Corporate Accounting: Journal Entries, Financial Statements, and Notes to Accounts

This article provides an overview of corporate accounting, including journal entries, financial statements, and notes to accounts. It covers segment reporting, exceptional items, and significant events. The course code and college/university are not mentioned.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student:
Name of the University:
Authors Note:

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CORPORATE ACCOUNTING
Contents
Answer 1:.........................................................................................................................................2
Requirement (a):..........................................................................................................................2
Requirement (b):..........................................................................................................................3
Requirement (c):..........................................................................................................................3
References:......................................................................................................................................6
Appendix 1:.....................................................................................................................................7
Appendix 2:...................................................................................................................................12

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CORPORATE ACCOUNTING
Answer 1:
Requirement (a):
Journal entries:
Date Account titles and
explanations Debit ($) Credit
($)
30-Jun-18 Land 50000
50000
30-Jun-18 Damages 150000
150000
30-Jun-18 Profit and loss account 150000
Damages 150000
30-Jun-18 Bad debt (70000 x 90%) 63000
63000
Profit and loss account 63000
63000
Credit note is in respect of next financial year
Accounts receivable
(Being the bad debt recognized due to the
Bad debt (70000 x 90%)
(Being bad debt recognized against profit and loss
Share capital issued already recorded earlier
Revaluation reserve
(Being the land revalued)
Damages payable
(Being damages payable)
(Being damages recognized against profit and loss

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CORPORATE ACCOUNTING
Requirement (b):
Statement of financial position:
It is a statement reflecting the position of assets and liabilities of an organization as on a
particular date. The statement of financial position of Simrex Limited below has been prepared
taking into consideration the balances provided in Trail Balance and the journal entries made in
the first part of the document (Ball, Li and Shivakumar, 2015).
Statement of profit and loss:
Statement of profit and loss of the company shows the amount of profit earned from business
operations or loss incurred in business. In this case despite the loss due to penalty for damages
and bad debt the company has managed to earn a net profit of $117,250 after payment of tax.
Thus, the company has been able to manage its resources quite well to earn significant amount of
profit for the financial year 2017-18 (Zeff, 2016).
Statement of changes in equity:
Statement of changes in equity shows the effects of transactions that affect the shareholders’
equity. The statement of changes in equity of Simrex Limited shows (Appendix 2) that the equity
of shareholders have increased in the current year.
Requirement (c):
Notes to financial accounts:

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CORPORATE ACCOUNTING
1. Segment reporting: Since the group has no identifiable reporting segments hence, no
segment report has been prepared.
2. Exceptional items: Those items of income and expenditures that are not regular in nature
have been reported as per the requirement of accounting standard. These include damages
of $150,000 to be paid for failure to control pollution (Libby, 2017).
3. Significant events: Significant events that have occurred during, before or after the end of
the year has also been reported to ensure that the users of financial accounts understand
the impact of these events on the financial performance and position of the organization.
Penalty for damage as well as the insolvency of the customers are two significant events
that have reduced the profit of the organization by $213,000 (150000+63000) of revenue
(Gitman, Juchau and Flanagan, 2015).
4. Income: The revenues of the company have been recorded as per the accrual system of
accounting.
5. Expenditures: Expenditures have been reported in the books of accounts even if not paid
following the accrual basis of accounting.
6. Recognition and measurement: Revenue has been recognized as per the accounting
standard on revenue recognition guidelines. Thus, only when the revenue has been earned
and no uncertainty remained regarding the receipt of revenue, it has been recognized in
the books of accounts.
7. Income tax expenses: The organization is on the tax slab rate of 30%. Thus, the amount
of profit earned by the organization has been multiplied by 30% rate to determine the
income tax expense.

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CORPORATE ACCOUNTING
8. Earnings per share: The earnings per share of the company has been reported as per the
requirements of AASBs. The EPS of the company if $0.21.
9. Working capital: Working capital of the company for the financial year 2017-18 is
($368,250 - $232,000) = $136,250.
10. Accounts receivable: The accounts receivable as on 30th June, 2018 is $129,500 after
deducting the bad debt for the customer that went to liquidation.
11. Inventories: Amount of inventories as on June 30, 2018 is $123,000.
12. Accounts payable: As on 30th June, 2018 the company owes $82,000 as accounts payable.
13. Damages payable: The amount of damages payable by the company as on June 30, 2018
is $150,000.
14. Goodwill: The Company has a goodwill of $50,000.
15. Building: The balance in the building account after deducting depreciation for the year
2017-18 is $288,000.
16. Motor Vehicle: after deducting depreciation for 2017-18 the balance in Motor vehicle
account is $235,000.

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CORPORATE ACCOUNTING
References:
Ball, R., Li, X. and Shivakumar, L., 2015. Contractibility and transparency of financial statement
information prepared under IFRS: Evidence from debt contracts around IFRS adoption. Journal
of Accounting Research, 53(5), pp.915-963. [Online] Available from:
https://onlinelibrary.wiley.com/doi/abs/10.1111/1475-679X.12095 [Accessed 18 September
2018]
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson
Higher Education AU. [Online] Available from: https://books.google.co.in/books?
hl=en&lr=&id=EQbiBAAAQBAJ&oi=fnd&pg=PP1&dq=Gitman,+L.J.,+Juchau,+R.
+and+Flanagan,+J.,+2015.+Principles+of+managerial+finance.
+Pearson+Higher+Education+AU.&ots=utmVACTXXP&sig=MjtwDafawHDGTeDR3iDCyTP
7Iec#v=onepage&q&f=false [Accessed 18 September 2018]
Libby, R., 2017. Accounting and human information processing. In The Routledge Companion
to Behavioural Accounting Research (pp. 42-54). Routledge. [Online] Available from:
https://www.taylorfrancis.com/books/9781317488002/chapters/10.4324%2F9781315710129-11
[Accessed 18 September 2018]
Zeff, S.A., 2016. Forging accounting principles in five countries: A history and an analysis of
trends. Routledge. [Online] Available from:
https://www.taylorfrancis.com/books/9781317488002/chapters/10.4324%2F9781315710129-11
[Accessed 18 September 2018]

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CORPORATE ACCOUNTING
Appendix 1:
Statement of profit and loss and other comprehensive income
Particulars Amount ($) Amount ($)
Revenue:
Sales 990,000.
00
Interest revenue 98,500.
00
Total revenue 1,088,500.
00
Expenditures:
Cost of goods sold 290,000.00
Distribution expenses 93,000.00
Sales and marketing expenses 95,000.00
Administration expenses 55,000.00
Bad debt 63,000.00
Damages 150,000.00

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CORPORATE ACCOUNTING
Warranty provisions 25,000.00
Provision for doubtful debts 8,000.00
Depreciation on:
Building (360000 x 10%) 36,000.00
Motor Vehicles (340000 x 15%) 51,000.00
866,000.
00
Profit before interest and tax 222,500.
00
Less: Interest expenses 55,000.
00
Profit before tax 167,500.
00
Less: Tax @30% (167500 x 30%) 50,250.
00
Net income 117,250.
00

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CORPORATE ACCOUNTING
Earnings per share:
Basic (117250 /560000)
0.21
Diluted
0.21
Dividend paid 32000
Profit to be transferred to retained earnings (117250 - 32000) 85,250.
00
Statement of financial position as on 30th June, 2018
Assets: Amount
($)
Amount ($)
Current assets
Cash at bank 115,750.
00
Inventories 123,000.

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CORPORATE ACCOUNTING
00
Accounts receivable (192500 -63000) 129,500.
00
Total current assets 368,250.
00
Non-current assets
Goodwill 50,000.
00
Term deposit 337,000.
00
Buildings (360000-72000) 288,000.
00
Motor vehicles (340000 - 105000) 235,000.
00
Land (85000 +50000) 135,000.
00
Total non-current assets 910,000.
00
Total assets 1,278,250.

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CORPORATE ACCOUNTING
00
Liabilities and equity:
Current liabilities:
Accounts payable 82,000.
00
Damages payable 150,000.
00
Total current liabilities 232,000.
00
Non-current liabilities:
Deferred tax liability 10,000.
00
Bank Mortgage due 240,000.
00
Total non-current liabilities 250,000.
00
Equity:
Share capital 560,000.

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CORPORATE ACCOUNTING
00
Land revaluation surplus (50000 + 50000) 100,000.
00
Retained earnings (51000 + 85250) 136,250.
00
Total equity 796,250.
00
Total liabilities and equity 1,278,250.
00
Appendix 2:
Statement of changes in equity:
Particulars Amount
($)
Amount
($)
Share capital 560,00
0.00
Revaluation surplus / Reserve as on June 30, 2017 50,00
0.00
Add: Revaluation surplus during the year 50,00

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CORPORATE ACCOUNTING
0.00
100,00
0.00
Retained earnings as on June 30, 2017 51,00
0.00
Add: Transferred during the year from profit and loss
account
85,25
0.00
136,25
0.00
796,25
0.00