ACACT203A S1 2022 Assessment Case Study - Desklib

This report consists of financial statement of Tempest holdings limited who has commenced its operations on 1 July 2020 which comprises of balance sheet, profit and loss account, statement of changes in equity, cash flow statement and notes to accounts.

ACACT203A S1 2022
ASSESSMENT CASE
STUDY

Contents
INTRODUCTION...........................................................................................................................2
TASK...............................................................................................................................................2
1.Preparation of Preliminary Trial Balance:...........................................................................2
2.Statement of Comprehensive Income:.................................................................................4
3.Statement of Financial position:..........................................................................................5
4.Statement of Changes in Equity:.........................................................................................6
5.Appropriate Notes to Accounts:..........................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Financial statement plays the significant role in the success of the organisation as it depicts
the positioning of the organisation in the market as well as industry. The financial statements are
the summary level reports that shows the financial results, financial position and cash flows of
the organisation. This report consists of financial statement of Tempest holdings limited who has
commenced its operations on 1 July 2020 which comprises of balance sheet, profit and loss
account, statement of changes in equity, cash flow statement and notes to accounts. These
statements are being prepared by complying with Australian accounting standards and their
respective rules. The main purpose of these statements is to evaluate the financial position of the
corporate in the market so that investor who are willing to invest in the organisation can clearly
understand the position of the organisation in the market (Amir and Ghitti, 2021).
TASK
1.Preparation of Preliminary Trial Balance:
The preliminary trial balance has been prepared with the help of general ledger account
before making adjustments in the books. Trial balance helps the organisation in detecting any
mathematical errors that has been occurred when the books are prepared using double entry
system. When both the balances are equal in the books that is debit and credit then it will be
considered as trail balance is balanced and it is assumed that there are no mathematical errors in
the books of accounts. Further the trail balance is of three types that is adjusted trail balance,
unadjusted trail balance and post closure trial balance. The following is the trail balance of
Tempest holdings limited for the year ending 30th June 2021 mentioned below:
Tempest Holdings Ltd - Trial Balance as at
30 June 2021 DR CR
$’000 $’000
Sales 962000
Cost of sales 601000
Selling expense 82000
Administration expense 26000
Wages and salaries expense 120000
Employee entitlements expense 5000
Interest expense 10000
Interest revenue 3000

Depreciation expense 34000
Doubtful debts expense
Plant and machinery 150000
Freehold land 60000
Buildings 80000
Debentures (10% , 5 year) 60000
Inventory 46000
Accounts receivable 54000
Allowance for doubtful debts (≡Allowance
for impairment) 8000
Accrued employee entitlements
Accumulated depreciation- plant and
machinery
Accumulated depreciation- buildings
Goodwill 80000
Accounts payable 30000
Bank loan 100000
Bank overdraft 4000
Cash at bank 194000
Share capital 250000
Income tax expense
Income tax payable
Deferred tax asset
Deferred tax liability 6000
Dividend payable
Asset revaluation reserve/revaluation surplus 14000
Plant maintenance reserve
Retained earnings (before closing entries) 233000
Total 1606000 1606000
2.Statement of Comprehensive Income:
The statement of comprehensive income is the income statement that forms part of
financial statement that summarized both net income of the organisation and other
comprehensive income also known as OCI. The net income has been arrived by preparation of

the income statement and other comprehensive income includes unrealized gains that has not
been included in the income statement directly. Comprehensive income statement is considered
to be the wider statement and has been used by various organisation carrying their business in
multiple countries (Angilella and Morelli, 2021). The examples of items that becomes part of
comprehensive income is being gain or loss arises on retirement programs, adjustments relating
to transaction entered in foreign currency, gain or loss on derivative instrument, unrealized profit
or loss on securities available for sale etc. The statement of profit and loss statement of Tempest
holdings limited are mentioned below: -
Profit and loss statement of Tempest Holdings Limited for the year ended 30th June 2021
Particular Amount
Revenue 962000
Interest Income 3000
Less Cost of Sales 601000 364000
Gross Profit 364000
Less Operating Expenses
Selling and distribution Expenses 82000
Administration Expenses 26000
Payment of Wages and Salaries 120000
Employee Entitlements Expenses 5000
Payment of Interest 10000
Depreciation 34000 277000
Net Profit Before tax 87000
Less : Tax@ 30 % 26100
Net Profit After Tax 60900

3.Statement of Financial position:
The balance reflects the position of assets and liabilities of the organisation as on data that
is 31st march or 31st December depending upon the period for which the books are being prepared
by the organisation. The major heading while preparing balance sheet are being. Current assets,
non-current assets, equity, non-current liability and current liability. The balance reflects the
positioning of the company in the market and on such basis the investor trust on them and invest
their funds in the company. Therefore, it plays the very important role in the success and failure
of the business as it shows their true picture to its connected stakeholders (Antysheva, Pronina,
and Fedotovskaya, 2018). The following is the balance sheet of Tempest holdings limited for the
period ending 30th June 2021 are mentioned below:
Consolidated Balance sheet of Tempest Limited as of 30th June 2021
PARTICULARS
Non-current assets:
Plant and Machinery at Cost 150000
Less Depreciation 30000 120000
Free Hold land 60000
Building at Cost 80000
Less Depreciation 4000 76000
Investment in Debentures 60000
Goodwill 80000
Current assets
Inventory 46000
Accounts Receivable 54000
Cash at Bank 194000
Total A 690000
Non-current liabilities
Deferred tax liability 6000
Other non-current liability 22100
Bank Loan 100000
Current liabilities
Bank Overdraft 4000

Equity:
Share Capital 250000
Retained earnings Opening Balance 233000
Add: Current Year Profits 60900 293900
Revaluation Reserve 14000
Total B 690000
4.Statement of Changes in Equity:
Statement of changes in equity shows the reconciliation between the opening and closing
balance of shareholder’s equity which has been reflected in the financial statements of the
organisation. These are the part of the financial statement that summarises all the transactions
that has been taken place during the whole accounting period. This report shall consist of
changes or movement that has been taken place in retained earnings, changes that has been taken
place in share capital by way of issue of new shares or buy back of shares, payment that has been
made to shareholders in the form of dividends etc. are covered. The need of statement of changes
in equity arises because the actual movement that has been taken place in equity throughout the
year cannot be calculated by other statements as they show only opening and closing balance of
the equity from one accounting period to another (Bâtcă-Dumitru, Sahlian, and Șendroiu, 2022).
Since there is no change in the equity from the beginning of the accounting year which is around
$250000 at the time of issue of shares and remain the same at the end of the accounting period.
5.Appropriate Notes to Accounts:
The notes of accounts consist of complete details relating to the information relating to
balance sheet items mentioned in the financial statements. These notes consist of the significant
accounting policies that is followed by the organisation, the commitment made by the entity to
their suppliers and customers, complete breakup of sales volume, purchases that has been made,
complete details of assets and liabilities hold by the entity which includes sale and purchase of
assets as well, the profits and loss of potential nature etc. are being recorded. The information
mentioned in notes plays the vital role as such information is studied by the investors or other
stakeholders connected with the entity and whose funds are invested in the business. Those

investors who only consider books of accounts and ignores notes will be easily mislead as main
crux of organisations performance lies in the notes to accounts. The length of the notes is
sometimes too long but they should give equal importance rather than under value them in
analysing the financial figures of the corporation (Gamarra Rupa, 2020).
CONCLUSION
Financial statement is the integral part of the organisation as it shows the performance of the
entity throughout the year. The financial statements consist of statement of financial position,
statement of financial performance, cash flow statements and notes to accounts. The above report
consists of the financial statements of Tempest holdings limited which are being prepared by
complying with accounting standards that has been implemented in Australia. Tempest holdings
commenced their business operation on 1st July 2020 by acquiring another organisation carrying
out the same business they are carrying for $350000. The above statement shows the accounting
treatment of all the transactions they have been carried out throughout the year in the form of
books of accounts.

REFERENCES
Books and Journals
Amir, E. and Ghitti, M., 2021. Financial Analysis of Mergers and Acquisitions: Understanding
Financial Statements and Accounting Rules with Case Studies. Springer Nature.
Angilella, S. and Morelli, D., 2021. Are the stock prices influenced by the publication of the
annual financial statements? Evidence from the Dow Jones Industrial
Average. Operational Research, 21(2), pp.1031-1040.
Antysheva, E.R., Pronina, A.M. and Fedotovskaya, E.Y., 2018. Development of a methodology
for reporting information on valuation obligations in financial statements. Components
of Scientific and Technological Progress, (1), pp.30-35.
Bâtcă-Dumitru, C.G., Sahlian, D.N. and Șendroiu, C., 2022. The General Budget and the
Provisional Financial Statements. CECCAR Business Review, 3(1), pp.9-16.
Gamarra Rupa, J.V., 2020. P145057 PASO 2018 Audited Financial Statements.
Isai, O. and Chuk, O., 2022. The Organization of Analytical Procedure for Assessing the Tax
Efficiency of the Company According to the Financial Statements for
Digitalization. Digital Science: DSIC 2021, 381, p.332.
Lessambo, F.I., 2020. Commercial Banks’ Financial Statements. In The US banking system (pp.
243-258). Palgrave Macmillan, Cham.
Manuja, A., 2020. P159512 Audited Financial Statements 2017-2019.
Murphy, G.J., 2020. The Financial Statements: Form and Format. In A History of Canadian
Accounting Thought and Practice (pp. 95-106). Routledge.
Ukpong-Bassey, C.A., 2020. 2019 EKITI NUWSRP WATER3 AUDITED FINANCIAL
STATEMENTS MERGED.