Audited Financial Statements - Domicile in Australia - Case Study Example

Audited Financial Statements Name of the student: Course Tittle: Name of the professor: Date Table of Contents Table of Contents 2 Comprehensive financial Statements 3 1.0 Comprehensive income statement 3 1.1 Comprehensive financial position of the company 4 1.2 Comprehensive cash flow statement 5 1.3 Changes in Owners’ Equity 6 2.0 Summary of significant accounting policies 7 2.1 Inventory valuation methods 7 2.2 Accounting for bad and doubtful debts 8 2.3 Revenue Recognition 8 3.0 Notes to financial statements 9 Director Declaration 12 Auditors Report and declaration 13 Audited Financial Statements of the Company Comprehensive financial Statements 1.0 Comprehensive income statement Comprehensive Income Statement for the year ended Jun-2014               Notes     $"000"               Revenue       98,640   Cost of sales 1     63,470   Gross profit       35,170.00   Other Incomes 2     46,572.00   Total income       81,742.00   wages and Salaries   $ 13,400       Other expenses 3 $ 44,670       Accrued Expenses   $ 287       Bad debts   $ 153       Depreciation 4 $ 1,034       Legal expenses   $ 450       Finance cost   $ 7,600       Total expenses       67,593.80   Profit /loss before tax       14,148.20               Income tax expense   30%   4,244.46   Profit/loss for the year       9,903.74   Retained earning       4,860.00   Reserves b/f       1,740.00   Taken o reserve       6,600.00   Profit distributed to shareholders       5,043.74   Earnings per share (USD):                           Basic   3,634.00       Diluted   -   1.1 Comprehensive financial position of the company Statement of financial position as at June- 2014   Assets    $ 000  $ 000 Non-Current Assets Notes     Property, Plant & Equipment   3,920   Land   6,880   Vehicles   980   Buildings   13,760         25,540.00         Current Assets       Inventories 6 14045   Trade Receivables 7 4606   Cash and cash equivalents   3,587         22,238.00 Total Assets     47,778.00         Equity and Liabilities               Equity       Share Capital 8 $ 3,634   Retained Earnings   $ 4,860   Revaluation Reserve   $ 5,600   Total Equity     14,094.00         Non-current liabilities       Long-term borrowings   7,600 7,600.00 Total long term borrowing       Current Liabilities       Trade and other payables   4940   Short-term borrowings   15000   Current portion of long-term borrowings   1900   Current tax payable   4244   Total current liabilities     26,084.00 Total liabilities     33,684.00 Total equity and liabilities     47,778.00 1.2 Comprehensive cash flow statement Statement of cash flows for the year ended 30 June 2014       KSH   Cash flows from operating activities                   Profit before taxation     14,148.20   Adjustments for:           Depreciation   1,034.00     Amortization   -     Investment income   46,572.00     Interest expense   380.00           62,134.20   Increase in trade receivables   -     Increase in inventories 6 14,045.00     Increase in short term borrowings   6,000.00     Increase in trade payables 7 4,940.00 (24,985.00) Cash generated from operations         Interest paid     22.00   Income tax paid     4,244.46 4,266.46 Net cash from operating activities       41,415.66           Cash flows from investing activities         Purchase of property, plant and equipment         Purchase of intangible assets         Proceeds from sale of equipment   $ 11,340.00   Proceeds from sale of intangible assets     $ -   other investments     $ 11,250.00   Interest received     $ 22.00   Net cash used in investing activities       112.00           Cash flows from financing activities         Proceeds from issue of share capital   11 26,000.00   Proceeds from long term borrowings     2,000.00   Dividend paid     830.00   Net cash used in financing activities       28,830.00           Net increase in cash and cash equivalents       70,133.66 Cash & cash equivalents at start of the period       3,587.00 Cash & cash equivalents at end of the period       73,720.66 1.3 Changes in Owners’ Equity Change of Owners Equity as at 30th June 2014 Balance b/d years $ 2001 1,000,000 2004 900,000 2012 1,760,000 3,660,000 Dividends paid 832,000 832,000 Increase in Reserves 4,860 4,860 Revaluation 5,600 5,600 Change in owners’ Equity 4,502,460 2.0 Summary of significant accounting policies The company is a domicile in Australia. The main accounting policies adopted in in the preparation of these consolidated financial statements are set out below. These policies and principle have been consistency applied for this year presented, unless otherwise stated. The financial statements are for single entity. The financial statements are presented in Australian dollar. The director authorized the financial report for issue on 3rd July 2014. a) Basis of preparation These general-purpose financial statements have been prepared in accordance with Australian Accounting Standard, other authoritative pronouncements of the Australian Standard Board, Australian Accounting Interpretation and the Company Act 2001. Compliance with IFRS The financial statement of the company complies with International Financial reporting Standards (IFRS) as issued by the International Accounting Standard Board (IASB). Significant accounting policy 2.1 Inventory valuation methods In the Company, inventories that are of short life are being valued at the lower of average cost and net realizable. Durable stock according to the Company policies is valued using the retail inventory method to arrive at the cost of the stock. The Company management believes that the inventory method is useful in determining the cost by reducing the value of the inventory by appropriate percentage margin that factor in the markdown prices. The stock in the warehouse is valued at the lower of average cost and net realizable value. 2.2 Accounting for bad and doubtful debts The provision for bad debts is recognized in the consolidated balance sheet at the time when the consolidated entities have presented their legal obligation because of present activity or event. They present legal constructive obligation because of a past activity in the Company and most probably an activity, which result in the outflow of an economic benefit, which requires settlement of that obligation. Whenever all or part of the Company obligations on economic benefits, there is, need to provide provision as the economic value is expected to be recovered from the third party. The account receivable is recognized in the balance sheet as an asset if it is virtually certain that it will be recovered with high reliability. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date and at the same time taking into consideration the risk involve and other surrounding uncertainties, which surrounds the obligation. The Company has adopted to measure the provision using the cash flows estimated to settle the current obligation. The carrying value of the obligation is the present value of the cash flow. 2.3 Revenue Recognition Revenue is measured at the fair value of consideration received or on receivable. The amount disclosed as revenue are net of the returns, trade allowances, rebates and amounts collected on behalf of other third parties. The company recognizes revenue when the full amount can be reliable measured and recognized, or it is probable that future economic benefit will flow to the entity and specific criteria have been met. The amount of revenue is not considered reliably measurable until all contingencies relating to the sale have been fully resolved. The company mostly bases its estimates on historical results taking into account the type of the customer its dealing with and on which type of transaction. The revenue is recognized as follows; Sales Revenue Sales revenue represent the revenue that is earned from the provision of goods and services rendered by the company. Sales revenue is only recognized when the significant risks and rewards of ownership of goods or service including possession have fully passed to the buyer and the right of compensation has been fully attained according to AASB. Interest income Interest income is recognized on the time proportion basis using the effective interest method. Another important accounting standard used here is; AASB 13 on Fair value measurements though this does not have major impact on outcome of the financial statements. The amendments of AASB 2011-9 in which Australian Accounting Standards presentation of activities of the comprehensive income according of AASB 101 Depreciation and Asset Acquisition For the Company the assets are being acquired either through purchase. The amount acquired by way of finance lease is normally started at the amount, which is equal to the lower of its fair value and the present value of the minimum lease, which was paid during the time of inception of the lease and the accumulated depreciation and impairment losses. Lease payments are accounted using the Australian Accounting Standard Board and the International Financial reporting Standards. Depreciation of building, plants and equipment are done on straight-line basis over the estimated useful life of the asset and then it is consolidated into the entity accounting book. The estimates of the remaining useful lives are normally made on the regular basis all the assets in this category. 3.0 Notes to financial statements Note 1 Cost of Sales "000" From expense 63,470 Note 2 Other incomes Note 2 Service Revenue 36260 Other revenue income 2042 Extraordinary gain 6400 Sale of Asset 1870 Total 46572 Note 3 General Expenses Note 3 Expenses 121,540 Less: Cost of Sales (63,470) Less: Wages and salaries (13,400) Net Sales 44,670 Note 4: Depreciation Depreciation Expenses Note 4 Buildings 432,000 plants and equipment 490,000 Vehicles 112,000 1,034,000 Note 5 Bad debts Note 5 Bad debts written off Bad debts 191,000 B/W 152,800 Note 6: Inventory Note 6: Inventory Closing Inventory $ 12,745 Return Inwards $ 1,300 $ 14,045 Note 7: Trade Receivable Note 7: Trade Receivable Opening account receivable 4,708 Provision for doubtful debts 102 Account receivable 4,606 Note 8: Share Capital Note 8: share capital Share Cost Net Ordinary share $ 1,000,000 $ 7,000 $ 993,000 Ordinary share $ 900,000 $ 8,000 $ 892,000 Ordinary share $ 1,760,000 $ 11,000 $ 1,749,000 Total $ 3,660,000 $ 26,000 $ 3,634,000 Note 9: Account Payable Note 9: Account payable “000” Creditors 3,060 Accrued expenses : Interest 380 : Principle 1500 Total 4,940 Note 10: disposal and property acquisition Note 10: Sale of property Sale of Antique Coins 6400 Sale of non-current asset 1870 Sale of land 850 Sale of plant 2220 Total 11340 Note 11: Other investments: Note 11: Other investments Car park Fees 150 Operating cost 11400.2 11250.2 Director Declaration The Directors declares that A. In the Directors opinion, there are reasonable grounds to believe that the Company will be able to pay its debts and as when they become due and payable B. The attached financial statements are in compliance with the international Financial Reporting Standard (IFRSs) as stated into the significant financial and accounting policies C. The attached financial statements are in compliance with the Australian Accounting Standard Board AASB as outlined by Australian Stock Exchange D. The attached financial statements are in compliance with the Corporate Act 2001 Therefore, the Directors declare that the statements are in compliance with relevance rules and regulations and gives true and fair view of financial position of the Company. Yours faithfully S.o.m. Auditors Report and declaration Independent Auditors Report To the Director of the Company Auditor’s independence In accordance with the section 307c of the Company Act 2001, as independent auditor of the Company for the year ended 30 June 2014, I declare that, to the best of my knowledge and belief, there has been; a) No contravention of the auditors independence requirements of the Company Act 2001 in relation to the Company Audit and b) There is no contravention of any applicable code of professional conduct in relation to the company Audit. Auditors Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with the Australian Auditing Standards. Those standards required that the auditor comply with relevant ethical requirements relating to audit engagement and plan and perform the audit to obtain reasonable assurance whether the financial reports are free from material misstatements. An audit involve performing procedures to obtain audit evidence about the amount and disclosure in the financial report. In our opinion, we believe that the audit evidence obtained is sufficient in providing the basis of our audit opinion. Director responsibility The company directors are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards. In accordance with the Company Act 2001 and for such internal control as the director has determined is necessary to enable the preparation of the financial reports that are free from misstatements whether due to fraud or error. Financial Report We have audited the Company financial statements, which comprises of comprehensive financial statement, comprehensive statement on financial position of the business, cash flow statement and the statement of change in equity. All the reports are prepared in accordance with the AASB and IFRS as spelled out in page 88 to 164. Read More