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Rio tinto financial report 2018

   

Added on  2020-05-16

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FinancePolitical Science
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Running Head: FINANCIAL REPORTINGFinancial reporting
Rio tinto financial report 2018_1

Financial Reporting 1Part ARio Tinto is a British multinational company and a leading metal and mining corporation in United Kingdom. It deals with the production of copper, diamond, coal, aluminium, iron ore and uranium. For the purpose of increasing its operating efficiency, the company is reorganizing its business. The trial balance for Rio Tinto at 31 March 2017 was as follows: Rio Tinto (metals)Unadjusted Trial Balance at 31 March 2017AccountDebitCredit£'000£'000Cash 248,000.00 Accounts Receivable 20,000.00 Bad debts 4,000.00 Inventory 46,000.00 Investment 100,000.00 Equipment 46,000.00 Vehicles 30,000.00 Prepaid Insurance 17,000.00 Accounts Payable 10,000.00 Retained Earnings 10,000.00 Common Stock 40,000.00 Sales 550,000.00 Gain on sale 50,000.00 Loans and borrowingsCost of goods sold 69,000.00 Factory Labour 20,000.00 Administrative cost 18,000.00 Salaries 40,000.00 Other expenses 2,000.00 Total 660,000.00 660,000.00 Additional information:1.Salaries amounted to £20,000 were unpaid at the end of March 2017. 2.A portion of insurance premium paid in advance, worth £7000 is related to 2019. 3.Equipment are to be depreciated at the rate of 20% on straight line method. The depreciation on the vehicles is to be at the rate of 25% on written down value method.4.There are further bad debts of £500. Provision of 5% is to be made at debtors. 5.The investments were initially recorded at historical prices. Now they are need to be reported at realisable value of £116,675.
Rio tinto financial report 2018_2

Financial Reporting 26.Previously the closing stock was valued by LIFO method and now the valuation method has been changed to FIFO.Rio Tinto (metals)Adjusted Trial Balance at 31 March 2017AccountDebitCredit£'000£'000Cash 241,000.00Accounts Receivable 19,500.00Bad debts 4,500.00Inventory 47,000.00Investment 116,675.00Equipment 46,000.00Vehicles 30,000.00Prepaid Insurance 24,000.00Accounts Payable 10,000.00Retained Earnings 10,000.00Common Stock 40,000.00Dividends 9,000.00 - Sales 550,000.00Gain on sale 50,000.00Cost of goods sold 60,000.00Factory Labour 20,000.00Administrative cost 18,000.00Salaries 60,000.00Outstanding salaries 20,000.00Other expenses 2,000.00Accumulated Depreciation 16,700.00Provision for doubtful debts 975.00Total 697,675.00 697,675.00Adjustments made:There was an outstanding salary of £20,000 which is shown on the credit side of trial balance as outstanding salary (Maheshwari, 2012).The same amount has been added to the salaries expenses account on the debit side of trial balance (Van Mourik & Walton, 2013).
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Financial Reporting 3The amount of £7,000 has been added to the prepaid insurance account in trail balance and same has been deducted from the cash account (Weygandt, Kimmel & Kieso, 2015, Porter & Norton, 2012).Depreciation amount on both the equipment is shown as an accumulated depreciation account on credit side of trial balance, the treatment of which is done in the balance sheet later on (American Water Works Association. 2012, Nikolai, Bazley & Jones, 2009).The balance of the bad debt has been increased by £500 and accounts receivables are decreased by the same value (Epstein, Nach & Bragg, 2009). A provision of doubtful debt is created at 5% of net debtor’s value, shown in adjusted trial balance on credit side. The bad debts are then shown in profit and loss account of the company (Heintz & Parry, 2012).The value of investment is recognized at their market value (Dagwell, Wines & Lambert, 2015, Coucom, 2012).Closing stock is been increased when recorded at FIFO method (Sofat, 2010, Maheshwari, Maheshwari & Maheswari, 2013).The unadjusted trial balance shown above is the list of the balances of general ledger accounts that are prepared at the end of the financial year. This trial balance is prepared before making any adjustment entries for the purpose of making financial statements (Warren, Reeve & Duchac, 2011).The adjusted trial balance prepared is a listing of all account balances after doing the treatment of additional adjusting entries. The adjustment of these journal entries is also done in the income statement and balance sheet appropriately. The treatment of adjusting entries made in trial balance mainly includes accruals, prepayments, adjustment related to the closingstock, bad debts and non-current assets. An adjustment of depreciation method is also passed if it is given outside the trial balance. All these transactions are not included in unadjusted trial balance and therefore it becomes necessary to prepare an adjusted one in order to get the correct figures of debit and credit balances (Warren, Reeve & Duchac, 2011).Part BThe changes made in the trial balance are highlighted. On the basis of above adjusted trial balance, financial accounts like statement of profit and loss and statement of financial position for Rio Tinto are prepared. The income statement will record all the expenses
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