Accounting Analysis Blenheim Instruments Ltd

Question: Discuss about the Repot of Accounting Analysis for Blenheim Instruments Ltd. Answer: Jenny Pike, the assistant accountant for Blenheim Instruments Ltd while finalizing the balance sheet of the company for the accounting period of 30th June 2015 noticed that the firm had taken a loan from ABB Bank. Jenny Pike came to see that two customers of the above mentioned company are under liquidation and the chance to recover the debt amount will fall appreciably by 10%. The company according to the loan agreement has to keep the ratio to 1.25:1 and this change in debt owing will result to modification in the ratio, which will have an impact on the financial statement of the company. The chief accountant of the company after listening to the concerns assured Jenny that such changes would not hamper the financial declarations of the company. The bank wants to know the figures of 30th June and any changes due to the change in account receivable will not impact the financial statement of this year because the amount of money recoverable for the debt owners cannot be assured befor e the next accounting period. The Chief accountant confirmed that by that period, the loss could be recovered and thus no reduction will happen of the ratio in the loan agreement. According to the Question, if I place myself in place of Jenny then I would have looked at the amount of receivable overstated in the balance sheet in the financial statement and how much debt is the company owes from the customers. Two of the customers have gone into liquidation, but the total amount recoverable from the debtors is yet unknown. It is not preferable to change the balance sheet according to the estimations of the total amount of money recoverable, and so the statement of finance for 30th June 2015 will remain the same. The chief accountant even after thinking over the problem when assures that any overstatement of the receivables will not concern the bank this year it is not appreciable to for me to make any changes to the balance sheet (Caplan and Dutta 2016). Mr. Russell Bayer, when feels that the assumption of 10% recoverable from bad debt, can change in the next year because the certainty of additional bad debts is unknown and the amount of overstatement made this year. It can be picked up by the end of the next financial year then I feel it is no point to change anything in the financial statement of the company. The chief accountant is experienced personnel and is aware of the accounting process, so when he assures not to panic, then I should not worry and finalize the balance sheet prepared by us. Being the accountant of the company, I would leave the balance sheet as prepared and prepare to understate the total receivable from debtors and balance it with the actual receivable from debtors in the next accounting period to maintain the ratio level according to the loan agreement. Thus I will not change data from the balance sheet from this year as the directors will also agree to keep the same (Vogel 2014). Reference List Caplan, D. and Dutta, S.K., 2016. Managing the risk of misleading financial metrics in annual reports: A first step towards providing assurance over management's discussion.Journal of Accounting Literature,36, pp.1-27. Mileris, R. and Boguslauskas, V., 2015. Data Reduction Influence on the Accuracy of Credit Risk Estimation Models.Engineering Economics,66(1). Vogel, H.L., 2014.Entertainment industry economics: A guide for financial analysis. Cambridge University Press. ZAINUDIN, E.F. and HASHIM, H.A., 2016. Detecting fraudulent financial reporting using financial ratio.Journal of Financial Reporting and Accounting,14(2).