|
KLZR LIMITED |
||
|
Statement Of Profit/Loss And Other Comprehensive Income |
||
|
Particulars |
Notes |
Amount |
|
Sales revenue |
9,97,000 |
|
|
Dividend revenue |
7,000 |
|
|
Interest revenue |
3,000 |
|
|
Revenue |
|
10,07,000 |
|
Cost of sales |
3,55,000 |
|
|
Gross Profit |
|
6,52,000 |
|
Administrative Expenses |
1 |
89,000 |
|
Selling and distribution expenses |
2 |
2,18,000 |
|
Finance Cost |
32,000 |
|
|
Impairment of non-current asset |
5,000 |
|
|
Other Expenses |
3 |
1,52,000 |
|
Profit Before Tax |
|
1,56,000 |
|
Income tax Expense |
61,000 |
|
|
Profit for the year |
|
95,000 |
|
Other comprehensive income |
– |
|
|
Total Comprehensive Income for the year |
|
95,000 |
|
Profit attributable to |
||
|
Owners of the company |
95,000 |
|
|
Non-controlling interest |
– |
|
|
Total comprehensive income attributable to |
||
|
Owners of the company |
95,000 |
|
|
Non-controlling interest |
– |
|
|
Earnings per share |
4 |
0.24 |
Notes:
|
1. Administrative |
|
|
Depreciation |
|
|
– Motor Vehicles |
20,000 |
|
– Plant and Equipment |
10,000 |
|
Salaries |
44,000 |
|
Rental expenses |
15,000 |
|
Total |
89,000 |
|
2. Selling and distribution |
|
|
Depreciation |
|
|
– Motor Vehicles |
25,000 |
|
– Plant and Equipment |
36,000 |
|
Salaries |
60,000 |
|
Selling expenses |
97,000 |
|
Total |
2,18,000 |
|
3. Other expenses |
|
|
Auditor remuneration |
36,000 |
|
Doubtful debts |
8,000 |
|
Office expenses |
92,000 |
|
Bad debt recovered |
-26,000 |
|
Loss on destruction of building |
42,000 |
|
Total |
1,52,000 |
|
4. Earnings per Share |
|
|
Total Earnings for the year |
95,000 |
|
Total number of shares outstanding |
4,00,000 |
|
EPS |
0.24 |
|
KLZR LIMITED |
|||||
|
Statement Of Changes In Equity |
|||||
|
Particulars |
Share capital |
Retained earnings |
General Reserve |
Revaluation Surplus |
Total equity |
|
$ |
$ |
$ |
$ |
$ |
|
|
Balance at 1 July 2017 |
4,00,000 |
2,25,000 |
15,000 |
– |
6,40,000 |
|
Changes in equity for the year 2017-18 |
|||||
|
Transfer |
– |
(25,000) |
25,000 |
– |
– |
|
Dividends |
– |
(65,000) |
– |
– |
(65,000) |
|
Income for the year |
– |
95,000 |
– |
– |
95,000 |
|
Revaluation gain |
– |
– |
– |
20,000 |
20,000 |
|
Balance at 30 June 2018 |
4,00,000 |
2,30,000 |
40,000 |
20,000 |
6,50,000 |
Other explanations:
- The auditors fee mentioned as a part of other expense include $ 16000 towards fee for management consulting services
- Dividend declared by the management would be should under payable in the current liabilities section of the balance sheet
- Impairment of goodwill has been shown as a spate line item in the profit and loss statement
There is a gap between the balance sheet date and signing of balance sheet date. During this period any events might take place which might affect the financials of the last year. Adjusting events are those events for which conditions exist on the balance sheet date for which adjustments in the balance sheet are required. (Fridson & Alvarez, 2012)Any important events which occur between these two dates for which the conditions exist on balance sheet date would require adjustments in the books of account. (Ramírez, 2018)Any other non-adjusting event if important will be required to be mentioned in the notes to account. Any event occurring after the balance sheet date that might be favourable for the company need not be mentioned in the financials. (Girard, 2014)If any adjusting event occurs which might affect the going concern assumption of the entity, then such events needs to be reported in the financial. If the assumption of going concern is harmed, then the financials needs to be made in the format specified by the standards in connection with the same. (Ittelson, 2009)
In the given scenario the balance sheet date is 30th June and on 20th august that has been finalised. Any important events which occur between these two dates for which the conditions exist on balance sheet date would require adjustments in the books of account. (Kuti, 2014)We have been provided with few events of Utar Ltd. we have classified the same as adjusting and non adjusting events and the treatment in such circumstances:
- The company holds the shares of the listed company which are recorded at market price. (Lerner, 2009)A considerable decline in value of investments before signing of the books requires making of a provision for diminution in value of these investments. Since the company holds the shares of the publically listed company as on the balance sheet date and there are events after such date that are likely to affect the financials, this event will be classified as an adjusting event and appropriate adjustments in the books shall be made. The following journal shall be passed:
|
Date |
Particulars |
Dr Amt |
Cr Amt |
|
30-06-2018 |
Profit and Loss |
50000 |
|
|
To Investment Fluctuation Reserve |
50000 |
||
|
(Being provision for decline in value of investments of Binnie Ltd accounted for) |
- The provision for debtors was made at 50%, but on 10thAugust it was sure that no amount can be recovered from them. The management should provide for the whole amount of the debtor as provision. Since the company had Fancy Ltd as there debtors as on the balance sheet date and there are events after such date that is likely to affect the financials, this event will be classified as an adjusting event and appropriate adjustments in the books shall be made. The following journal shall be passed:
|
Date |
Particulars |
Dr Amt |
Cr Amt |
|
30-06-2018 |
Profit and Loss |
400000 |
|
|
To Provision for Doubtful Debts |
400000 |
||
|
(Being Provision for doubtful debt increased for Fancy Ltd) |
- The company has an outstanding loan in foreign currency. Any major fluctuations in the currency rate will affect the position of the company. (McLaney & Adril, 2016)Before the finalisation of the balance sheet a major shift in the currency rate was witnessed which increased the company’s liability by A$10105. Since the company had the foreign currency loan as on the balance sheet date and there are events after such date that is likely to affect the financials, this event will be classified as an adjusting event and appropriate adjustments in the books shall be made. The following journal shall be passed:
|
Date |
Particulars |
Dr Amt |
Cr Amt |
|
30-06-2018 |
Profit and Loss |
10105 |
|
|
To Foreign Currency Fluctuation Reserve |
10105 |
||
|
(Being reserve created for fluctuations in foreign currency) |
- Charging of lesser depreciation in order to arrive at higher profits is a wrong. The fixed assets should be appropriately depreciated and they should be valued at fair value.(Piper, 2015) In the given case the fixed assets should be valued at $1150000. Since the company had these fixed assets as on the balance sheet date and there are events after such date that is likely to affect the financials, this event will be classified as an adjusting event and appropriate adjustments in the books shall be made. The following journal shall be passed:
|
Date |
Particulars |
Dr Amt |
Cr Amt |
|
30-06-2018 |
Depreciation |
350000 |
|
|
To Plant and Equipment |
350000 |
||
|
(Being under charged depreciation accounted for) |
|
In the books of TARA Limited |
|||
|
Journal |
|||
|
Date |
Particulars |
Dr amt |
Cr amt |
|
01-Aug-17 |
No entry |
||
|
30-Sep-17 |
Bank |
156,00,000 |
|
|
To Share Application |
156,00,000 |
||
|
(Being Share application money received for 5200000 shares at $3 each) |
|||
|
10-Oct-17 |
Share Application |
6,00,000 |
|
|
To Bank |
6,00,000 |
||
|
(Being money received for extra application on 200000 shares refunded) |
|||
|
10-Oct-17 |
Share Application |
150,00,000 |
|
|
To Share Capital |
150,00,000 |
||
|
(Being amount received on application transferred to share capital account) |
|||
|
10-Nov-17 |
Bank |
100,00,000 |
|
|
To Share Allotment |
100,00,000 |
||
|
(Being Share allotment money received for 5000000 shares at $2 each) |
|||
|
28-Feb-18 |
Bank |
49,00,000 |
|
|
To Share Call |
49,00,000 |
||
|
(Being Share call money received for 4900000 shares at $1 each) |
|||
|
14-Mar-18 |
Share Capital |
5,00,000 |
|
|
To Share Forfeiture |
5,00,000 |
||
|
(Being money received for 100000 shares forfeited for non receipt of call money) |
|||
|
14-Mar-18 |
Bank |
5,30,000 |
|
|
Share forfeiture |
70,000 |
||
|
To Share Capital |
6,00,000 |
||
|
(Being Shares forfeited reissued at $5.3 per share) |
|||
|
14-Mar-18 |
Share forfeiture |
4,30,000 |
|
|
To Bank |
4,30,000 |
||
|
(Being remaining money in forfeiture account refunded to former shareholders) |
Calculation of amount to be forfeited:
No of shares on which call not paid = 100000
Monies already received on these shares = 3+2 =5 per share
Total amount received on forfeited shares = 100000*5 = 500000
Calculation of amount to be refunded:
Total money forfeited = 500000
Less: Loss on reissue of forfeited shares = 70000
Amount to be refunded to former shareholders = 500000-70000 =430000
|
In the books of Companion Ltd |
|||
|
Journal |
|||
|
Date |
Particulars |
Dr amt |
Cr amt |
|
01-07-2016 |
Machine |
1,90,000 |
|
|
To Bank |
1,90,000 |
||
|
(Being Machine purchased for $190000) |
|||
|
30-06-2017 |
Accumulated Depreciation |
30,000 |
|
|
To Machine |
30,000 |
||
|
(Being depreciation for the year charged) |
|||
|
30-06-2017 |
Revaluation Reserve |
10,000 |
|
|
To Machine |
10,000 |
||
|
(Being machine revalued at year end) |
|||
|
30-06-2017 |
Deferred tax asset |
3,000 |
|
|
To Profit & Loss |
3,000 |
||
|
(Being deferred tax asset created on tax bas due to revaluation) |
|||
|
30-06-2018 |
Accumulated Depreciation |
28,800 |
|
|
To Machine |
28,800 |
||
|
(Being depreciation for the year charged) |
|||
|
30-06-2018 |
Machine |
18,800 |
|
|
To Revaluation Reserve |
18,800 |
||
|
(Being machine revalued at year end) |
|||
|
30-06-2018 |
Deferred tax asset |
12,000 |
|
|
To Profit & Loss |
12,000 |
||
|
(Being deferred tax asset created on tax bas due to revaluation (15000-3000)) |
|
Year |
Opening value of Block |
Depreciation for the year |
Value after depreciation |
Revaluation |
Total Block- Closing |
|
2016-2017 |
1,90,000 |
30,000 |
1,60,000 |
-10,000 |
1,50,000 |
|
2017-2018 |
1,50,000 |
28,800 |
1,21,200 |
18,800 |
1,40,000 |
|
Particulars |
As per accounting record |
As per taxable record |
Tax Base |
|
Value of Asset on 01.07.2016 |
1,90,000 |
1,90,000 |
|
|
Less: Depreciation |
-30,000 |
30,000 |
|
|
Less: Revaluation |
-10,000 |
– |
|
|
Closing Value on 30.06.2017 |
1,50,000 |
1,60,000 |
-10,000 |
|
Value of Asset on 01.07.2017 |
1,50,000 |
1,60,000 |
|
|
Less: Depreciation |
-28,800 |
-30,000 |
|
|
Add: Revaluation |
18,800 |
– |
|
|
Closing Value |
1,40,000 |
1,90,000 |
-50,000 |
|
DTA on 30.06.2017 |
10000*30% |
3000 |
|
|
DTA on 30.06.2018 |
50000*30% |
15000 |
In the above solution we have assumed that the depreciation charged charges under tax laws is on straight line basis.
Fridson, M., & Alvarez, F. (2012). Financial Statement Analysis: A Practitioner’s Guide. New York: John Wiley & Sons.
Girard, S. L. (2014). Business finance basics. Pompton Plains, NJ: Career Press.
Ittelson, T. (2009). Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports. Franklin Lakes, N.J.: Career Press.
Kuti, M. (2014). Crowdfunding: How to Fund Your Business Idea. Retrieved from www.business.gov.au: https://www.business.gov.au/info/run/finance-and-accounting/finance/crowdfunding-how-to-fund-your-business-idea
Lerner, J. J. (2009). Schaum’s outline of principles of accounting. New York: Schaum.
McLaney, E., & Adril, D. P. (2016). Accounting and Finance: An Introduction. United Kingdom: Pearson.
Piper, M. (2015). Accounting made simple. United States: CreateSpace Pub.
Ramírez, C. Z. (2018). The Impact of IFRS 16 on Key Financial Ratios: A New Methodological Approach. Accounting in Europe .
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