years the company used to provide bonus based on reported profit (net profit after tax). However, the year of 2019 showed a decline in the net profit after tax. Mathew is highly concerned with bonus for himself. The management also is concerned about their rating and bonuses. In order to report a higher profit, Mathew has attempted to switch the depreciation methods used, to reduce the amount charged to Profit and Loss Account. This helped Mathew to report a higher profit during the current year.

2. Christine is a junior accountant recently joined Precision Company. She is responsible to prepare the financial statements for the company. During the year, there was an accident that resulted in loss of RO500,000 worth materials of the company. The company filed a case against the transporting company. As the case is still going on, the management informed Christine to disclose the details of the loss in the notes to the financial statements. Christine believed that a disclosure in the notes to the financial statements is sufficient to allow users to understand and aware about the issue of oil leakage

3. Amir is an accountant in the NMT Mobile Company. He is responsible for the preparation of the financial statements of the company. During the year, there are certain expenses of the Board of Directors, which are accounted in the financial statements of the company. For instance, two of the directors went to Malaysia with their family members. Though the purpose of travel was to attend a one-day conference, they stayed there for one week. During this time, they have visited many places. In the accounting statements, their expenses are included under the head traveling expenses. Amir believed that all the expenses towards the travel should be accounted in the financial statements as the tour program was primarily for attending the conference.

4. In GHG Contracting Company, few contracts were signed during the year for different projects that include construction of buildings and supply of materials. In one of the contract, the company agreed to provide 50,000 units of a material for the next three years, to an overseas company. The company received the full amount of 150,000 units as an advance. While preparing the financial statement, the accountant considered the advance as revenue and reported the same in the profit and loss account.

Question 5 (Scenario Based) Under each of the following case studies/scenarios, identify and explain the appropriate accounting concept(s) and/or convention(s) that the company has adhered to and/or breached. (2% +2% +2% +2%= = 10 Marks) 1. 2. 3. Mathew is a senior accountant, currently working with Mazoon Company. For many years the company used to provide bonus based on reported profit (net profit after tax). However, the year of 2019 showed a decline in the net profit after tax. Mathew is highly concerned with bonus for himself. The management also is concerned about their rating and bonuses. In order to report a higher profit, Mathew has attempted to switch the depreciation methods used to reduce the amount charged to Profit and Loss Account. This helped Mathew to report a higher profit during the current year. Christine is a junior accountant recently joined Precision Company. She is responsible to prepare the financial statements for the company. During the year, there was an accident that resulted in loss of R0500,000 worth materials of the company. The company filed a case against the transporting company. As the case is still going on, the management informed Christine to disclose the details of the loss in the notes to the financial statements. Christine believed that a disclosure in the notes to the financial statements is sufficient to allow users to understand and aware about the issue of oil leakage Amir is an accountant in the NMT Mobile Company. He is responsible for the preparation of the financial statements of the company. During the year, there are certain expenses of the Board of Directors, which are accounted in the financial statements of the company. For instance, two of the directors went to Malaysia with their family members. Though the purpose of travel was to attend a one-day conference, they stayed there for one week. During this time, they have visited many places. In the accounting statements, their expenses are included under the head traveling expenses. Amir believed that all the expenses towards the travel should be accounted in the financial statements as the tour program was primarily for attending the conference. In GHG Contracting Company, few contracts were signed during the year for different projects that include construction of buildings and supply of materials. In one of the contract, the company agreed to provide 50,000 units of a material for the next three years, to an overseas company. The company received the full amount of 150,000 units as an advance. While preparing the financial statement, the accountant considered the advance as revenue and reported the same in the profit and loss account. 4