Accounting Question - Essay Example

Accounting Questions Financial management is an extremely important part in any organization. Through it, the management can be ina position to track and account for any improvement and failures in an organization. Investors rely on such information to make decisions regarding their investment abilities and expectations.Qn. 1. There are two key types of financial statements. There financial statement that calculates income taxes and the financial statement is for financial reports. The former’s objective is to identify the total taxes payable or refundable in a single financial period.

In addition, it is essential in the recognition of deferred tax liabilities and assets in relation to future tax consequences. On the contrary, the latter’s objective is to give the financial information which is very useful to the potential investors and creditors in making decisions about investing or providing resources to that particular organization (Kieso, 2013). For this reason, financial reports are meant for the public consumption because they show what the company can offer should they wish to make investments with them.Qn. 2.

The Health of Ontario Pension Plan is of the view that pension plans are very useful because they encourage most employees to save and be certain about the future. In this context, defined-contribution and defined-benefit types of pension plans will form a major part of the discussion. Defined-benefit plan is where factors like salary, period of employment and personal history determine the benefits an employee gets. On the contrary, defined-contribution plan is where a company specifies a certain percentage of money each year that is of benefit to the employee.

Defined-benefit plan’s advantages; it offers income security to the employee, shields employees from uncertainties in investment risks, allows employees to estimate their future pensions among others. However, its main disadvantages are it offers inaccuracy in the estimates, difficult in summing up all the assumptions under the DB plan, and lastly it has got many issues revolving around the off-balance sheet pension accounting. The defined-contribution pension plan is important because employers are relieved from paying tax, contributions made by employees are transferred to the next of kin should the die before getting a share and contributions are voluntary.

Its disadvantages are it only offers security on savings while ignoring the income, it leaves members liable to the investment risk, and members cannot estimate their total contributions and investment decisions depend on the member and not the company. There exist many pension plans in the current system. While they are meant to serve a purpose specific to the needs of the users, the above discussed types of pension plans are the widely used in most health care systems, government offices and in a good number of companies.Qn. 3.

Most companies consider leasing equipment over buying because it enables the company in saving the extra money that would have been used in buying. Small companies with a small capital base can be in a position to manage their financial cash flows because of the little regular amounts involved in leases. Leasing gives the company an assurance because in for asset finance agreements, they cannot terminate the lease unless there is a mutual agreement. Leasing is flexible in terms of the payment periods thus easy to relate with the equipment’s useful life.Qn. 4.

As an investor, I would be worried if the company I am in invested in continually restates its financial statements to correct errors. This is because, while it may be a good thing in making frequent error corrections in the financial statements, investors may be worried about such behaviors, since they value accuracy. Through accurate information, they can build their trust in a company and be willing to take the risk of investing because they are certain of openness. Regular error correction means there are underground deals in a company that are questionable.

In reality, it indicates lack of seriousness and professionalism in the manner of handling financial matters.ConclusionFinancial statements serve a very important purpose to all business entities. They determine the worth and will power to convince investors into being part of their growth. To make it effective, the company has to make sure that there are very little or no errors in the financial statements. Financial information is very important to the company, its investors, creditors and the public.

By understanding the requirements, it is very easy for all these categories to make decisions depending on the level of interest. The discussion above gives an outline ranging from financial matters in an organization, the pension plans and their uses and the advantages of leases as opposed to buying.ReferencesHealth of Ontario Pension Plan. (2014). Comparing Retirement Options: How does the Defined Benefit Model Compare Other Types of Retirement Options? Accessed March 29 2014 from: http://hoopp.

com/Learning-Resources/Defined-Benefit-Plan/Comparing- Retirement options/.Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2013). Intermediate Accounting. Hoboken: Wiley.