Accounting Report on Financial Statements, Depreciation Methods, and Inventory Methods

This report discusses financial statements, different methods of depreciation, and inventory methods in accounting. It also covers internal control mechanisms and provides a conclusion.

ACCOUNTING 1
ACCOUNTING

ACCOUNTING 2
Contents
Introduction:...............................................................................................................................3
Financial statements:..................................................................................................................4
Financial Report:......................................................................................................................16
Different method of depreciation:........................................................................................18
Inventory methods:...............................................................................................................19
Internal control mechanisms:...............................................................................................19
Conclusion:..............................................................................................................................19
References:...............................................................................................................................20

ACCOUNTING 3
Introduction:
This report talks about the transactions that have been entered into during the year. It further
shows the various calculations with regard to the drawing of the T accounts, journal entries,
closing entries, drawing of the financial statements etc.
Then the report talks about the various depreciation method that could be used, their
advantages and disadvantages. Also, the inventory method and their impact over the financial
position of the company.

ACCOUNTING 4
Financial statements:
TRANSACTIONS
Date Details
Jul-17 2 Business established with contribution from A Stanlee of $100,000 cash.
5
Purchased inventory on credit from SuperStock. Purchased 25x Mermaid Fountains
for $349 each (not incl GST) and 12x Kingseat Garden Benches for $275 each (not
incl GST).
Aug 2 Bought office furniture (asset) from Smart Mart, on credit, for $33 000 (incl GST).
Aug 18 Bought general supplies for the office for $665.50 (incl GST). Paid with cash.
Aug 29 Paid Super Stock account in full for July purchases.
Sept 4
Sold 10x Mermaid Fountains on credit to Garden Solutions for $10 516 (gross
total). Credit terms 4/15 n60.
Sept 16 Received payment from debtor of Sept 4 (4% discount applies).
Sept 29 Sold 3x Kingseat Benches for $3 135 cash (incl GST).
Oct 2
Paid cash for insurance Invoice in the amount of $2750. (Invoice amount covers
insurance for 12months - 1 Oct 17-30 Sept 18, and includes GST)
Oct 9
Performed services including delivery and installation for $1870 (incl GST) on
credit to customers.
Oct 12
Purchased inventory from SuperStock: 10x Mermaid Fountains for $360 each (not
incl GST). Paid with cash.
Nov 5 Paid Super Realty rent for July to October - paid cash $1232 (incl GST).
Nov 7
Sold 6x Mermaid Fountains on credit to Bank Botanicals for $6 479 (incl GST).
Credit terms 3/30 n60

ACCOUNTING 5
Dec 2
Received full payment from Bank Botanicals for sale of 7 Nov (3% discount
applies).
Jan-18 1
Paid $27 500 (incl GST) on credit for a Toyota van (asset). The van will have a
residual value of $6000 at the end of its effective life.
Feb 22 Purchased 4x Kingseat Benches for $1 200 total (not incl GST) on credit.
Mar 5 Paid Super Realty rent for November to February - paid cash $1232 (incl GST).
Mar 31
Sold inventory: 2x Mermaid Fountains and 6x Kingseat Benches for a total of
$14,190 (incl GST) cash.
June 6
Paid fortnightly wages: office assistant, T Frankenstand received $970 (net pay)
(PAYG $172).
June 20
Paid fortnightly wages: Frankenstand received $970 (net pay) (PAYG $172); and M
Spiders received $448 (net pay) (PAYG amount $21).
June 27 A. Stanlee withdrew $4500 from the business for private travel.
GENERAL JOURNAL
Date Details Debit Credit
July 2 Cash at bank 1,00,000.00
A Stanlee, Capital 1,00,000.00
A Stanlee contributes cash to the business
July 5 Purchases 12,025.00
Account payable 12,025.00
(Purchased raw material)
Aug 2 Office furniture 30,000.00
GST 3,000.00
Cash 33,000.00

ACCOUNTING 6
Purchased office furniture
Aug 18 General supplies 598.95
GST 66.55
Cash 665.50
Purchased general supplies
Aug 29 Accounts payable
Cash 33,000.00
Paid for purchase of inventory 33,000.00
Sep 4 Accounts receivables 10,516.00
Sales 9,560.00
GST 956.00
Sales made
Sep 16 Cash 10,095.36
Accounts receivables 10,095.36
Cash received in respect of sales made
Sep 29 Cash 3,135.00
Sales 2,850.00
GST 285.00
Sales made
Oct 2 Prepaid insurance 2,475.00
GST 275.00
Cash 2,750.00
Amounts paid towards insurance
Oct 9 Accounts receivables 1,870.00
Sales 1,700.00

ACCOUNTING 7
GST 170.00
Sales revenue generated
Oct 12 Purchases 3,600.00
Cash 3,600.00
Purchases made
Nov 5 Rent expense 1,108.80
GST 123.20
Cash 1,232.00
Paid rent
Nov 7 Accounts receivables 6,479.00
Sales 5,890.00
GST 589.00
Sales revenue generated
Dec 2 Cash 6,284.63
Accounts receivables 6,284.63
Cash received in respect of sales made
Jan 1 Van 24,750.00
GST 2,750.00
Cash 27,500.00
Purchased van
Feb 22 Purchases 1,200.00
Account payable 1,200.00
(Purchased raw material)
Mar 5 Rent expense 1,120.00
GST 112.00

ACCOUNTING 8
Cash 1,232.00
Paid rent
Mar 31 Cash 14,190.00
Accounts receivables 14,190.00
Cash received in respect of sales made
Jun 6 Wage expense 970.00
PAYG 172.00
Cash 1,142.00
Paid wages
Jun 20 Wage expense 1,418.00
PAYG 193.00
Cash 1,611.00
Paid wages
Jun 27 Drawings 4,500.00
Cash 4,500.00
Withdrawings
2,76,027.49 2,76,027.49
GENERAL JOURNAL - Adjustments 30 June 18

ACCOUNTING 9
Date Details Debit Credit
ADJUSTMENTS:
a Supplies expense 365.0
0
Supplies 365.0
0
( adjustment for supplies used)
b Wages Expense 1,611.0
0
Wages Payable 1,611.0
0
(adjustment for wages)
c Insurance expense 2,062.5
0
Prepaid insurance 2,062.5
0
(adjustment for insurance)
d Provision for doubtful debts 37.4
0
Accounts receivable 37.4
0
(adjustment for doubtful debts)
e Depreciation expense 13,375.0
0
Accumulated depreciation-furniture 9,075.0
0
Accumulated depreciation-vehicle 4,300.0
0
(record depreciation expense)
f Loss on inventory 680.0
0
Inventory 680.0
0
(to record the inventory damage)
g Rent expense 1,232.0
0
Rent payable 1,232.0
0
(to record rent payable)
19,362.90 19,362.90
GENERAL JOURNAL - Closing at 30 June 18
Date Details Debit Credit
CLOSING ENTRIES:
June
Sales Revenue 31,752.60
Sales Discount
-
615.01
Service Revenue 1,870.00

ACCOUNTING 10
P&L Closing Account
33,007.59
(Close all Revenue / Cr A/c's)
P&L Closing
41,339.91
Cost of goods sold
Discount allowed
16,145.00
Rent expense
615.01
Wages expense
3,696.00
PAYG expense
3,999.00
Insurance expense
365.00
Depreciation expense
2,062.50
Supplies expense
13,375.00
Loss on inventory
365.00
Provision for doubtful debts
680.00
Drawings
37.40
Retained earnings 4,500.0
0
Drawings
4,500.00
78,847.50 78,847.50

ACCOUNTING 11
Details Debit Credit Balance Details Debit Credit Balance Details Debit Credit Balance Details Debit Credit Balance Details Debit Credit Balance
July 2 $ 1,00,000.00 ########## - $1,00,000.00 1,00,000.00 Sep 4 Accounts receivables 10,516.00 10,516.00 Oct 12 Purchases $ 3,600.00 3,600.00
Aug 2 Office furniture 33,000.00 67,000.00 Jun 30 Wages 1,611.00 1,611.00 1,00,000.00 Sep 29 Cash 3,135.00 13,651.00 Feb 22 Purchases $ 1,200.00 4,800.00
Aug 18 General supplies $ 665.00 66,335.00 1,611.00 1,00,000.00 Sep 4 Cash $ 10,516.00 24,167.00 4,800.00
Aug 29 Accounts payable 33,000 99,335.00 1,611.00 1,00,000.00 Oct 9 Accounts receivables 1,870.00 26,037.00 4,800.00
Sep 16 Sales 10,095 ########## 1,611.00 1,00,000.00 Nov 7 Accounts receivables 6,479.00 32,516.00 4,800.00
Sep 29 Sales 3,135 ########## 1,611.00 1,00,000.00 32,516.00 4,800.00
Oct 2 Prepaid insurance 2,750.00 ########## 1,611.00 1,00,000.00 32,516.00 4,800.00
Oct 12 Purchases 3,600.00 ########## 1,611.00 1,00,000.00 32,516.00 4,800.00
Nov 5 Rent 1,232.00 ########## 1,611.00 1,00,000.00 32,516.00 4,800.00
Dec 2 Accounts receivables 6,285 ########## 1,611.00 1,00,000.00 32,516.00 4,800.00
Jan 1 Van 27,500.00 83,767.99 1,611.00 1,00,000.00 32,516.00
Mar 5 Rent 1,232.00 82,535.99 1,611.00 1,00,000.00 32,516.00
Mar 31 Accounts receivables 14,190 96,725.99 1,611.00 1,00,000.00 32,516.00
Jun 6 Wages 1,142.00
Jun 20 Wages 1,611.00
Jun 27 Drawings 4,500.00
96,725.99
Details Debit Credit Balance Details Debit Credit Balance Details Debit Credit Balance Details Debit Credit Balance Details Debit Credit Balance
- - Jun 27 Cash 4,500.00 - Nov 5 Cash $ 1,232.00 1,232.00
July 5 Purchases $ 12,025.00 12,025.00 July 5 Purchases 12,025.00 12,025.00 - Mar 5 Cash $ 1,232.00 2,464.00
Jun 30 Loss on inventory $ 680.00 11,345.00 Aug 29 Cash 33,000 - 20,975.00 - Jun 30 Rent payable 1,232 3,696.00
11,345.00 Feb 22 Purchases 1,200 - 22,175.00 - 3,696.00
11,345.00 - 22,175.00 - 3,696.00
11,345.00 - 22,175.00 - 3,696.00
11,345.00 - 22,175.00 - 3,696.00
11,345.00 - 22,175.00 - 3,696.00
Details Debit Credit Balance Details Debit Credit Balance Details Debit Credit Balance
- - Mar 5 Cash $ 1,142.00 1,142.00
Aug 2 Cash $ 33,000.00 33,000.00 Jun 30 Depreciation 9,075.00 9,075.00 Jun 6 Cash $ 1,611.00 2,753.00
33,000.00 9,075.00 Jun 30 Wages payable $ 1,611.00 4,364.00
33,000.00 9,075.00 4,364.00
33,000.00 9,075.00 4,364.00
33,000.00 9,075.00 4,364.00
33,000.00 9,075.00 4,364.00
33,000.00 9,075.00 4,364.00
Details Debit Credit Balance Details Debit Credit Balance Details Debit Credit Balance
- - Jun 30 Supplies $ 365.00 365.00
Aug 18 Cash $ 665.00 665.00 Jun 30 Depreciation 4,300.00 4,300.00 365.00
Jun 30 Expense $ 365.00 300.00 4,300.00 365.00
300.00 4,300.00 365.00
300.00 4,300.00 365.00
300.00 4,300.00 365.00
300.00 4,300.00 365.00
300.00 4,300.00 365.00
Details Debit Credit Balance Details Debit Credit Balance Details Debit Credit Balance
- - Jun 30 Insurance $ 2,062.50 2,062.50
Sep 4 Sales $ 10,516.00 10,516.00 Jun 30 Rent expense 1,232.00 1,232.00 2,062.50
Sep 16 Sales 10,095 20,611.36 1,232.00 2,062.50
Oct 9 Sales 1,870 22,481.36 1,232.00 2,062.50
Nov 7 Sales 6,479 28,960.36 1,232.00 2,062.50
Dec 2 Cash 6,284.63 22,675.73 1,232.00 2,062.50
Mar 5 Cash 14,190.00 8,485.73 1,232.00 2,062.50
Jun 30 Provision for doubtful debts 37.40 8,448.33 1,232.00 2,062.50
Details Debit Credit Balance Details Debit Credit Balance
- Jun 30 Accounts receivables 37.40 -
Oct 2 Cash $ 2,750.00 2,750.00 -
Jun 30 Insurance $ 2,062.50 687.50 -
687.50 -
687.50 -
687.50 -
687.50 -
687.50 -
Details Debit Credit Balance Details Debit Credit Balance
- Jun 30 Acumulated depreciation $ 13,375.00 13,375.00
Jan 2 Cash $ 27,500.00 27,500.00 13,375.00
27,500.00 13,375.00
27,500.00 13,375.00
27,500.00 13,375.00
27,500.00 13,375.00
27,500.00 13,375.00
27,500.00 13,375.00
Details Debit Credit Balance
Jun 30 Inventory $ 680.00 680.00
680.00
680.00
680.00
680.00
680.00
680.00
680.00
Depreciation expense
Date
Loss on inventory
Date
Rent payable
Date Date
Provision for doubtful debts
Date
accumulated dep-furniture
Date
accumulated dep-van
Date
Wage expense
Date
Supplies expense
Date
Insurance expense
Date
Prepaid insurance
Date
Van
Date
Office furniture
Date
General supplies
Date
Accounts receivables
Wages Payable
Date
LIABILITIES EQUITY
A Stanlee, Capital
Date
GENERAL LEDGER
Inventory Accounts payable A Stanlee, Drawings Rent expense
REVENUE
Sales Revenue
Date
Cost of Goods Sold
Date
EXPENSES
Date
Cash at Bank
ASSETS
Date Date Date Date Date
Trial Balance
As At 30/6/2017
Account Name Dr Cr
Cash at Bank 1,04,947.99
Office funiture 29,700.00
GST 799.10
Supplies 598.50
Accounts receivables 1,870.00
Prepaid insurance 2,750.00
Van 27,500.00
Accounts payable 61,700.00
Stanlee Capital 1,00,000.00
Purchases 16,825.00
Sales revenue 33,622.60

ACCOUNTING 12
Discount allowed 615.01
Rent expense 2,464.00
Wages expense 2,388.00
PAYG expense 365.00
Drawings 4,500.00
Totals 1,95,322.60 1,95,322.60
Worksheet for Financial year end 30 June
Account
Unadj Trial
Balance
Adjustme
nts
Adjusted
Trial
Balance
Income
Statemen
t
Balance
Sheet
Names
Debit
Cre
dit
Deb
it
Cre
dit
Deb
it
Cre
dit
De
bit
Cr
edi
t
Deb
it
Cre
dit
Cash at Bank
$
1,04,
947.9
9
$
1,04
,947
.99
$
1,04
,947
.99
Office
furniture
$
29,70
0.00
$
29,7
00.0
0
$
29,7
00.0
0
GST $ $ $

ACCOUNTING 13
799.1
0
799.
10
799.
10
Supplies
$
598.5
0
$
365.
00
$
233.
50
$
233.
50
Accounts
receivables
$
1,870
.00
$
37.4
0
$
1,83
2.60
$
1,83
2.60
Provision for
doubtful
debts
$
37.4
0
$
37.4
0
$
37.
40
Prepaid
insurance
$
2,750
.00
$
2,06
2.50
$
687.
50
$
687.
50
Van
$
27,50
0.00
$
27,5
00.0
0
$
27,5
00.0
0
Accumulated
depreciation-
furniture
$
9,07
5.00
$
9,07
5.00
$
9,07
5.00
Accumulated
depreciation-
van
$
4,30
0.00
$
4,30
0.00
$
4,30
0.00
Accounts $ $ $

ACCOUNTING 14
payable
61,7
00.0
0
61,7
00.0
0
61,7
00.0
0
Rent payable
$
1,23
2.00
$
1,23
2.00
$
1,23
2.00
Wages
payable
$
1,61
1.00
$
1,61
1.00
$
1,61
1.00
Stanlee
Capital
$
1,00
,000
.00
$
1,00
,000
.00
$
1,00
,000
.00
Purchases
$
16,82
5.00
$
680.
00
$
16,1
45.0
0
$
16,
145
.00
Sales revenue
$
33,6
22.6
0
$
33,6
22.6
0
$
33,
622
.60
Discount
allowed
$
615.0
1
$
615.
01
$
615
.01
Rent expense $ $ $ $

ACCOUNTING 15
2,464
.00
1,23
2.00
3,69
6.00
3,6
96.
00
Wages
expense
$
2,388
.00
$
1,61
1.00
$
3,99
9.00
$
3,9
99.
00
PAYG
expense
$
365.0
0
$
365.
00
$
365
.00
Drawings
$
4,500
.00
$
4,50
0.00
$
4,5
00.
00
Supplies
expense
$
365.
00
$
365.
00
$
365
.00
Insurance
expense
$
2,06
2.50
$
2,06
2.50
$
2,0
62.
50
Depreciation
expense
$13
,375
.00
$
13,3
75.0
0
$
13,
375
.00

ACCOUNTING 16
Loss on
inventory
$
680.
00
$
680.
00
$
680
.00
$
1,95,
322.6
0
$
1,95
,322
.60
$19
,362
.90
$19
,362
.90
$
2,11
,540
.60
$
2,11
,540
.60
$
45,
839
.91
$
33,
622
.60
$
1,65
,700
.69
$
1,77
,918
.00
Profit or
Loss 0
$
12,
217
.31
$
12,2
17.3
1 0
$
-
$
-
$
45,
839
.91
$
45,
839
.91
$
1,77
,918
.00
$
1,77
,918
.00
FINANCIAL STATEMENTS
Balance Sheet:
Current Assets:
Cash at bank
1,04,947.9
9

ACCOUNTING 17
Supplies
233.5
0
Accounts receivables less doubtful debts
1,832.6
0
Prepaid insurnace
687.5
0
Total Current Assets
1,07,701.5
9
Non-current Assets:
Office furniture
29,700.0
0
Accumulated depreciation-furniture
-
9,075.00
Van
27,500.0
0
Accumulated depreciation-van
-
4,300.00
GST
799.1
0
Total Non-current Assets 44,624.1

ACCOUNTING 18
0
Total Assets
1,52,325.6
9
Current Liabilities:
Accounts payable
61,700.0
0
Rent payable
1,232.0
0
Wages payable
1,611.0
0
Total Current liabilities
64,543.0
0
Non-current liabilities and shareholders equity:
Stanlee capital, less drawings
87,782.6
9
Total Liabilities and shareholders equity
1,52,325.6
9

ACCOUNTING 19
Profit and Loss
Particulars Amounts in $
Sales revenue
33,622.6
0
Less: cost of goods sold
16,145.0
0
Gross profit
17,477.6
0
Less: expenses:
Discount allowed
615.0
1
Rent expense
3,696.0
0
Wages expense
3,999.0
0
PAYG expense
365.0
0
Insurance expense
2,062.5
0
Depreciation expense
13,375.0
0
Supplies expense 365.0

ACCOUNTING 20
0
Loss on inventory
680.0
0
Provision for doubtful
debts
37.4
0
Drawings
4,500.0
0
29,694.9
1
Net Loss
-
12,217.31
Perpetual Inventory
Stock: Mermaid Fountains Weighted Average
Purchases Sales Inventory on Hand
Date
Quantit
y
Unit
Cost
Total
Cost
Quantit
y
Unit
Cost
Total
Cost
Quantit
y
Unit
Cost
Total
Cost
Beg. 0
$
-
05-Jul 25
$
349
$
8,725 25 349.00 8,725.00
04-Sep 10
$
1,052
$
10,516 35 549.74
19,241.0
0
12-Oct 10 $ $ 45 507.58 22,841.0

ACCOUNTING 21
360 3,600 0
07-Nov
$
- 6 507.58 3,045.47 39 507.58
19,795.5
3
31-Mar
$
- 2 0.00 0.00 37 535.01
19,795.5
3
TOTAL
S 45
$
22,841 8
$
3,045 37
$
19,796
507.577
8
Stock: Kingseat Bench Weighted Average
Purchases Sales Inventory on Hand
Date
Quantit
y
Unit
Cost
Total
Cost
Quantit
y
Unit
Cost
Total
Cost
Quantit
y
Unit
Cost
Total
Cost
Beg.
05-Jul 12
$
275
$
3,300 12 275.00 3,300.00
29-Sep 3
1105.0
0 3315.00 9 -1.67 -15.00
22-Feb 4
$
300
$
1,200 13 91.15 1,185.00
31-Mar 6 281.25 3315.00 7
-
304.29
-
2,130.00
TOTAL
S 16 4500 23 103.04 2,370.00

ACCOUNTING 22
281.25

ACCOUNTING 23
Financial Report:
The following are the desired financial statements:
FINANCIAL STATEMENTS
Balance Sheet:
Current Assets:
Cash at bank
1,04,947.9
9
Supplies
233.5
0
Accounts receivables less doubtful debts
1,832.6
0
Prepaid insurance
687.5
0
Total Current Assets
1,07,701.5
9
Non-current Assets:
Office furniture
29,700.0
0
Accumulated depreciation-furniture -

ACCOUNTING 24
9,075.00
Van
27,500.0
0
Accumulated depreciation-van
-
4,300.00
GST
799.1
0
Total Non-current Assets
44,624.1
0
Total Assets
1,52,325.6
9
Current Liabilities:
Accounts payable
61,700.0
0
Rent payable
1,232.0
0
Wages payable
1,611.0
0
Total Current liabilities 64,543.0

ACCOUNTING 25
0
Non-current liabilities and shareholders equity:
Stanlee capital, less drawings
87,782.6
9
Total Liabilities and shareholders equity
1,52,325.6
9
Profit and Loss:
Particulars Amounts in $
Sales revenue
33,622.6
0
Less: cost of goods sold
16,145.0
0
Gross profit
17,477.6
0
Less: expenses:
Discount allowed
615.0
1

ACCOUNTING 26
Rent expense
3,696.0
0
Wages expense
3,999.0
0
PAYG expense
365.0
0
Insurance expense
2,062.5
0
Depreciation expense
13,375.0
0
Supplies expense
365.0
0
Loss on inventory
680.0
0
Provision for doubtful
debts
37.4
0
Drawings
4,500.0
0
29,694.9
1
Net Loss
-
12,217.31
Statement of changes in equity:

ACCOUNTING 27
Particulars Amounts in $
Opening capital 1,00,000.00
Less: net loss 12,217.31
Less; drawings 4,500.00 16,717.31
Closing capital 83,282.69
The company has reported a loss for the financial year of its business operations. Hence, the
following are the recommendations that must be made to the company:
 It must look for the ways to increase its sales revenue which would in turn leads to an
increase in the net profit being earned by the company.
 The company must also look for the ways to reduce its expenses so that it is able to
earn more in the next year.
 Rent expense could be eliminated by looking for a premise which is cheaper than the
current one or try to negotiate with the landlord, if he allows to reduce the rent by the
way of paying an advance.
 The company would reduce the expenses of wages by the way of looking for
contractual or the temporary employees who would charge less as their wages.
 Once, the wage expense is reduced, the PAYG expense would also get reduced
 The company could look for the ways to reduce the riskiness that it is exposed to by
the way of mitigation strategies which would help in the reduction of the insurance
expenses being paid by the company.

ACCOUNTING 28
 The company could get insurance for its inventory since that would reduce any sort of
loss incurred by it in respect of the same.
 The company could go for offering discounts to the customers so that they pay in
cash. This would reduce the provision of any sort of doubtful debts and would
eliminate any bad debt expenses.
Different method of depreciation:
The first method of depreciation is the straight line method which indicates that the same
amount of depreciation is charged over the useful life of the asset.
Then the second method is the reducing balance method which indicates that the amount of
depreciation and decreases with the number of useful lives.
The third is the sum of the year’s digits which allocates the depreciation expense keeping in
mind the life of the asset.
Then there is units of activity depreciation which indicates the amount of the deprecation
dependent upon the proportion of the change in the level of the activity.
The advantages of the straight line method include the ease of calculation, useful when the
economic benefits that flow in to the entity are somewhat equal, is also suitable for the assets
that provide some similar economic benefits over the useful life of the asset. The
disadvantage include the incorrect pattern of the economic benefits that flow in to the entity
of the asset.
The advantages of the reducing balance method include the appropriateness of the method
wherein the usefulness of the asset reduces as and when the useful life of the asset decreases
and the disadvantage include the fact that the rate depends upon bias.

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The advantage of sum of years digits include the ease of understanding, the effects of the
decrease in the amount of the depreciation which depends upon the reduction of the balance
method and the disadvantage include the difficulties when it comes to calculating the
expense.
The advantage of the units of activity include the accurate reflection of the pattern of
consumption of the economic benefits that flow into the entity and apt for the assets whose
wear and tear depends upon the units of the activity that they produce. The disadvantage
include the unreasonableness of the basis of the activity involved (Accounting simplified,
2019).
Inventory methods:
The first is the FIFO method which means that the goods that are purchased first are sold
first.
Then there is LIFO method which means that the goods that were purchased in the last are
sold first.
The weighted average method indicates the average of the sales price divided by the number
of units.
The financial position of the company depends upon the inventory method being used since
the sales revenue would depend upon the purchase price of these goods which would affect
the net sales and also, the inventory at hand as being valued in the closing stock.
Internal control mechanisms:
The following are some of the internal controls:
 Bank reconciliations

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 Cash management
 Different people for cash collection and cash disbursement
 Payments being made with adequate authority and be duly authorised (finance, 2019).
Conclusion:
The company has earned a loss for the first year of its business operations. It is recommended
that few of the steps be undertaken and changes be made, so that the business could earn
some profit for the second year.

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References:
Internal Controls | Financial Reporting. (2019). Retrieved from
https://finance.uw.edu/fr/internal-controls
Methods of Depreciation | Accounting-Simplified.com. (2019). Retrieved from
https://accounting-simplified.com/financial/fixed-assets/depreciation-methods/types.html