Summary of General Ledger and Additional Information for Park Ltd
According to IAS 1 all entities must prepare and present its financial statements as per this Internal Accounting Standard as well as per the International Financial Reporting Standards.
In both questions 1&2 IAS 1 paragraph 9 is applicable whereby it outlines how profit and loss and comprehensive income statement Gazzola(2015.Pg 7) is to be prepared and presented as well as statement of changes in equity and cash flow as well.
1.(a)
Park Ltd (Note 2)
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For The Year Ended 31st December 2017.
Notes; Amount
Revenue (sales of goods) 3 4469000
Less Cost Of Good Sold;
Cost of Sales 3 (2987000)
Gross Profit 1482000
Add Other Incomes;
Interest Income 6000
Total Income 1488000
Less Expenses;
Distribution Expenses 86000 3
Administration Expenses 252000 3
Other Expenses; 3
Sales and Marketing Expense 820000 3
Employee benefit 62000 3
Warrant expense 37000 3
Finance Cost;
Other Borrowing Expenses 4000 4
Interest Expense 44000 4
Total Expense (1305000)
Profit Before Tax 183000
Less Tax;
Income Tax Expense Note 3 (85000)
Year After Tax Profit From continuing operation 98,000
Add Profit from the Period 0
Profit for the Year 98,000
Other Comprehensive Income 0
Gain on land and investment revaluation (note 7) 42000
Total Comprehensive Income 14000
Park Ltd
Statement of Changes in Equity
For Year Ended 31st Dec 2017
Retained Asset Revaluation Equity/Capital
Earnings Reserve/Surplus Contributed Total Equity
Ball b/f (Note2) 326000 50000 1541000 1917000
Profit For
Period 98000 0 0 98000
Other
Comprehensive
Income/loss (Note 7)
For Period 0 0 0 0
Issue of Share
Capital/Right Issue 0 0 120000 120000
Dividend Reinvest (Note 5)
0 0 30000 30000
Revaluation Surplus (Note 6)
0 92000 0 92000
Less;
Dividend paid (Note 5)
(150000) 0 0 (150000)
Income tax on (Note 6)
Revaluation 0 (18000) 0 0
Closing Balance As
At 31st Dec 2017
Attributable To Shareholder 274000 124000 1691000 2089000
Park Ltd
Statement of Financial Position as At 31st Dec 2017
Assets;
Current Asset’
Cash & Cash Equivalent 4000
Deposits at Call 100000
Trade and Other Receivables 436000
Other Debtors 93000
Finished Goods Inventory 714000
Raw Materials Inventory 188000
Current Assets 1535000
Non-Current Assets’
Good will (IFRS3.64) 870000
Patent (note 11) 45000
Property Plant & Equipment (note 8) 952000
List Investment (note 9) 232000
2099000
Total Assets 3634000
Liabilities;
Current Liability
Bank Loan (note10) 36000
Other loan (note10) 460000
Trade Creditors 510000
Preparation of the Statement of Profit and Loss and Other Comprehensive Income for Park Ltd
Provision for Employee Benefit (note12) 31000
Current Tax Payable (note13) 19000
Differed Tax Liability 135000
Current Liability 1191000
Amount Attributable To Shareholders 2089000
3280000
Just as it is stipulated by AASB 101 that there only ways of presenting statement of profit or loss and other comprehensive income is as single statement or two statements is exactly what has been done in this question. Whereby the use of single statements format is what has been applied as it was the specification given in the question that is to prepare one statement covering both profit or loss and other comprehensive income part Maynard (2017.Pg 4)
The below note numbers illustrate the accounting concept and regulations used preparation and presentation of the profit or loss and other comprehensive income statements.
Note 1;
Although it is not outline what kind of business Pak Ltd is engaged with we are aware that it operates a business of selling products and possibly products that it has manufactured itself this is as per the info in the trial balance where we are told that the company has finished and raw material products then we are further informed that it has cost of sales Akhmetshin(2015.Pg 900).
Note 2;
This note outlines that every statement in financial reporting has to have an heading or rather a title and period of reporting as stipulated in AASB 101.85.Whereby the face of operations should be presented via outline the company name, the item being presented and the period that is being presented for. This cuts across all other statements not just this of profit, loss and other income.
This note further stand to defend the fact that all financial and corporate regulations have been applied the likes of IFRS and Australian 2001 corporation act. This note likewise outline that the financial year of reporting is 31st December 2017 but with of course subsequence balances brought forward for financial year 2016.
Note 3;
Revenue is reported as it is in the trial balance reporting period together with cost of sales too which do not have any item in the additional information affecting it. Expenses have been factored in but on functional basis as stipulated in AASB 101.99.Expenses are factored depending on the proximity it has towards revenue generation. Employee and warranty expenses are factored in because they were paid in that year as part of the respective provisions set in place. For Income tax expense is treated as a different component since this is the share of the state over the income made. Robinson (2015.Pg 27).
Preparation of a Statement of Cash Flows for Copper Inc.
Note 4;
This note is on finance cost whereby have include interest expense as part of finance cost because have assumed this expense is on the interest on the loan facility given to the company whereas other borrowing expense is too include because it is expensed under the borrowings made Henderson(2015.Pg 38)
The law as per AASB 134.10 expects that all preparation of statements of changes in equity be done with a title heading and total, sub-totals with them. At the left side of the statement of changes in equity it is expected to see all the items referenced there with their top equivalent representation and the amount at their right side.
Note 5;
All the items appearing in this platform are mostly the item that has changes in equity part of the financial position. Dividend reinvested portion involves that part of paid dividend whose owners have agreed to reinvest this amount so as part of their shareholding portion. Dividend paid of 150000 likewise forms part of this because it reduces the retained earnings
Note 6;
The revaluation surpluses figure in the statement of changes of equity is a sum up of both land and investment i.e. 50000+42000.The income tax on this revaluation surplus is likewise required to be factored in so as to recognize the net effect.
Note 7;
Other comprehensive income Bradbury (2016.Pg 50) in this platform is not directly recognized since they are not presented, for example items like foreign exchange rate gain or loss there is no information relating to it, gain or loss sale of financial instruments, gain or loss of fair value cash flow hedges, income on associate investment share, income from gain or loss of defined benefit plans.
Ideally all these components appear but there is no income, gain or loss from it is recognized.
Guidance notes Statement of Financial Position;
Financial position declares the real picture, face and position of a firm, it shows and items that are actual i.e. they are always at net book value and in good condition.
Note 8,
Land & Building Plant & Equipment
Bal b/d 257000 1260000
Revaluation 35000 0
Less accumulated depreciation (36000) (564000)
256000 696000=952000
Note 9,
List Investment
Bal b/d 225000
Revaluation 7000
232000
Note 10,
Bank loan=66000-30000=36000
Other loans=570000-110000=460000
Note 11,
Patent value is less the amortization figure of 3000 hence =48000-3000=45000
Note 12,
Provision For employee benefit was 93000 but out of it they paid 62000 thus the balance=93000-62000=31000
Note 13,
Current tax payable=25000-6000=19000
2.Use of direct Method Reid (2017, Pg 11)
Cooper Incl
Statement of Cash-flow
For The Year Ended December 31st 2017
Cash-flow From Operating Activities (IAS7.10)
Trade receivable (sales on credit) increase (30000)
Allowance for doubtful debt increase (3000)
Increase in inventory (22000)
Increase in accounts payable 10000
Accrued interest increase 2000
Income tax paid (IAS7.35) (24000)
Net cash operated by operating activities (67000)
Cash flow from investing activities (IAS7.10)
Purchase of PPE (20000)
Investment (7000)
Net cash from investing activities (27000)
Cash flow from financing activities (IAS7.10)
Increase in borrowings 20000
Deferred tax 7000
Interest expense (IAS7.31) (7000)
Retained Earnings increase 25000
Profit for the year 58000
Dividend (IAS 7.31) (33000)
Current investment revaluation (7000)
Accrued interest expense (7000)
Investment revaluation reserve (5000)
Net Cash flow from financing activities 13000
Net increase/decrease in cash =79000-67000-27000= (15000)
Cash balance brought down (IAS7.45) 4500
Ending Cash Balance 35000
Use of indirect method; Bradbury (2011.Pg 130)
Cooper Inch
Statement of Cash-flow
For The Year Ended December 31st 201
Operating activities ;( IAS7.10)
Profit before tax 82000
Add Non cash adjustment
Interest expense 7000
Net changes in working capital (note14) (45000)
Taxes reclaimed (IAS7.35) 24000
Net cash from operating activity 68000
Investing Activities
Purchase of PPE (20000)
Investment (7000)
Net cash from investing activities (27000)
Financing activities
Increase in borrowings 20000
Deferred tax 7000
Interest expense (7000)
Current tax payable (15000)
Retained earnings sent (63000)
Dividend paid (33000)
Investment revaluation reserve (5000)
Net cash from financing activities (96000)
Net cash from all activities 68000-27000-96000 (55000)
Add cash and cash equivalents b/d (IAS7.45) 45000
Cash and cash equivalent C/F (Note 15) 35000
Guidance notes on preparation of cash flow statement
Note 14;
Trade receivable (sales on credit) increase (30000)
Allowance for doubtful debt increase (3000)
Increase in inventory (22000)
Increase in accounts payable 10000
Changes in working capital (45000)
According to IAS 7 flow of cash is presented in two different methods, i.e. one is direct the other one is indirect.
Note 15,
According to IAS 7.46, cash equivalents are the end result of cash flow where it entails the cash at hand and deposits made as well as short term convertible notes that are highly liquid
References;
Akhmetshin, E.M. and Osadchy, E.A., 2015. New requirements to the control of the maintenance of accounting records of the company in the conditions of the economic insecurity. International Business Management, 9(5), pp.895-902.
Bradbury, M., 2011. Direct or indirect cash flow statements?. Australian Accounting Review, 21(2), pp.124-130.
Bradbury, M.E., 2016. Discussion of ‘other comprehensive income: a review and directions for future research’. Accounting & Finance, 56(1), pp.47-58.
Gazzola, P. and Amelio, S., 2014. Is total comprehensive income or net income better for the evaluation of companies’ financial performance?.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.
Maynard, J., 2017. Financial Accounting, Reporting, and Analysis. Oxford University Press.
Reid, W. and Myddelton, D.R., 2017. Cash flow statement. In The Meaning of Company Accounts (pp. 16-16). Routledge.
Robinson, T.R., Henry, E., Pirie, W.L. and Broihahn, M.A., 2015. International financial statement analysis. John Wiley & Sons.
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