Accounting Australian Traditional Agriculture

Question: Discuss about the Accounting for Australian Traditional Agriculture. Answer: Introduction The extractive industry is defined as the industry that is engaged in the search of natural resources. The resources that are extracted includes oil, natural gas and mine. The extractive industry require involvement of heavy expenditure before production. The pre-production cost can be dealt either by recognizing it as expenses or by recognizing it assets (Barron, et al., 2015). The accounting treatment of recognizing the preproduction cost as asset is more justified. Therefore, it can be said that the pre-production cost should be recognized as an assets. The reason for such decision is decided in the report below. Recognition of Preproduction Expenses as Expenditure The accounting treatment of recognizing the pre-production cost as expenses is flawed. The cost that are incurred before production is known as the pre-production cost. In general, it can be said that the income statement should recognize the expenses that are incurred for earning the revenue. In this case as the production has yet not started so the recognition of expenses in the profit or loss account is unjustified (Doran et al., 2015). The recognition of pre-production expenses in the profit or loss account increases the cost and hence the loss is increased. Therefore, it can be said that if the pre-production cost is allowed for recognizing in the profit or loss then it will cause abnormal decline in profit thereby giving a wrong picture of the financial position of the company. Recognition of Pre-Production Expenses as Asset There is an alternative way of recognizing assets it is by recognizing the preproduction cost as assets. The assets is any item that is expected to provide future economic benefit to the enterprise. The pre-production cost are incurred so that excavation work is completed (Budeba et al., 2015). On completion of the excavation, work there is a possibility that the company will make economic benefit. Hence, the expenses that are incurred for excavation should be recognized as expenses and amortized over the useful life of the excavation. This will distribute the pre-production cost over the excavation period thus avoiding any abnormal expenditure (Hiscock et al., 2016). Conclusion Based on the above discussion it can be seen that the enterprise should recognize the excavation costa as assets. The main reason for the decision is that expected future economic benefit will arise so the expenses should be recognize as expenditure. Reference Barron, O., Ali, R., Hodgson, G., Smith, D., Qureshi, E., McFarlane, D., ... Zarzo, D. (2015). Feasibility assessment of desalination application in Australian traditional agriculture.Desalination,364, 33-45. Budeba, M. D., Joubert, J. W., Webber-Youngman, R. C. W. (2015). A proposed approach for modelling competitiveness of new surface coal mines.Journal of the Southern African Institute of Mining and Metallurgy,115(11), 1057-1064. Doran, C. M., Ling, R., Milner, A., Doran, C. (2015). The economic cost of suicide and suicide behaviour in the South Australian Construction Industry. Hiscock, P., OConnor, S., Balme, J., Maloney, T. (2016). Worlds earliest ground-edge axe production coincides with human colonisation of Australia.Australian Archaeology,82(1), 2-11.