Primary Users and Professional Ethics in Accounting

Question 1 (10 marks)
a) Identify the primary users and their uses of financial information as outlined in the Conceptual Framework. (5 marks)
[Answer here]
Investors- Current and potential investors seek a return on their investors after providing capital through investing in the firm.
Lenders- the lenders are mostly banks and different providers of credit who seek to determine he credit risk and whether the entity can pay the short-term and long-term obligations
Creditors- These include trade suppliers or vendors who provide goods and services noncredit
b) What does the word ‘ethics’ mean? Explain what is considered ethical behaviour for an accountant. Use your own example to explain your point. (5 marks)
[Answer here]
Ethics refers to behaviour and actions that are socially accepted principles and values and result in positive outcomes. Ethical conduct is based on a professional code of conduct where there are professional’s duties and rights. Professional ethics in the accounting field are regulated by professional bodies. Accounting ethics reflect the set of high-quality principles, duties, and ethical standards that guide the practice of accountants. For instance, there is professional competence and diligence, which refers to maintaining knowledge and competence at the levels necessary to ensure that clients and entities receive high-quality professional services
Question 2 (20 marks)
The comparative statements of ABC Ltd are presented here:
ABC Ltd, Income Statement (extract), for years ended 30 June 2018
2018 2017
$ $
Net Sales 3,637,000 3,501,000
Cost of sales 2,011,000 1,992,000
Gross Profit 1,626,000 1,509,000
Selling and administrative expenses 1,012,000 958,000
Finance costs 36,000 38,000
Profit before income tax 578,000 513,000
Income tax expense 173,400 154,000
Profit for the period 404,600 359,000
ABC Ltd, Statement of Financial Position, as at 30 June 2018
2018 2017
Assets $ $
Current assets
Cash 129,800 128,400
Marketable securities 500,000 400,000
Accounts Receivable (net) 300,000 205,600
Inventory 400,000 231,000
Total current assets 1,329,800 965,000
Non-current assets
Property, plant and equipment (net) 1,250,600 1,040,600
Total assets 2,580,400 2,005,600
Liabilities and Equity
Current liabilities
Accounts payable 300,000 290,800
Income taxes payable 87,000 84,000
Total current liabilities 387,000 374,800
Non -current liabilities
Notes payable 720,000 700,000
Total liabilities 1,107,000 1,074,800
Equity
Share capital ($10 each) 900,000 600,000
Retained earning 573,400 330,800
Total Equity 1,473,400 930,800
Total Liabilities and Equity 2,580,400 2,005,600
All sales were on account. Net cash provided by operating activities for the year ended 30 June 2018 was $760,000. The weighted average number of shares is 150 274.
Net Sales

3,637,000

3,501,000

Cost of sales

2,011,000

1,992,000

Gross Profit

1,626,000

1,509,000




Selling and administrative expenses

1,012,000

958,000

Finance costs

36,000

38,000




Profit before in...