Financial Accounting Assignment

This financial accounting assignment provides a comprehensive analysis of a company's financial statements, including the statement of financial position, statement of changes in equity, and notes to accounts. It also includes other required reports such as the directors' declaration, annual directors' report, and annual auditors' report. The assignment follows Australian Accounting Standards and the Corporation Act, 2001.

FINANCIAL
ACCOUNTING
ASSIGNMENT

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By student name
Professor
University
Date: 25 April 2018.
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Contents
Background..................................................................................................................................................3
Discussion and Analysis...............................................................................................................................3
Statement of Financial Position...............................................................................................................4
Statement of changes in equity...............................................................................................................5
Notes to accounts....................................................................................................................................6
Other required reports..........................................................................................................................11
Directors Declaration.........................................................................................................................11
Annual Directors report.....................................................................................................................12
Annual auditors report......................................................................................................................13
References.................................................................................................................................................14
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Background
A financial report or the annual report has been done for the company in hand for the year ending 30 th
June 2019. All the accounting adjustments has been done and the necessary financial statements have
been prepared and presented below in compliance with the Australian Accounting Standards (issued by
AASB) and the Corporation Act, 2001. Necessary disclosures and the notes on accounts have been
prepared and shown below. In addition to that, other required reports like that of Directors’ declaration,
Annual Directors Report and the Auditors Report has also been included in the assignment.
Discussion and Analysis
Statement of profit or loss and other comprehensive income
Statement of profit or loss and other comprehensive income
Particulars Notes Amt.($)
Operating Activities
Revenue from sale of goods and services
Sales revenue 29,760,300
Services revenue 18,510,400
Total operating revenue 48,270,700
Cost of sales 17,930,000
Gross Profit 30,340,700
Other operating expenses 9 24,080,600
Operating income 6,260,100
Non-operating income 8 293,000
Earnings before interest and tax 6,553,100
Financing costs 12 76,500
Profit before income tax 6,476,600
Income tax expenses 10 1,942,980
Profit for the period from continuing operations 4,533,620
Extraordinary Gain
Extraordinary Profit (net of tax) 7 438200
Profit for the period 4,971,820
Profit attributable to equity holders 4,971,820
Profit from continuing operations 4,533,620
Extraordinary Profit 438,200
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Statement of Financial Position
Statement of Financial Position
Particulars
Note
s Amt.($)
Current Assets
Trade and other receivables 17 5,080,300
Cash at bank 53,400
Inventory 2,495,100
Prepaid expenses 2 245,700
Total Current Assets 7,874,500
Non-Current Assets
Plant. Property and Equipment 11 11,466,800
Land 4,280,500
Total Non-Current Assets 15,747,300
Total Assets 23,621,800
Current Liabilities
Trade and other payables 18 897,450
Provisions 4 1,638,080
Other current liabilities 3 3,717,808
Income tax payable 10 2,130,780
Total Current Liabilities 8,384,118
Non-Current Liabilities
Loan from MyBank 1,700,000
Provisions 4 572,520
Total Non-Current Liabilities 2,272,520
Total Liabilities 10,656,638
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Net Assets 12,965,162
Equity
Contributed equity 5 2,649,400
General Reserve 6 2,877,600
Retained Earnings 6 7,438,162
Total Equity 12,965,162
Statement of changes in equity
Statement of Changes in Equity
Particulars Share
Capital
General
Reserve
Retained
Earnings Total
Balance as on 1st July 2018 2,527,000 877,600 5,277,650 8,682,250
Issue of bonus shares -
102000 fully paid ordinary shares @
$1.2 122,400 122,400
Add: Transfer to General reserve 2,000,000 (2,000,000) -
Dividend declared & paid - 2018 (357,000) (357,000)
Dividend declared & authorised - 2019 - (454,308) (454,308)
Profit for the period 4,971,820 4,971,820
Balance as on 31st June 2019 2,649,400 2,877,600 7,438,162 12,965,162
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Notes to accounts
Note 1: Basis of Preparation (Para 51, AASB 101)
The company is incorporated in Australia and has prepared the financial statements for the year ending
30th June 2019 considering all the adjustments. All the relevant accounting policies have been
consistently applied and are in compliance with Australian Accounting Standards and Interpretations,
and the Corporation Act, 2001 (Para 7, AASB 1054).
Note 1.1: Significant accounting policies
Some of the significant accounting policies (Para 117, AASB 101) being followed in the preparation of
annual financial statements are stated below:
1. Revenue has been recognised at fair value of consideration received or receivable and is in
conformance with the revenue recognition criteria specified in AASB standard (Para 97, AASB
101).
2. Trade and other receivables has been prepared in accordance with Para 77, AASB 101. Similarly,
the trade and other payables has been reported in accordance with Para 77 of AASB 101.
3. Inventory is being valued and reported at cost or net realisable value, whichever is lower.
4. Cash and cash equivalents includes cash and deposits with the maximum maturity of 3 months.
5. Foreign Currency: The currency which has been used to present the financial statements is
USD($)
Note 2: Prepaid Expenses
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The split of the prepaid expenses has been shown below:
Note 2: Prepaid Expenses
Particulars Amt. ($)
Prepaid insurance 65,000
Prepaid advertising 107,000
Prepaid maintenance services 73,700
Total 245,700
Note 3: Other Current Liabilities
The split of the other current liabilities including dividend and interest payable has been shown below.
The accrued expenses shown below are mainly towards the utility bills of the company.
Note 3: Other current liabilities
Particulars Amt. ($)
Prepaid services revenue 2,975,000
Accrued expenses (Utility expenses) 212,000
Interest Outstanding 76,500
Dividend Payable 454,308
Total 3,717,808
Note 4: Provisions – Current and Non-Current (Para 84 and 85, AASB 137)
The provisions carried in books based on the outflows expected by the company has been shown below.
The same has been bifurcated between current and non-current based on the expected date of
settlement. None of the long service leave is expected to be taken until 2022. Out of the provision for
warranties, the 80% of the amount is expected to be settled by 30th June 2020 (Goldmann, 2016).
Note 4: Provisions
Particulars Amt. ($)
Legal provision 650,000
Provision for annual leave 234,000
Provision for Long Service leave 384,000
Provision for warranties 942,600
Total 2,210,600
Current 1,638,080
Non-Current 572,520
Note 5: Contributed Equity (Para 79a, AASB 101)
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The holders of the equity shares are entitled to receive the dividend was declared and authorised by the
Board and are also entitled to one share one vote in the meetings of the shareholders.
Note 5: Contributed Equity
Particulars Amt. ($)
2,500,000 fully paid ordinary shares @ $1 2,477,000
Bonus Shares - 50,000 fully paid ordinary shares @ $1 50,000
Movement:
Balance at the start of the period 2,527,000
Issue of bonus shares - 102000 fully paid ordinary shares @
$1.2 122,400
Total 2,649,400
Note 6: General Reserve and Retained Earnings (Para 79, AASB 101)
The details of the opening and closing balance of the reserves, the transfer, the dividend declared and
paid has been shown below in the summary.
Note 6: General Reserve and Retained Earnings
Particulars
General
Reserve
Retained
Earnings
Amt. ($) Amt. ($)
Opening Balance as on 1st July, 2018 877,600 5,277,650
Add: Transfer to General reserve 2,000,000 (2,000,000)
Dividend declared & paid - 2018 (357,000)
Dividend declared & authorised - 2019 - (454,308)
Profit for the period 4,971,820
Closing Balance as on 30th June 2019 2,877,600 7,438,162
Note 7: Extraordinary Gain
The extraordinary gain shown below relates to the unexpected receipt of money from one of the
debtors who was declared bankrupt in 2015 and $1210000 has been written off from books in May
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2016. However, ASIC undertook the investigation and recovered assets from the customer basis which
an amount of $626000 was received by the company (Dichev, 2017).
Note 7: Extraordinary Gain
Particulars Amt. ($)
Extraordinary Gain 626,000
Tax on income @ 30% (187,800)
Total 438,200
Note 8: Non-Operating income
Note 8: Non-operating income
Particulars Amt. ($)
Proceeds from sale of land 780,000
Cost of land sold (487,000)
Total 293,000
Note 9: Other Operating expenses (Para 97, AASB 101)
The operating expenses of the company incurred during the year have been shown below:
Note 9: Other Operating Expenses
Particulars Amt. ($)
Salaries and wages 9,214,000
Annual leave expense 966,000
Long service leave expense 86,000
Power and other utility expenses 1,240,000
Insurance expense 795,600
Advertising expenses 1,690,000
Other general operating expenses 3,112,500
Depreciation expense for equipment 680,000
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Depreciation expense for vehicles 380,000
Depreciation expense for buildings 695,000
Warranty expense 1,240,000
Payment to auditors - Audit services (Para 10, AASB
1054) 460,000
Payment to auditors - Non Audit services 65,000
Subscription to online TV/sports streaming service 400
Other Expenses 3,456,100
Total 24,080,600
Note 10: Income tax (Para 97, AASB 101)
The income tax details of the company have been shown below. It has been calculated at the rate of
30%.
Note 10: Income tax
Particulars
Continuing
Business Extraordinary Gain
Amt. ($) Amt. ($)
Earnings before tax 6,476,600 626,000
Tax payable at 30% 1,942,980 187,800
Total tax payable 2,130,780
Note 11: Plant, Property and Equipment (Para 77, AASB 101)
Note 11: Plant property and equipment
Particulars Equipment Vehicle Building Total
Cost 3,890,000 1,680,100 7,651,700 13,221,800
Depreciation expense 680,000 380,000 695,000 1,755,000
Carrying amount at the end of the period 3,210,000 1,300,100 6,956,700 11,466,800
 The company’s Plant, property and equipment are being shown at cost less accumulated
depreciation and impairment losses, if any, till date.
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 The depreciation is charged on the straight line basis on all the assets, equipment, vehicle and
building. The gain or loss on sale of PPE is recognised in the Statement of Profit or loss.
 The assets are checked for impairment in case the condition exists.
Note 12: Finance Costs
Particulars Amount ($)
Interest on Loan 76500
The Company has borrowed a loan from MyBank on 1st July 2018, which is expected to be paid off fully
on 1st July 2022. The same has been reported as per Para 71, AASB 101.
Note 13: Change is estimates and Judgements (Para 125, AASB 101)
The company was providing for 12 months warranty for most of its products and services until now
however, since most of the competitors provide for long warranty period, the company decided to
change its policy from 01st May, 2019 to provide for 3 years warranty. This is expected to increase the
warranty expenses by 18% going forward (Alexander, 2016).
Note 14: Dividend
The dividend declared on 2nd July 2018 was settled on 1st September 2018. Furthermore, the directors
declared a final dividend of 17 cents a share on 3rd July 2019 which will be paid in early September 2019.
Note 15: Government contract
The Company also tendered a government contract in late April 2019 for 3 years which was successful
and allotted to company. The same is to commence on 1st September 2019 and is expected to increase
the revenue by 20% with a marginal increase in the profits. This however, will help the company in
entering into further contracts with government in future (Choy, 2018).
Note 16: Legal Claim
The lawyers clarified that the legal claim on the company where customer sued the company for
damages due to the products. They had earlier advised that it is extremely likely to be paid by company
but as per the recent developments it is believed that the company is not required to pay off the same.
The matter is to be finalised in October 2019.
Note 17: Trade and other receivables (Para 77, AASB 101)
Particulars Amount ($)
Accounts receivable 5,420,300
Less: Allowance for doubtful debts 340,000
Total 5,080,300
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Note 17: Trade and other receivables (Para 77, AASB 101)
Particulars Amount ($)
Trade Payables 897,450
Other required reports
Directors Declaration
The directors of the company declare that:
a. In director’s opinion, the company has reasonable grounds to believe that the company has paid
the debts as and when it has become due
b. In director’s opinion, the financial statements have been prepared as per IFRS standards.
c. In director’s opinion, the financial statements have complied with regulations specified in
Corporations Act, 2001 and that it represents true and fair view of financial performance and
position of company.
d. The directors have given declaration given in Section 295A of Corporation Act, 2001.
Signed in accordance with the resolution of directors as per S295A of Corporation Act, 2001.
On the behalf of the directors.
XXXXXXXXX XXXXXXXXX
Chairman Chief Executive Officer
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Annual Directors report
Board Skills and experience
1. Retail market
2. Governance
3. Financial Acumen
4. People and culture
5. Risk management
6. Sustainability, safety and health
Board of Directors
1. XXXXX
2. AAAAA
3. BBBBB
Group Executive Committee
1. XXXXX
2. AAAAA
3. BBBBB
Principal Activities of the company: The Company is involved in sale of goods and provision of services
Directors and Meetings of Directors: The directors met 4 times during the year.
Company Secretary: Mr. XYXXYX was appointed as company secretary and Chief Legal officer of the
company on 11th May, 2016.
Non Audit Services
During the year, the auditors provided audit as well as non-audit services and non-audit services mainly
included the tax advisory services. The board is satisfied that the auditors of the company have not
compromised on their independence during the course of provision of services.
The report is made and signed as per resolution passed by Directors on 20th July 2019.
XXXXXXXXX XXXXXXXXX
Chairman Chief Executive Officer
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Annual auditors report
Auditors Name Auditors Address
Independent Auditor’s Report to the Members of the company
Opinion: We have audited the annual accounts of the company which comprises of Statement of
Financial Performance, Statement of Financial Position and Statement of Changes in Equity and in our
opinion the company has prepared the financial statements as per the Corporation Act 2001 and has
also followed Australian Accounting Standards and it also represents the true and fair view of the
financial position.
Basis of Opinion: We conducted the audit of company in accordance with the Australian Auditing
Standards and complied with auditor independence requirements of the Corporations Act 2001. We also
followed APES 110 Code of Ethics for Professional Accountants (the Code). We confirm our
independence during the audit.
Key Audit Matters
1. XXXXX
2. YYYYY
3. ZZZZZ
Other Information: ZZZ
Directors’ Responsibilities for the Financial Report: The directors of the company are responsible for
preparation and presentation of the financial statements in accordance with relevant rules and
regulations.
Auditor’s Responsibilities for the Audit of the Financial Report: Our objective is to provide reasonable
assurance whether the financial statements of the entity is free from material misstatements, fraud and
error.
Report on the Remuneration Report: XXXXX
Signature of the Partner
Partner
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Chartered Accountants
XYZ, 20th September 2019
References
Alexander, F., 2016. The Changing Face of Accountability. The Journal of Higher Education, 71(4), pp.
411-431.
Choy, Y. K., 2018. Cost-benefit Analysis, Values, Wellbeing and Ethics: An Indigenous Worldview Analysis.
Ecological Economics, 3(1), p. 145.
Dichev, I., 2017. On the conceptual foundations of financial reporting. Accounting and Business
Research, 47(6), pp. 617-632.
Goldmann, K., 2016. Financial Liquidity and Profitability Management in Practice of Polish Business.
Financial Environment and Business Development, 4(3), pp. 103-112.
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