Financial Statements Analysis

This assignment focuses on analyzing a set of financial statements. It presents a balance sheet, an income statement, and detailed notes explaining various items within the financial reports. The student is tasked with understanding the information presented in these statements to gain insights into the company's financial health, performance, and position.

CORPORATE
ACCOUNTING

Colour Ltd
Journal
Date Details Debit
($)
Credit
($)
30-06-
2017
Salaries and wages ……….dr 32,000
To Outstanding Salaries and Wages 32,000
(Being unaccounted salaries recorded in the books of
accounts)
30-06-
2017
Heating and lighting expenses ……….dr 16,000
To Outstanding Heating and lighting expenses 16,000
(Being unaccounted Heating and lighting expenses
recorded in the books of accounts)
30-06-
2017
Insurance Expenses ……….dr 20,000
To Prepaid Insurance 20,000
(Being insurance expenses for the year accounted for)
30-06-
2017
Interest Expense ……….dr 30,000
To Outstanding Interest Expense 30,000
(Being unaccounted Interest Expense recorded in the
books of accounts)
30-06-
2017
Depreciation ……….dr 85,000
To Accumulated Depreciation – Plant & Machinery 36,000
To Accumulated Depreciation - Computers 20,000
To Accumulated Depreciation – Buildings 29,000
(Being depreciation for the year recorded in the
books)
30-06-
2017
Income Tax Expense ……….dr 1,60,000
To Provision for Income Tax Expense 1,60,000
(Being income tax expenses for the year accounted for
30-06-
2017
Final Dividend ………dr 50,000
To Provision for Dividend 50,000
(Being dividend for the year being declared and

approved by board)

Colour Ltd
Statement of Comprehensive Income
For the year ended 30th June 2017
Particulars Note No Amount
Revenue
Sales Proceeds 3 28,66,000
Total- A 28,66,000
Expenses
COGS 4 14,60,000
Salaries and wages 5 3,52,000
Heating and lighting expenses 5 1,16,000
Audit fees and charges 5 40,000
Interest Expense 5 60,000
Damage due to flooding 5 1,34,000
Interim dividend 6 32,000
Depreciation 7 85,000
Income Tax Expense 8 1,60,000
Insurance Expenses 5 20,000
Final Dividend 6 50,000
Total- B 25,09,000
Profit from Operations (A-B) (Carried forward to balance
Sheet) 3,57,000

Colour Ltd
Statement of Financial Position
For the year ended 30th June 2017
Assets Note
No Amount
Current assets
Cash at bank 3,04,000
Inventories 9 440000
Accounts Receivable 3,42,000
Short term Investment - due 30th September, 2017 10 6,64,000
Prepaid insurance 60,000
Total current assets 18,10,00
0
Non-current assets (net of accumulated depreciation)
Plant & Machinery 11 1,44,000
Computers 2,60,000
Buildings 4,35,000
Investments 1,60,000
Total non-current assets 9,99,000
Total assets 28,09,00
0
Liabilities
Current liabilities
Accounts Payable 2,40,000
Outstanding Salaries and Wages 32,000
Outstanding Heating and lighting expenses 16,000
Outstanding Interest Expense 30,000
Provision for Doubtful Debts 12 40,000
Provision for Income Tax Expense 1,60,000
Provision for Dividend 50,000
Total current liabilities 5,68,000
Non-current liabilities
Bank Loan secured over buildings, due 1st May, 2019 13 6,00,000
Total non-current liabilities 6,00,000
Total liabilities 11,68,00
0
Net assets 16,41,00
0
Owners’ equity
Share Capital 14 10,00,00
0
General Reserve 1,60,000
Retained Earnings 15 4,81,000
Total owners’ equity 16,41,00
0

Colour Ltd
Statement of changes in equity for the year ended 30th June 2017
Particulars Share
capital
Retained
earnings
General
Reserve
Total
equity
USD USD USD USD
Balance at 1 July 2016 10,00,000 1,24,000 1,60,000 12,84,000
Changes in equity for the
year 2017
Dividends - 82,000 - 82,000
Income for the year - 3,15,000 - 3,15,000
Balance at 30 June 2017 10,00,000 5,21,000 1,60,000 16,81,000
Notes to Financial Statements:
Note 1: Accounting Policies
The company is consistent in applying the accounting standards and other laws. No
changes have been made in the accounting policies unless otherwise required by law
or required by a statute or for better presentation of financial statements
Note 2: Expenses
The expenses incurred and expended are recorded in the books keeping in
consideration the accrual system of accounting. The expenses relating only to current
year are recorded in the profit and loss statement.
Note 3: Revenue
Particulars Amount
Sales Proceeds
28,66,
000
722000
Note 4: Cost of Goods Sold (COGS)
Particulars Amount
Opening Stock 460000
Add: Purchases 1440000
Less: Closing Stock 440000
1460000

Note 5: Other Expenses
Particulars Amount
Salaries and wages 3,52,000
Heating and lighting expenses 1,16,000
Audit fees and charges 40,000
Interest Expense 60,000
Damage due to flooding 1,34,000
Insurance Expenses 20,000
7,22,000
Note 6: Dividend
Particulars Amount
Interim Dividend 32000
Final Dividend 50000
82000
The Final Dividend has been declared and approved by the board.
Note 7: Depreciation
Particulars Amount
Plant & Machinery 36000
Computers 20000
Buildings 29000
85000
Note 8: Tax Expense
The company pays tax at the rate of 30%. The estimate of current tax liabilities are
made in accordance with the rules and tax laws as applicable on the balance sheet
date. The company had a liability of $160000 to be paid as current tax. The provision
of defer tax does not apply to the company.
Note 9: Inventories
As per the relevant accounting standards the inventories are to be recorded at lower
of cost or net realisable value. For the given company the cost of inventories
amounted to $ 44000 as per the relevant rules.
Note 10: Investments
Investments have been classified as current investments and non-current investments.
The standards lay down that current investments are to be valued at cost or market

price whichever is lower. The non-current investments on the other hand are to be
valued at cost. The market values of non-current investments are available, but they
have been valued at cost as per the rules laid down by the accounting standards.
Note 11: Fixed Assets
Straight line method for calculating depreciation has been followed.
Particulars Cost
Accumulate
d
Depreciatio
n till date
Depreciatio
n for
current
year
Closing
Value
Plant &
Machinery 3,60,000 180000 36000 1,44,000
Computers 4,00,000 120000 20000 2,60,000
Buildings 5,80,000 116000 29000 4,35,000
Note 12: Provision for Doubtful Debts
The company makes an estimate of doubtful debts keeping in view the results of
previous year, and based on a certain percentage based on various factors and
assumptions the required provision is made. During the current accounting year the
company made a provision for doubtful debts for $40000.
Note 13: Bank Loan
The bank loan presented in the books of accounts for $ 600000 has been secured
against the building held and shown in balance sheet. The loan has been classified
as a non current liability since the repayment has to be made after a period of
twelve months.
Note 14: Equity Share Capital
The Equity share of the company comprise of 500000 numbers of ordinary shares
of $2 each.
Note 15: Retained Earnings
Particulars Amount
Opening Balance 124000
Add: Profit during the year 439000
Less: Interim Dividend 32000
Less: Final Dividend 50000
481000

References:
Bruner, R., Eades, K. and Schill, M. (2017). Case studies in finance. Dubuque, IA: McGraw-
Hill Education.
Khan, M. and Jain, P. (2014). Financial management. New Delhi: McGraw Hill Education.
Saunders, A. and Cornett, M. (2017). Financial institutions management. New York:
McGraw-Hill Education.
Shim, J. and Siegel, J. (2008). Financial management. Hauppauge, N.Y.: Barron's
Educational Series.