FNSACC504 - Assessment: Consolidation Worksheet, Financial Statements, and Tax Implications

This assessment explores the consolidation of financial statements for a parent company and its subsidiary, focusing on the preparation of a consolidation worksheet, comprehensive income statement, statement of change in equity, statement of financial position, and cash flow statement. It also delves into the differences between PAYG tax and the Income Tax Assessment Act, the implications of AASB standards on reporting requirements, and the legal implications of business expansion into different states and federal legislation.

FNSACC504 - Assessment
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Table of Contents
Assessment 1...................................................................................................................................3
Assessment 2...................................................................................................................................5
1: Comprehensive income statement...........................................................................................5
2: Prepare Statement of Change in Equity..................................................................................5
3: Statement of Financial Position................................................................................................6
4: Cash flow statement:.................................................................................................................8
5: Provide notes for the important information as per AASB standards.................................9
Assessment 3.................................................................................................................................10
Part 1.............................................................................................................................................10
Part 2.............................................................................................................................................14
References.....................................................................................................................................16
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Assessment 1
Consolidation worksheet
30 June 2016
TMH
Ltd
RDL Elimination
Consolidation Statement
Consolidation
statement
Dr. Cr
$ $ $ $ $
Sales 330,000 240,000 20,000 - 5,50,000
Inventory 1-7-2015 30,000 20,000 - 1,000 49,000
Purchase 180,000 110,000 20,000 - 2,70,000
210,000 130,000 - - 8,70,000
Inventory 30-6-2016 40,000 20,000 - 7,00 59,300
Cost of goods sold 170,000 110,000 - - 8,10,700
Gross profit 160,000 130,000 9700 - 2,80,300
Operating expenses 113,000 94,000 - - 2,07,000
47,000 36,000 - - 73,300
Add: Profit on sale of
plant
- 4,000 4000 - -
Management fee received
from RDL
7,000 - 4,000 - -
Dividend received from
RDL
4,000 - 4,000 - -
Profit before tax 58,000 40,000 - - 73,300
Less: Income tax
expenses
10,000 18,000 - - 12,637
Profit 48,000 22,000 - - 60,663
Retained earnings 1-7-
2015
20,000 16,000 - - 36,000
Available for
appropriation
68,000 38,000 - - 96,663
Appropriation:
Interim dividend paid 8,000 4,000 4,000 - 8,000
Declared final dividend 10,000 6,000 6,000 - 10,000
General reserve 10,000 4,000 -14,000 - -
Total appropriation 28,000 14,000 - - 32,000
Retained earnings 30-6-
1016
40,000 24,000 - - 64,000
Share capital 200,000 60,000 60,000 - 2,00,000
General reserve 72,000 15,000 45000 - 42,000
Non-current liabilities 2,000 16,000 - - 18,000
Current liabilities 56,000 27,000 - - 83,000
370,000 142,000 - - 4,07,000
Share in RDL Ltd 110,000 - 1,10,000 - -
Other non-current assets 150,000 90,000 - - 2,40,000
Inventory 46,000 20,000 - - 66,000
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Other current assets 64,000 32,000 - - 96,000
Goodwill on
consolidation
- - - - 5,000
Accumulated
impairment- goodwill
- - -
370,000 142,000 4,07,000
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Assessment 2
1: Comprehensive income statement
Comprehensive income: items which are not included in profit and loss statement due to their
nature but have a significant impact on the financial position of the business, called
comprehensive income items and the statement which is used to report such items known as
comprehensive income statement (Gazzola and Amelio, 2014).
Income and comprehensive income statement
Profit statement 2015 2016
sales 675000 7,62,250
Cost of goods sold 3,50,000 386790
GP 3,25,000 3,75,460
Salaries and wages 1,57,860 1,97,800
Superannuation 15,000 7,900
Motor vehicle expenses 30,000 14,700
General expenses 20,140 18,300
Depreciation- Building 4,000 5,400
Depreciation- Motor vehicle 11,000 12,900
Depreciation- Plant 5,000 6,800
Advertising expenses 2,000 500
Bad debts 5,000 2,310
net profit 75,000 1,08,850
Income tax expenses 25,000 35,920
Net profit 50,000 72,930
comprehensive Adjustment
Profit on revaluation - 50000
Total income attributed to shareholders fund 50000 1,22,930
2: Prepare Statement of Change in Equity
This statement is made to express the change in capital of shareholders. In other words,
various transactions take place in the course of business which affects the balance of
shareholder’s equity. It includes the information about the retained earnings, increases or
decreases in capital reserves etc.
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Statement of Change in Equity
Particulars Equity general reserve Retained earnings
Opening balance 400000 - 21940
the issue during the year 100000 - -
Transfer to general reserve - 2194 19746
Dividend (interim) - -254 -19746
Closing balance 500000 1940 0
3: Statement of Financial Position
Statement of financial position can be defined as a statement which denotes the position of an
asset, capital and liabilities of an organization at a particular date (Kulikova, et, al., 2015). It
is also known as balance sheet and made at end of the year to report the financial situation of
an organization.
Particulars 2015 2016
Assets
Current asset
Cash at bank 17560 135880
Account receivable 86,810 91590
Commission income accrued 400 600
Inventory 77,520 73190
Total current asset 1,82,290 3,01,260
Non-current asset
Land and building less Acc. 2,36,000 190600
Motor vehicle less Acc. 27100 39200
Plant less Acc 34500 20200
Suspense accounts - 50000
Call on deposit - 200000
Total Non-current asset 2,97,600 5,00,000
Total Asset 4,79,890 8,01,260
Liabilities
Current Liabilities
Account payable 55,860 59,440
Accrued salaries and wages 790 1,030
Taxation payable 21,300 35,920
Dividend payable 30,000 10,000
Total Current Liabilities 1,07,950 1,06,390
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Non-Current Liabilities
Debenture - 100000
Total Liabilities 1,07,950 2,06,390
Share capital 300000 500000
Retained earning 21940 19746
General reserve - 2194
Profit for the year 50000 72930
Total share capital 371940 594870
Total liabilities and share capital 4,79,890 8,01,260
4: Cash flow statement:
Cash flow statements can be defined as those statements which are used to show the flow of
cash (Miletić, 2014). It includes all cash related transaction without considering their nature
and size.
Particulars 2016
Cash receipt from sales 86000
Cash receipt from customers -
cash paid to suppliers -
Motor vehicle expenses -14700
General expenses -18300
Advertising expenses -500
Miscellaneous income 2000
Cash purchase -34500
Net from Operating Activities 20000
Investment activities (Net) -
Financing Activities
Capital Issue 100000
Dividend of 2015 -30000
Interim dividend -20000
Net from Financing Activities 50000
Net Decrease or increase in cash 70000
Opening balance of cash 65880
Closing balance 135880
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5: Provide notes for the important information as per AASB standards.
AS per AASB 1039: According to the AASB 1039, Australian companies should prepare
and publish their concise financial statements. The concise financial statements mean that
company should report complete financial information in financial statements.
As per AASB 139: AASB recognition and measurement, the financial statements are made
after the sufficient risk measurement. The company also measured the risk related to the
value of the fixed asset and significant adjustment is made for the risk factors. The
revaluation hedges are included in the comprehensive income statement to give the effect on
capital.
As per AASB 107: AASB 107’cash flow’ denotes that a statement of cash changes should
be made along with financial statements to report the receipt and allocation of cash funds.
AASB 107 marks that cash flow statements are assumed as the part of financial statements
and Atlanta Company is made cash flow statements as per need.
As per AASB 116: As per AASB 116, Property, “Plant and Equipment” a business should
value its fixed asset appropriately and the amount of depreciation, revaluation, carrying
amounts and cost should be segregated properly. Financial statements of Atlanta Company
are also made after considering all instructions of AASB 116.
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Assessment 3
Part 1
Discuss the differences in the calculation of income tax based on the PAYG system and the
Income Tax Assessment Act.
In Australia, there are various laws which can be followed in relation to taxation and there are
several systems which are available for the calculation of the tax amount. The tax can be
calculated either by the income tax assessment act or with the help of PAYG system. There are
various aspects which are required to be noted in them and for that, it will be required that proper
understanding in relation to them is obtained. There are several differences between them which
will also be identified by the information which is provided below:
PAYG system:
This is the system of the tax in which the company will be making the advance payment in
relation to the tax so that the expected tax liability which will be arising is covered by the
business. In this, the investment income which is related to the present year will also be
considered. This will be paid on the basis of the assumption in which the expected tax will be
calculated (D'Elia, 2016). Then at the end of the ear actual accounts will be prepared and the tax
in accordance with them will be calculated. The amount which has been paid will be compared
to the company with the actual amount and the deviation which is there will be ascertained. By
this, the amount which is to be collected as a refund or the additional liability is any will be
determined. If the paid amount is more than a refund will be there and in case of the actual being
high, the company will have to issue a further invoice in this respect of the amount that is
payable. The amount of the PAYG tax will be calculated by the company and in that they will be
considering the information which will be available with the help of the information that is
present in the income tax returns which have been recently filed (Chen, 2015). The tax is
calculated by the ATO on the investment and business income in which growth in GDP will be
included and this will determine the amount of the installment. This will be paid in a quarterly
manner.
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Income tax assessment act:
It is the Act which is made by the parliament of Australia and in this, the laws which are required
to be followed by all the assesses are specified (Baum, et. al., 2017). There are various
provisions and sections which are specified in them in which the manner in which the company
will be required to calculate the assessable income and tax on the same will be ascertained. There
are various rules which are to be followed in respect of deductible and non-deductible expenses.
In this, all types of incomes and expenses are given the consideration (Faccio & Xu, 2015).
There is the proper system which will be followed and then the rate which is provided is used to
calculate the amount of the tax.
In this, no advance payment is made as in case of the PAYG and all of the calculation is made on
the actual information and no estimation is made.
Discuss what constitute taxable transactions, and what legislation governs this.
In the business, there are various transactions which are carried and it is required that the ones on
which tax is to be paid are identified and they are known as the taxable transactions. The
company will be liable to pay the tax on this. Out of all the taxable transactions, there are some
of the events which are exempt and they are to be excluded from the tax. The tax is paid on the
various transactions and they include international transactions which are made, the assessable
income which is earned in business will also be taxable and that will be taken after allowing the
deduction (Hemmelgarn, et. al., 2016). The capital gains which are made will also be considered
as the taxable transactions. All of the incomes which are made in the business will be included in
this as they will be the earning and will be counted as the taxable transaction. They all are
specified in the laws and act which is formulated and is to be followed.
There are various legislations which will be governing this and they include local government
legislation in which the state government will be making the act. Another is Commonwealth
legislation which will be dealing with all of the tax-related matters and in this various types of
taxes such as customs duties and excise will be covered. The last is the state and territory
legislation in which the stamp tax, payroll tax, and land tax are levied.
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Provide information regarding the impact the AASB has on reporting requirements to
businesses
The AASB is being adopted in Australia in place of the IFRS and there are various impacts
which will be faced by the business due to this in respect of the financial reporting. There are
various new policies and standards which are formulated under this and they will be required to
be applied (Kent, 2017). By them, the reporting will be made in their accordance and various
modifications will have to be adopted. There are several disclosure requirements that are to be
compiled by with the introduction of them. The new policies are providing the information to the
users and by that, they can take the decisions on various aspects inappropriate manner. The
change which will be faced in the financial position due to the new standards will have to be
disclosed. The reporting is now made in the more effective manner and true position of the
business is depicted by them (Adrian & Liang, 2016). The reporting will be made in lieu of the
acts and they will be reported to the responsible authorities.
Discuss the legal implications that affect business-research into a different state and federal
legislation.
There are various changes that may affect the business of the organization (Larrat, et. al., 2012).
The New Year implies the new taxation policies and this is important as it helps in gaining the
developments in the infrastructure of the organization. The change in the policy is different from
gaining the competitive advantage due to various compliance issues (Kitching, et. al., 2015). The
legal implications which may impact the business are:
1. Tax Policy Changes: The change in the tax policy may impact the business in the
adverse way that the federal tax policy reforms is passed in the Congress but have the
implications on business which are of all sizes (Kitching, et. al., 2015). The US tax code,
as well as the many states, may change the change the policies so that the better federal
policy can be confirmed and the regulations can be enhanced (Larrat, et. al., 2012). The
business should keep the proper track on the development of the new technologies so that
the new opportunities and the strategies can be pursued and the profitability within the
organization can be attained (Larrat, et. al., 2012).
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2. General data protection regulations (GDPR) in the European Union: The general
data protection regulations are established so as to follow up with the regulations which
are similar so that the American network can be constructed and the data can be secured
(Larrat, et. al., 2012). These developments are very much important for the entrepreneurs
so that the data security can be maintained within the European as well as the other
countries. The businessman should ensure that the policies are on the radar and thee
regulations are to be maintained in future (Kitching, et. al., 2015).
3. The Affordable Care Act: The change in this act will also impact the business
operations in the United States. This is the reform which is for the health care reform.
The tax changes which were made in the year 2018 include the provision within itself
that there was the reduction in Affordable Care Act (Larrat, et. al., 2012). The standards
which are set of the reporting are hard to change but the individuals who are self-insured
and the employees should always be ready to adopt all the changes (Kitching, et. al.,
2015).
So, the size of the organization does not matters but the businessman or the entrepreneur
should be ready to comply with all the changes that may affect the business in the future.
These should be included in their reports so that the managers of the business or the
organizations can take the decisions related to the particular implication accordingly (Larrat,
et. al., 2012).
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Part 2
Who is being protected by the legislative / standards?
By the help of the legislation and the standards which are being used in the business all of the
parties which are involved in them will be protected. The laws are made in such manner that the
interest of all including the company and the others are taken into consideration. The company
will be able to make all of the activities appropriately and also the as all of the laws will be
identified so they will also be compiled inappropriate manner (De Simone, 2016). There will be
appropriate reporting which will be made and company will be able to identify all the aspects of
the business. The investors will also be protected as they will be getting the true information by
which the decisions will be made in such manner that they are protected from any kind of loss.
Also, the employees are protected as the laws are made in relation to them also and they are
provided with all the rights which are necessary for them. There will be no risk which will be
involved in relation to the employment and this way they will be working efficiently.
What do these laws/standards promote?
The standards which are used will be promoting various aspects. They will be ensuring the
proper reporting in the business as by the help of the standards it will be possible to make the
records which will be incorporating all of the information in a proper manner and that will be
used for the interest of the company. The investors will also be using it and this will promote the
investment as they will be willing to invest in the company after knowing the true information.
The transparency is maintained at all of the disclosures are made in the business. There will be
an appropriate format which will be used and by that comparison will be made possible that
helps in evaluation of the entity and its position. The calculations are made in accordance with
them which ensure that they are accurate and no error is made. As they are same for all so
consistency will also be established in the business as all of will be following them and attaining
the best of the results by which busies growth will be achieved.
What do these laws/standards prevent?
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They will be used in the business and so all the changes which are there of having made the
mistakes and errors will be prevented. There are various situations in which the business requires
assistance and the same will be provided by them and this way they will be able to use them so
that they can take the appropriate decisions and prevent the business from any kind of adverse
impact. The misuse of the information will also be prevented as there are proper laws and the
disclosures are made in accordance with them and also the parties that are allowed to use the
records are also specified so all will not be using them. The misstatements will not be made and
the chances of making the default in compliance with the laws that are applicable will also be
presented as the company will be following all in a proper manner.
How do these laws/standards promote ethical accounting?
The ethical accounting is promoted by them as there will be proper standards which are set and
all will be required to follow them and make the accounts in respect of them. By this the
consistency will be there and as they are rigid so the employees and other parties will not be
having the right to make the changes in them (Ho, et. al., 2015). They will be followed as it is
and no modification will be allowed. In them, best aspects are mentioned and they all are ethical.
The accounting will be made by using them which will ensure that no illegal practice is used by
which unethical results are attained.
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References
 AASB, 2015. Property, Plant, and Equipment. Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB116_08-15_COMPoct15_01-
18.pdf [accessed on 29-05-2018]
 Adrian, T., & Liang, N. (2016). Monetary policy, financial conditions, and financial
stability.
 Baum, A., Mackmin, D., & Nunnington, N. (2017). The income approach to property
valuation. Routledge.
 Chen, H. J. (2015). Fertility and PAYG Pensions in an Overlapping Generations Model
with Endogenous Retirement.
 De Simone, L. (2016). Does a common set of accounting standards affect tax-motivated
income shifting for multinational firms?. Journal of Accounting and Economics, 61(1),
145-165.
 D'Elia, V. V. (2016). The PAYG system and the optimal redistribution instrument in an
overlapping generation model. International Social Security Review, 69(2), 107-136.
 Faccio, M., & Xu, J. (2015). Taxes and capital structure. Journal of Financial and
Quantitative Analysis, 50(3), 277-300.
 Gazzola, P. and Amelio, S., 2014. The impact of comprehensive income on the financial
ratios in a period of crises. Procedia Economics and Finance, 12, pp.174-183.
 Hemmelgarn, T., Nicodème, G., Tasnadi, B., & Vermote, P. (2016). Financial
Transaction Taxes in the European Union. National Tax Journal, 69(1), 217.
 Ho, S. S., Li, A. Y., Tam, K., & Zhang, F. (2015). CEO gender, ethical leadership, and
accounting conservatism. Journal of Business Ethics, 127(2), 351-370.
 Kent, R. A. (2017). The informational impacts of Australian listed companies reporting
the direct or indirect method statement of cash flows: cash flow disclosure.
 Kitching, J., Hart, M., and Wilson, N., (2015). Burden or benefit? Regulation as a
dynamic influence on small business performance. International Small Business Journal,
33(2), pp.130-147.
 Kulikova, L.I., Garyntsev, A.G. and Gafieva, G.M., 2015. The Balance sheet as
information model. Procedia Economics and Finance, 24, pp.339-343.
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 Larrat, E.P., Marcoux, R.M., and Vogenberg, F.R., (2012). Impact of Federal and State
Legal Trends On Health Care Services. Pharmacy and Therapeutics, 37(4), p.218.
 Miletić, D., 2014. Cash flow statement: Assessment of situation and application problems
in Serbia. Industrija, 42(4), pp.99-114.
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