Tax-Effect Accounting 101 for Australian Businesses

Governments levy taxes on individuals and businesses to finance its activities and/or (in the economic spirit of things) discourage certain certain activities. More likely than not, a business will be required to pay tax on its income. In doing so, that business would need to look at its accounts to determine the tax that is payable (or, if they are doing badly enough, how much they can claim from the tax agency).

The amount of tax a business needs to pay is often a fixed percentage of the profit they earn. Generally, where they earn revenue, the tax payable increases, while incurring expenses decreases tax payable.

If the business is operating in Australia, among others, it would need to follow the accounting standard AASB 112 Income Taxes, which, in general, would require two things:

1. Calculating current tax payable by reconciling from the accounting profit recorded for the year
2. Calculating deferred tax by recognising the differences between the accounting and tax balances of assets and liabilities

Vision’s Incentive Systems: A Case Study

Every World of Warcraft raiding guild aspires to progress through raid content in a timely pace. Most members of the raiding corps focus on attaining gear and other goals, and so cannot be expected to directly satisfy the guild’s purpose. Thus, the guild must facilitate this indirectly by setting compatible goals, and then motivate raiding members to achieve them.

Human Resources (HR) departments of real-life companies handle these issues regularly, and the officerships of ingame guilds are no more exempt. I will introduce the theories associated with incentive systems, then apply them to analyse the incentive systems of my current guild, Vision of Frostmourne US.

Direct Costing (with Defects)

In the ideal world, every bit of material and labour allocated to a product is used, and no waste is generated. Unfortunately, materials can have defects and precious labour is spent on dealing with it. This means that more input than ideally required is actually used.

In developing standard costs for products, management accountants must take defects into account. To do so, they need to have a good grasp of division and multiplication.

If C is the theoretical amount of material or labour and r is its defect rate, the total amount of material/labour actually used (T) is:

T = ^C/_{1 - r}

Resources and Their Sources

Accounting is a practice that allows someone (or something, in the case of an organisation), the accounting entity, to keep track of their economic and financial details. It involves accounting for their economic resources, as well as the sources from which they are obtained.

In early accounting practice, businesses would keep separate lists of their resources and sources. It was soon discovered that both can be linked. Thus came double-entry accounting, where every transaction that is recorded would recognise both and implicitly relate the two together.

All accounting entities strive to accumulate resources, while being careful of how they finance them. Those resources help to satisfy the accounting entity’s economic wants by providing economic benefits.

Making Sense of Financial Statement Ratios

Many basic features of a business' business can be gleaned from their set of financial statements. However, the more intricate details can be found through ratio analysis.

The financial statement's figures are measured in currency units, which have little value in themselves because they do not consider the scale of business operations. By comparing relative sizes of these figures, this problem with units of measurement are eliminated by removing the units entirely. The resulting ratios are scale-free and can be used in comparing:

• Two businesses of different sizes
• The same business as it grows (or collapses) over time.

Analysts have devised myriad ratios to use in this type of analysis. What do they mean in real-world terms?