Financial Statements - Assignment Example

Financial Accounting Name: Institution: Date: Contents Part 1 Financial Statements 2 Comprehensive income 2 Financial position (balance sheet) 3 Changes in equity 4 Part 2 Notes to the financial statements 4 Note 1: Significant Accounting Policies 5 1.1Statement of compliance (AASB 101, para 15 &16) 5 1.2 Basis of Preparation (AASB 101, para 118) 5 1.31.3 Accounting judgments, estimate and assumption (AASB 101, para 122 & 125) 6 Note 2: 9 Revenue (AASB 101, para 82 (a)) 9 Note 3: 9 Other income (AASB 101, para 84) 9 Note 4: Expense excluding finance costs – analysis by function (AASB 101, para 97 & 103) 9 4.1 Loss on sale of the 2 vehicles (AASB 101, para 82 (e) (ii)) 10 5.1 Finance costs 10 Note 6: Income tax expense (AASB 101, para 82 (d); 112, para 79) 11 Note 7: Cash at bank 11 Note 8: Inventory (AASB 101, para 54 (g)) 11 Note 9: Intangible asset (AASB 101, 54(c)) 11 Note 12: Trade and other payables (AASB 101, para 54(k)) 11 Note 13: Provisions (AASB 101, para 54 (l), para 78 (d), AASB 137, para 84, 85) 11 Note 14: Share capital (AASB101, para54 (r), 79 (a)) 12 Note 15: General reserve (AASB 101, para 54 (r)) 12 Note 16: Retained earnings (AASB 101 para) 12 Note 17: Changes in Accounting estimates (AASB 108, para 39) 12 Note 18: Contingent liabilities contracts 13 Note 19: 13 COMMITMENTS 13 References 13 Part 1 Financial Statements Comprehensive income For the period ended 30th June 2014 2014 2013 Notes ($) ($) Revenue 2 134,900 X Other income 3 9,032 X 143,932 XX Expenses minus finance costs 4 (123,524) (X) Less Finance costs 5 (190) (X) PBT 20,219 X Less Income tax expense 6 (6,066) (X) PAT 14,153 X Paid dividends (832) x Total Comprehensive Income for the period 13,321 X Add retained earnings b/f 4,860 x R/E c/f 18,181   Financial position (balance sheet) As at 30th June 2014 Assets Notes 2014 2013 Current Assets Cash at bank 7 3,587 X Trade and other receivables 8 4,606 X Inventories 9 12,745 X Total current assets 20,938 X Non-current assets Property, plant and equipment 10 25,540 X Intangible assets 11 X Total non-current assets 25,540 X Total assets 46,478 X Liabilities Current liabilities Trade and other payables 5,228 X Provisions 1,610 X Income tax payable 6,066 X Proposed dividends 12 1,200 Total current liabilities 14,104 X Non-current liabilities 7,600 suspense Account 970 Total non-current liabilities 8,570 X Total liabilities 22,674 X 0 Net assets 1,131 X Equity Share Capital 14 3,634 X General Reserves 15 1,990 X Retained earnings 16 18,181 X Total equity 23,805 X Changes in equity Statement of Changes in Equity For the year ended 30 June 2014 Share Capital General Reserves Reserve Earnings Total Equity $ $ $ $ Balance at 1 July 2013 3,634 1,740 4,860 10,234 Transfer from retained earnings 1,300 (1,300) 0 Paid Dividend1 (832) (832) paid dividend2 (1,050) (1,050) Total comprehensive income 0 Balance at 30 June 2014 3,634 1,990 2,728 8,352 Part 2 Notes to the financial statements Notes to the Financial Statements Note 1: Significant Accounting Policies The above financial reports of xxx Limited for the year ended 30th June 2014 have been authorized for issue is the 30th September 2014. The principle of accounting policies in the preparation of the financial report are set out in the notes below: 1.1 Statement of compliance (AASB 101, para 15 &16) “Accounting Standards include Australian equivalents to International Financial Reporting Standards. Compliance with International Financial Reporting Standards ensures that the consolidated financial statements and notes of the Group comply with International Financial Reporting Standards.” (Leo et al. 2009, p.537) Therefore, the report should be presented a true and fair view. 1.2 Basis of Preparation (AASB 101, para 118) The financial report is a general purpose financial report which has been prepared in accordance with the Corporation ACT 2001, Accounting Standards and interpretations (AASB). “The Corporation Act requires an entity’s financial report to comply with Australia Accounting Standards and, if necessary to give a true and fair view, further information to be disclosed in the notes.”(AASB 101, para Aus15.1) The financial report has been prepared under historical cost measurement basis and all amounts are presented in Australia dollars. Otherwise disclose in the notes. Cost and liability are record at fair value. (Leo et al. 2009, p480) 1.3 1.3 Accounting judgments, estimate and assumption (AASB 101, para 122 & 125) “In the application of the firm’s accounting policy management is required to make judgments; the estimate and assumption are based on historical experience and various other factors that are considered to be relevant. Management decisions have the most significant effect on amounts recognized in the financial statements. Therefore, Actual result may differ from these estimates.”(Leo et al. 2009, p.537) “The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events.”(Leo et al. 2009, p480) i) Revenue “Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants.”(AASB 118, para 7) Revenue from the sales of goods should be recognized when all the conditions at AASB 118, para 14 from (a) to (e) have been satisfied. ii) Proceeds from the sale of equipment The proceeds from sale of building are bigger than the carrying amount. Therefore, the proceeds from sale of building less the carrying amount are the gain of the equipment. Moreover, as the prior to sale this was being used in operations and had been recorded using the cost basis, we do not need to put in the other income again.[Leo091] iii) Proceeds from the sale of vehicles The proceeds from sale of vehicles are smaller than the carrying amount. Therefore, the proceeds from sale of vehicles less the carrying amount are the loss of the vehicle. Moreover, we need to present it as an expense. iv) Expenses Expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants. (AASB Framework, para 70 (b)) v) Finance costs Finance costs comprise and borrowing costs, which are recognized as an interest expense with relevant interest rate. vi) Income tax expense Current tax liabilities for the current are measured at the amount which is expected to be paid to the taxation authorities. The tax and tax laws used to compute the amount are those that are enacted by the financial position date. (Leo et al. 2009, Para.486). Income tax = profit before tax * tax rate of 30% vii) Trade and other receivables Trade and other receivables are the amount less the allowance for doubtful debts, which the company will not be able to collect the debts. viii) Inventories Inventories are valued at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale. (Leo et al. 2009, p.484) ix) Property, plant and equipment The property, plant and equipment included vehicles, buildings and plant. They are measured at cost less accumulated depreciation.[CPA13] x) Intangible assets There are no intangible assets. xi) Trade and other payables Liabilities for trade creditors and other amounts are recognized at cost which is the fair value of the consideration to be paid in the future for inventories and other goods or services received. (Leo et al. 2009, p. 486) xii) Provision Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. (AASB 137, para 14) xiii) Share Capital Share capital is the ordinary shares less share issue costs plus bonus share issue plus share call. xiv) General reserve Reserve is consisting of direct adjustments to equity and retained earnings. (Leo et al. 2009, p. 46) xv) Retained earnings Retained earnings not paid out as dividend but instead reinvested in the company or used to pay off debt. Note 2: Revenue (AASB 101, para 82 (a)) 2014 2013 $ $ Sales revenue 98,640 X Service revenue 36,260 X Total revenues 134,900 X Note 3: Other income (AASB 101, para 84) 2014 2013 $ $ Interest earned 22 Proceeds from sale of Buildings 1,870 X Proceeds from sale of antique coins 6,400 X Parking income 150 Decrease in Annual leave 140 Decrease in legal provision 450 Total other income 9,032 X *Gain on sale of Buildings (AASB 101, para 82 (e) (ii)) 2014$ 2013 Proceeds from sale of item plant 4,200 X Less: carrying amountof plant sold (1,980) Gain on sale ofplant 2,220 X Note 4: Expense excluding finance costs – analysis by function (AASB 101, para 97 & 103) $ Cost of sales 63,470 Selling &distribution expenses comprise: Sales returns 1300 Sales agents Bonuses expense 4,500 Total selling and dist cost 5,800 Administration costs Audit fees 685 Consultancy 875 Insurance and power 11,400 Redundancy payments 900 Council fees 97 Dept :buildings 432 Dept: plant & Equipment 490 Dept:Vehicles 112 Loan Subscription approval fee 6,000 Wages and salaries 13,400 Annual leave expense 1,240 Long leave expense 1,720 Call centre cost 459 Doubtful debts expenses 89 Increase in long leave provision 1,525 General expenses 14,829 Total administrative expense 54,253 Total expense excluding finance costs 123,524 4.1 Loss on sale of the 2 vehicles (AASB 101, para 82 (e) (ii)) 2014 2013 $ $ Proceeds from sale of Buildings 850 X Less: cost of Buildings sold (1,200) (X) loss on sale (350)   4.2 Annual leave expenses 2014$ 2013 Total expense for annual leaves b/f 620 X Total provision for annual leaves 480 X Less: expense portion in 2014 (1,240) (X) Total annual leave expenses c/f 480 X 4.3 Payment to auditors (AASB 101, PARA 138.1) Payment to auditors was $ 1,560,000, which includes $875,000 for consultation work. Note 5: Finance costs (AASB 101, para 82 (b)) 2014($) 2013$ Total Interest on borrowings 190,000 x 5.1 Finance costs Interest expense for the year: $7,600,000 * 5% * (1/2) = $190,000 As at 1 Jan 2014, the company secured a loan of $7,600,000 with interest rate at 5% per annum was payable one year in arrears, and is to be repaid in full in 2018. Note 6: Income tax expense (AASB 101, para 82 (d); 112, para 79) Income tax expense = PBT * Tax rate = $20,219,000 * 30% = $6,066,000 Note 7: Cash at bank Cash at bank = 3,587,000 Note 8: Inventory (AASB 101, para 54 (g)) 2014($) 2013$ Inventory 12,745,000 X Note 9: Intangible asset (AASB 101, 54(c)) The company has no intangible assets for the period ended 30 June 2014. Note 12: Trade and other payables (AASB 101, para 54(k)) 2014($) 2013$ Accounts payable 3,060,000 X Principle due 1,520,000 X Interest due 648,000 X Total trade and other payables 5,228,000 X Note 13: Provisions (AASB 101, para 54 (l), para 78 (d), AASB 137, para 84, 85) 2014$ 2014$ Provision for annual leave at June 30, 2014 480 X Provision for legal provision 510 X Provision for long leave expenses 2,505 X Less: settlement fees (1,885) (X) Total provision 1,610 X Note 14: Share capital (AASB101, para54 (r), 79 (a)) 2014($) SHARE CAPITAL Authorised, issued & fully paid: 500 Ordinary shares of $ 2 each 1,000 300 Ordinary shares of $3 each 900 400 Ordinar shares of $4.40 each 1,760 Issue cost -26 TOTAL 3,634 Note 15: General reserve (AASB 101, para 54 (r)) Note 16: Retained earnings (AASB 101 para) 16.1 Total dividend Statement of Changes in Equity For the year ended 30 June 2014 Share Capital General Retained Reserve Earnings Total Equity $ $ $ $ Balance at 1 July 2013 3,634 1,740 4,860 10,234 Transfer from retained earnings 1,300 (1,300) 0 Paid Dividend1 (832) (832) paid dividend2 (1,050) (1,050) Total comprehensive income 0 Balance at 30 June 2014 3,634 1,990 2,728 8,352 Note 17: Changes in Accounting estimates (AASB 108, para 39) The firm estimates the cost to rehire and train and employ staff to undertake new services are estimated at $2,600,000. Note 18: Contingent liabilities contracts In September 2013 the company the company decided to outsource staff service to an overseas call centre to reduce staff costs. The $545,000 payment includes a $200,000 payment for initial training and initial establishment costs of overseas call center and $345,000 paid in advance for services (for the period from the 1 October 2013 to 30 September 2014). Due to this outsourcing a number of staff were made redundant. Payments to these staff are noted above under staff related expenses.[FA2141]. Note 19: COMMITMENTS The company has no capital commitments. References Leo091: , (Leo, 2009), CPA13: , (CPA, 2013), FA2141: , (FA2 Annual Report Assignment Case Study, 2014), Read More