International Accounting

INTERNATIONAL ACCOUNTING

Question          : Prove how the development of accounting system may or may not be related                                 with the idea of “accounting as socially constructed idea”

v  ANSWER:

            An idea is a plan, suggest or concept that existing and developed by the mind as a result of mental understanding, awareness, or activity. Then, that idea or concept used as guidance in realization. For instance is about revenue recognition. The idea or concept is revenue will recognize when the goods are consider leaving the organization and owned by the others. Then, it used as guidance in accounting implementation in reality. When company sale the goods to another party, it means that the inventory is taking out from the warehouse and become the asset of another company. Then, company has to be considering it as revenue and has to recognize it. In reality, there are differences in time when the company should recognize the revenue. Sometimes company recognizes it when the goods are completed, when the customer is invoiced, or even when placed the order.  But, it backs to the company itself or depends on company discretion. According to the explanation of the article, it can be conclude that the idea or concept is the most important things and really needed as a basic of accounting implementation, development or even alteration.

            “Accounting as socially constructed idea” means that accounting is an idea or something created because the impact of social live or interaction. It created and developed based on the social condition and situations that exist in our live. It may take an example about the accounting issue which is IFRS. IFRS is created because the impact of social interaction that happens between company to company in different countries. It begins when the company faces the difficulties to prepare the consolidated financial statement for foreign operation. As we know that each country has own accounting system or standard. Thus, when the parent company wants to consolidate the financial statement of foreign company (subsidiary company), the parent company must convert it to the parent accounting standard. Moreover, another condition is when the company has interaction with another party to obtain the capital by selling stocks or borrowing the money in foreign country. It means that the company which wants to obtain the capital must prepare its financial condition (financial statement) based on the foreign accounting standard which gives the capital.

            For those reasons, the experts try to analyze and think hard about the differences. Then, they think how to eliminate the differences in order to the company get easy to do the activities both consolidate the financial statement and obtain the capital for company operation. By analyze the social condition, the experts have an idea which is they have to create or brings the different accounting standard or principle to one accounting standard. Then they construct IFRS (International Financial Reporting Standard) as basic or international accounting standard where different accounting principle or standard in different country can be eliminated. Thus, it enables for the company to conduct the company activity (social interaction with another party) without need to convert the financial statement.                            

            By realization the idea, indirectly the accounting system has developed from GAAP to IFRS. It also changes the accounting implementation in other country. Before IFRS, mostly the company in other country use the rule based approach (under GAAP). Nowadays, most company using the principle based approach. Then, it brings the company to better implementation because the principle based approach lead to greater transparency. Thus, from the social interaction or social condition, the idea can be constructed and will influence or change the existence condition (accounting system). It proves that “development of accounting system relate to the statement ‘accounting as socially constructed idea’ “.

#Comment: it just my assignment of International Accounting subject :) 
Sorry for the mistakes
Thank You,


Aida :)

THESIS PROPOSAL

THESIS PROPOSAL

ANALYZE THE LIQUIDITY OF COMPANY

USING FINANCIAL STATEMENT

AND ITS IMPACT ON WORKING CAPITAL

PRESIDENT UNIVERSITY

AIDA NUR FITRIA

FACULTY OF ECONOMIC
MAJORING IN ACCOUNTING 

CHAPTER I

INTRODUCTION

I. Research Background

            There are a lot of companies which run the business in this globalization era. It means the business world has developed rapidly. Through increasing the number of company, the competition inter-company will be occurring and even the level of competition itself will be higher. Thus, the company must able to attract the customer’s attention to compete with other company and survive from financial crisis. The company can compete with the others through improving performance of the company such as operate the business more effective and innovative. Through improving the performance, company may increase its profit in order to able continuing the company business and avoid the bankruptcy. Moreover, the company management must also keep monitoring the financial condition of company because the main element that supports company for running the business is company financial.

            Company financial is a control of the business performance and it is a tool for measuring whether company has done the business well or not. The management of company may examine the company financial by using the financial reporting because it provides them the overview of the whole company activities within certain period. In financial reporting, there are several aspects that must be considered by the finance managers. It is not only involves the profits earned by the company but it also involve another aspect which is the level of company liquidity. The level of company liquidity means the level of company’s ability to pay off its short term liability. In this case, the company management is expected to manage the current asset to satisfy its current liability to external party which is creditors.

            The goal oriented of company in running the business is making profit and it will be allocated to all aspects to support the company activities. Then, if the company’s liability is higher than its current asset, the company will spend all of profit earned to cover company’s liability. Thus, the company will have no sufficient amount to support the others aspects and it will be impact on company’s activities. The company operation may be disrupted, for example the production process may stopped for a while because there is no sufficient raw material in the warehouse. For that reason, the finance managers must consider the company liquidity to prevent from problems that may affect the business operation or even a loss.      

            The management will acquire more information about financial condition and its usefulness, especially for making decision, through analyzing the financial statement of the company. There are four types of Financial Statement which is Balance Sheet, Income Statement, Statement of Cash Flows, and Statement of Owner’s Equity. Normally, the analyst will used Balance Sheet and Income Statement to analyze the condition of company financial. Balance Sheet is a report created by the accountant that describes the financial position of company such as position of Asset, Liabilities and Equity within certain period, whereas Income Statement is report which explains the income received from the sale and expenses incurred for one year period. Through analyzing the financial statement of company, the management will obtain information about the company performance and what should they do for improving or maintaining the current performance. In acquiring the information about company liquidity, the management will used ratio analysis which is liquidity ratio for analyzing the financial statement. It is a ratio that shows the company performance through knowing the cash, account receivable and other current asset that company has. Through liquidity ratio, the management obtain information about company ability whether the company has sufficient amount or not to cover the short term liability that owned by the company. 

            Basically the level of liquidity influences the company working capital where it helps the company to cover the current liability and provide additional funds for running the company operational. The net working capital is the differences between asset and liability that owned by the company to support company operation. The higher liquidity of company means the higher capital that will owned by the company. If the current asset higher than current liability, means company capital will be increasing. Then, the company has sufficient capital to meet the company needs such as buying the machine, raw material, pay salary, etc. The capital not only derives from internal company but it also derives from external company. Thus, the company must have good performance to convince the outsiders to acquire the additional capital. Analyze the Liquidity of company using liquidity ratio has influence in examine the performance within certain period and its impact in increasing company capital to support the business operation.

II. Research Problems

            The performance of company varies from one company to other company. Through Liquidity Ratio, the researcher is going to know:

1)      How the financial condition of the company and its performance regarding to company’s ability to cover its liability?

2)      What factors that affects the company’s liquidity?

3)      How liquidity of company can influence the company in increasing its capital?

III. Research Scope and Limitation

1)      Analyze the company liquidity through calculating each account stated in Balance Sheet and Income Statement that relevant to liquidity ratio during 5-year period.

2)      Analyze the result of company liquidity with the company’s ability to cover its liability and its relationship with the capital without explains the type of capital more detail.

3)      Analyze the Cash Flow of Company to obtain more information about working capital and its utilization in maximizing the company activities.

4)      Examine the items or accounts that really influence the level of company liquidity

 

IV. Objectives

1)      Knowing what factors influence the company liquidity as a tool for measuring the performance company

2)      Calculating and analyzing each liquidity ratio such as current ratio, quick ratio and acid test ratio using financial statement and its impact on working capital.

3)      Examining the fluctuation of company working capital from year to year 

V. Research Benefits

            For Company:

1.      This research can provide suggestion and consideration for the company in making decision to improve and maximize the performance for the future.

            For Researcher:

1.      The researcher could implement the knowledge received when studying in University.

2.      The researcher can increase the knowledge and deep understanding for the company liquidity particularly in relation between liquidity and company capital.

            For Further Research:

1.      This research may used as a reference for the further studies particularly in discussing the issue related to Company Liquidity and Working Capital.

VI. Research Method

            There are two types of research method used by researchers in conducting observation which is qualitative method and quantitative method. Qualitative method is a method performs direct observation to the object or data that being observed. Data collected in qualitative method may include the questionnaire, interview, observation, etc. In contrary, the quantitative method is a method that used measurement in processing the data that have been collected. In quantitative method, the data collected through documentation such as reports, pictures, etc. Then, the data processed in numbers using statistical formulas to obtain more objective in the result.

            The research method applies for this study is quantitative method that using statistic to examine the data. The data collected for this research is through documentation which is collecting the reports related to the objects that being observed. In this research, the researcher is going to discuss about company liquidity and its impact on working capital. Thus, the researcher needs financial statement of company such as Balance Sheet for conducting the analysis. It is a report provides numbers and information required to solve the problems that being discussed in this research. For the data resource, the researcher is going to used secondary data which is Financial Statement published by Bursa Efek Jakarta (Indonesia Stock Exchange). 

CHAPTER II

LITERATURE REVIEW

II. Theory

A.    Financial Statement

            Financial Statement is a summary of financial transaction that occurred during financial year concerned. Financial statement consists of Balance Sheet, Income Statement, Statement of Changes in Equity and Statement of Cash Flows. The purpose of financial statement is to provide information for the users regarding financial condition of the company. The users who need information from Financial Statement are:

1.      Manager of the Company

The manager needs the financial statement for knowing the financial position that will use as a basic consideration for making decision in the future for the better performance.

2.      Shareholders

The shareholders need information from financial statement to know the performance of company. They will receive dividend from profit earned by the company.

3.      Creditors

The creditors will know the ability of company to cover its liability and ensure that there is no potential for loss.

4.      Investors

The investors need to know the condition of financial statement as consideration for making decision to decide whether to invest or not.

5.      Governments

In this case, the financial statement used as a basic for determine how much tax that will be imposed for profit earned by the company.

B.     Balance Sheet

            Balance sheet is a report that provides information about the amount of wealth, financial liabilities, and equity for certain period. On the left side of balance sheet consist of asset and liability while on the right side state the liability and equity of company.

C.     Income Statement

            Income statement is a report explains about the revenue, expense and gain or loss within certain period. Through income statement, the company knows how gain or loss received for certain period and how tax that will be imposed.

D.    Liquidity Ratio Analysis

            Liquidity is the ability of the company to provide the cash or cash equivalents. In the balance sheet, cash placed in the first while other asset accounts is placed based on the ability of these assets to be converted into cash. For example, the account receivable will placed before the stock because it is relatively easy to convert into cash. Thus, liquidity measures the ability to convert an asset into cash quickly without loss of its initial value. In this case, cash is the most liquid asset.

            Liquidity ratio is a ratio that shows the relationship between cash, account receivable and other current asset with the current liability. It describes the company ability to cover its current liability to creditors. The tools used to measure the company liquidity are current ratio, quick ratio, account receivable turnover, inventory turnover, etc. There are two type of ratio that frequently used to measure the liquidity of company which is quick ratio and current ratio.  

E.     Working Capital

            Working Capital is differences between current asset and current liability. There are two types of working capital, positive working capital and negative working capital. The positive working capital is condition where the current asset is higher than current liability and it means the company able to pay the liability. In contrary, the negative working capital is current asset is lower than current liability and it means the company does not meet current liability to its current asset.

CHAPTER III

DATA PROCESSING

A. Data Resources

            Data resource used for this research is secondary data which is data obtained indirectly and through intermediary where the data has been recorded and processed by other parties. The data resource for this research is data publish by Bursa Efek Jakarta (Indonesia Stock Exchange). Data used to support this research is Financial Statement of the company which is Balance Sheet and Income Statement.

B. Variable Research

            In processing the data, the researcher must determine what variable that explains the research object to be observed and to provide information used to making conclusion or solve the problems. 

1.      Independent Variable

Independent Variable for this research is Liquidity of Company which is level of company’s ability to pay its current liability using its current asset. Liquidity of company can be determined through liquidity ratio which is ratio that explains the relationship between current assets and current liability.

2.      Dependent Variable

Dependent Variable used to support the research, regarding Independent Variable is Working Capital.

D. Population and Sample

1.      Population

Population is the total numbers of object related to the issue that will be examined. The population includes people, animals, plants, years, houses, companies, etc. In this case, the population is the financial statement of the company.

2.      Sample

Sample is a part of population that represent object being studied. The sampling technique used is purposive sampling which is sampling technique that used for certain purpose. The sample for examine the object is financial statement of company for five years period.

E. Data Collection Method    

            According to the resource data chosen, secondary data, the data collection method used for doing research is documentation. The documentation method is searching and analyzing the documents related to variable or information to support the research. It may include reports, minutes, agendas, books, etc. In this case, the type of document is Financial Statement of Company which published during several periods to support the research. 

F. Data Processing Method

            Method used to process quantitative data, data related to the numbers, is data analysis. It means researcher calculate the numbers relevant with the problems and object to be observed. Analyze the data can be used through calculating the liquidity ratio which is ratio that explain the relationship between items or certain accounts stated in Balance sheet and Income Statement. Through calculating the ratio, the researcher obtains the calculating result regarding to the Company Liquidity and then connecting it with the problems to make conclusion and answering each problem.   


#Comment: Sorry for the mistakes that might be existed in the article.. 
Thank You,


Aida :)