Corporate Financial Accounting Assessment Task 2022

Running head: CORPORATE FINANCIAL ACCOUNTING
Corporate Financial Accounting
Name of the Student
Name of the University
Author Note

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CORPORATE FINANCIAL ACCOUNTING
Table of Contents
Case Studies.....................................................................................................................................3
Task 1...........................................................................................................................................3
Task 2...........................................................................................................................................3
Task 3...........................................................................................................................................4
Task 4...........................................................................................................................................5
Task 5...........................................................................................................................................6
Task 6...........................................................................................................................................7
Task 7...........................................................................................................................................8
Part 2..............................................................................................................................................10
Answer to question 1..................................................................................................................10
Answer to Question 2.................................................................................................................10
Answer to Question 3.................................................................................................................10
Answer to Question 4.................................................................................................................10
Answer to Question 5.................................................................................................................11
Answer to Question 6.................................................................................................................11
Answer to Question 7.................................................................................................................11
Answer to Question 8.................................................................................................................11
Answer to Question 9.................................................................................................................11
Answer to Question 10...............................................................................................................12
Answer to Question 11...............................................................................................................12
Answer to Question 12...............................................................................................................12
Answer to Question 13...............................................................................................................12
Answer to Question 14...............................................................................................................13
Answer to Question 15...............................................................................................................13
References..................................................................................................................................14

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CORPORATE FINANCIAL ACCOUNTING
Case Studies
Task 1
Date Particulars Debit Credit
21.6.2018 Inventory $
100,000.00
Accounts Receivable $
200,000.00
Land $
300,000.00
Buildings $
170,000.00
Fittings and
Equipment
NIL
Motor Vehicles $
5,000.00
Accounts Payable $
181,000.00
Bank Overdraft $
100,000.00
Business Purchase $
494,000.00
(Entry to record the purchase of business)
21.6.2018 Business Purchase $
494,000.00
Goodwill $
6,000.00
Ordinary Share Capital $
500,000.00

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CORPORATE FINANCIAL ACCOUNTING
(Entry to settle the purchase consideration)
Task 2
a. Statement to determine taxable income
Particulars Amount Amount
Net Profit before Tax 80000
Additional Depreciation charged during the
year
(2500)
Warranty expenses paid and charged (7000)
Bad debts written off (5000)
Rent received in advance NIL
Net Taxable Income during the year 65500
b. Required Journal Entries
Particulars Amount Amount
Tax Expense 19650
Tax Payable 19650
(Tax charged on overall income)
Deferred Tax Assets 4350
Tax Expense 4350
(Deferred Tax created on the expenses
deducted)
Task 3
Statement of Operating Cash Flow

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CORPORATE FINANCIAL ACCOUNTING
Particulars Amount
Operating profit after tax $104,000.00
Eliminate:
Depreciation Expense $17,000.00
Loss on sale of plant $25,000.00
Adjust:
Decrease in Accounts Receivable $13,000.00
Increase in Inventory ($3,000.00)
Decrease in Interest Receivable $300.00
Increase in prepayments ($400.00)
Decrease in Accounts Payable ($2,000.00)
Increase in Dividends Payable $5,000.00
Increase in Current Tax Payable $1,200.00
Increase in rent received in
advance
$1,400.00
Decrease in Accruals ($600.00)
Cash Flow from operating
activities
$160,900.00
Task 4
Statement of Comprehensive Income
Particulars Note Amount
('000)
Amount
('000)
Net Sales 1 8,280.00
Cost of Sales (1,105.00)
Gross Profit 7,175.00

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CORPORATE FINANCIAL ACCOUNTING
Operating Expenses 2
Selling and Distribution Expenses (450.00)
Administration Expenses (1,550.00)
Total Operating Expenses (2,000.00)
Operating Income 5,175.00
Non-operating or Other Items
Other Income 3 191.00
Finance Costs (16.00)
Valuation loss on trading investments (250.00)
Auditor's Remuneration (25.00)
Depreciation Expense (345.00)
Other Expenditure 4 (636.00)
Net Income during the year 4,730.00
Add: Non-tax deductible items 250.00
Net Taxable Income during the year 4,980.00
Working Notes:
1. The revenue earned by the entity includes the revenue earned from the sales made by the
company.
2. Operating expenses are inclusive of the selling and distribution expenses of $450 and
administration expenses of $1550.
3. The other income which is not attributable to the operating income of the entity has been
arrived at $191.
4.

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CORPORATE FINANCIAL ACCOUNTING
Particulars Amount
Finance Costs 16.00
Valuation loss on trading investments 250.00
Auditor's Remuneration 25.00
Depreciation Expense 345.00
Other Expenditure 636.00
5. The trading instruments are considered as a material item by the entity. Hence, the loss
on their valuation has been included in the statement of comprehensive income.
Task 5
a. Journal Entries
Date Particulars Debit Credit
30.6.2010 Land 90
To Deferred Tax Liability 27
To Asset Revaluation Reserve 63
(Increase in the value of land)
30.6.2010 Available for sale investments - revaluation
reserve
45.5
Deferred Tax Asset 19.5
Available for sale investments 65
(Decrease in the value of available for sale
investments)
b. Statement of Changes in Equity
Particulars Amount
Share capital at the beginning of the year $10,200
Issuance of Stock $6,000
Net Income (Net Loss) $4,525

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CORPORATE FINANCIAL ACCOUNTING
Amount transferred to reserves ($80)
Dividend Paid during the year ($300)
Net Equity $20,345
Task 6
a. Current Assets Section
Particulars Note Amount
('000)
Trade Debtors 1 $
165.00
Loan to Directors $
17.00
Cash at Bank $
138.00
Inventories 2 $
750.00
Total Current
Assets
$
1,070.00
b. Non-current Assets
Particulars Note Amount
Goodwill, Net 3 $
320.00
Computer
Software, Net
4 $
400.00
Deferred Tax
Asset
$
62.00

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CORPORATE FINANCIAL ACCOUNTING
Total Non-Current Assets $
782.00
Notes to Accounts:
1. The trade debtors or Accounts receivable has been included in the current assets as it is
usually receivable within a period of one year. The value of this is 165 million as the
provisions for doubtful debts of $18 million has been deducted from the trade debtors of
$183 million.
2. The inventories consist of the following items:
Particulars Amount ($ million)
Raw materials at cost 100
Work in Progress at Cost 250
Finished goods at lower of cost and net
realisable value
400
3. The cost of Goodwill is $400 million. The impairment of $80 million has been deducted
from the same to show the net value of goodwill, which is $320 million.
4. The value of computer software is $500 million. Amortisation expenses of $100 million
have been deducted to arrive at the net value of $400 million.
Task 7
Consolidation Worksheet South
Ltd
West
Ltd
Eliminations Consolidated
30-Jun-17 Dr Cr Statements
Sales 900,000 500,000 110000 1,290,000
Inventory 01/07/2016 70,000 60,000 130,000
Purchases 510,000 400,000 910,000
580,000 460,000 1,040,000
Inventory 30/06/2017 90,000 80,000 3000 173,000

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CORPORATE FINANCIAL ACCOUNTING
Less Cost of Goods Sold 490,000 380,000 110000 760,000
Gross Profit 410,000 120,000 530,000
Expenses 210,000 40,000 250,000
200,000 80,000 280,000
Add Other Income
Profit on Sale of Plant 10,000 0 10000 0
Interest Income 750 0 750 0
Dividends from West Ltd 30,000 0 30,000
Profit before Tax 240,750 80,000 310,000
Less Income Tax expense 90,000 30,000 120,000
Profit 150,750 50,000 190,000
Retained Earnings
01/07/2016
80,000 40,000 2750 122,750
Available 230,750 90,000 312,750
Appropriations:
Dividend – Paid 40,000 30,000 70,000
Dividend - Declared 50,000 20,000 70,000
Total Appropriations 90,000 50,000 140,000
Retained Earnings
30/06/2017
140,750 40,000 27,000 153,750
General Reserve 100,000 50,000 30,000 120,000
Share Capital 200,000 100,000 100,000 200,000
Dividend Payable 50,000 20,000 70,000
Other Current Liabilities 110,000 60,000 170,000
Non-Current Liabilities 60,000 20,000 80,000
660,750 290,000 793,750
Shares in West Ltd 160,000 0 160000 0
Plant and Equipment (net) 260,000 120,000 2000 378,000
Inventory 90,000 80,000 3000 5000 168,000

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CORPORATE FINANCIAL ACCOUNTING
Other Assets 150,750 90,000 240,750
Goodwill on Consolidation 0 10000 10000
Accum Impairment –
Goodwill
-3000
660,750 290,000 793,750
Part 2
Answer to question 1
The three types of coding systems that can be used by a business to systematically
classify, code and checking the data are source coding, channel coding, cryptographic coding and
line coding. These systems are helpful in compressing the data and making it more useful in
being used as a part of the business (Shkvir and Borshchuk 2018).
Answer to Question 2
Some of the computerized accounting systems that could be used for accounting for data
include ready-to-use software, customised software and tailored software. Some of the prominent
software that are available in the market for businesses include QuickBooks, Sage and
Bookkeeper. These software are essential in breaking down vast amounts of data and using it in
the preparation of the financial statements.
Answer to Question 3
The first step in preparing a consolidated statement is to combine the assets and liabilities
of both the entities. Any prior investment of the parent company in the subsidiary should be
eliminated. The profits or losses of the non-controlling interest should then be separated. Their
share in the assets and liabilities should also be separated. The combined balances form the
consolidated account (Miller Jr and Segall 2017).

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CORPORATE FINANCIAL ACCOUNTING
Answer to Question 4
Fair value measures are used in the valuation of the assets at the time of preparing the
consolidated financial statements. These values are used to reflect the existing market conditions
and the position of the business at the time of undertaking the business. This also helps the parent
company in avoiding the undervaluation and overvaluation of the business at the time of merger
(Palea 2014).
Answer to Question 5
The various effects of taxation that need to be considered are the amount of income tax
related to the comprehensive income after making necessary adjustments to the profits and losses
of the entities. The consolidated entity can either show the net tax effect or show the entire tax
amount and allocate it between the pre-adjustment and post-adjustment comprehensive income.
Answer to Question 6
The types of charts that can be used for a report include a pie chart, horizontal and
vertical bar charts and a histogram. These are useful in simplifying the data and representing the
results visually. The diagrams that can be used in reports include a flowchart diagram, object
diagram and a component diagram. A profile and package diagram are also useful in a report
(Blanchette et al. 2013).
Answer to Question 7
One of the major requirements that needs to be followed at the time of preparing the
financial statements is the rules and regulations prescribed by the Accounting Standards. These
financial statements should also be audited on an annual basis and certified by a qualified
auditor. Sufficient disclosures should also be made suggesting the reliability of the financial
statements.

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CORPORATE FINANCIAL ACCOUNTING
Answer to Question 8
Financial statements are the only source of information about the financial performance
and health of an organisation to most of the stakeholders. Hence, they should be consistent with
the information available to the management at the time of their preparation. This also avoids
any unnecessary sanctions and penalties from the statutory authorities in the future (Handley
2013).
Answer to Question 9
The current taxation requirements suggest that every entity should prepare the financial
statements in accordance with the Australian Accounting Standards. The cash flows of the entity
should be presented separately from other parts of financial statements. Other important items
include the interest, income tax paid, dividends received and other expenses paid. The notes to
accounts and various registers should also be appropriately maintained.
Answer to Question 10
In Australia, the entities should identify the taxation and financial reporting requirements
before the preparation of the financial statements. The financial statements are then prepared in
accordance with the requirements. Other acts like the Corporations Act 2001, regulations of
ATO, ASIC, Financial Reporting Council and the AASB should all be followed in preparing the
financial statements of an entity.
Answer to Question 11
In case of a relation between a service provider and an adviser, the adviser is likely to
provide an advice which will benefit the service provider. However, this should be avoided. If
sensitive information like the product design and policies of the entity are not stored properly,
then they can be accessed by outsiders. This should be avoided by the organisation (Fung 2014).

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CORPORATE FINANCIAL ACCOUNTING
Answer to Question 12
The industry-standard methods include the usage of coding to simplify and record
necessary data. The financial statements are prepared using the Accounting Standards suggested
by AASB. Presentation of the financial results and their interpretation is done through different
charts and diagrams to visually represent the data.
Answer to Question 13
A depreciation schedule, also known as the fixed asset register should be maintained by
the entities to record their fixed assets at cost. The depreciation on these assets is then charged
over the lifetime of the asset or until they are sold by the business. The depreciation on the assets
is calculated either by using the straight line method or the written down value method of
depreciation.
Answer to Question 14
The general requirements that should be included in the organisational policies include
the adoption of the Generally Accepted Accounting Standards in the preparation of the financial
statements. The accounting policies should be selected on the basis of the size, business and the
requirements of the entity. The policies should also comply with all the statutory requirements
guiding the corporate entities (Anić-Antić and Konsuo 2015).
Answer to Question 15
The Directors of an entity can delegate their power but not their responsibilities to others.
The financial reports should be prepared on both annual and half-yearly basis. Both should
contain important financial results of the entity. The tax payment timings should be followed on
the basis of the information gathered from the Corporations Law.

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CORPORATE FINANCIAL ACCOUNTING

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CORPORATE FINANCIAL ACCOUNTING
References
Anić-Antić, P. and Konsuo, D., 2015. THE IMPORTANCE OF CONVERGENCE BETWEEN
US GAAP AND IFRS FOR PUBLICLY LISTED COMPANIES. Ekonomski pregled, 66(4),
pp.358-383.
Blanchette, M., Racicot, F.É., Sedzro, K. and Simonova, E., 2013. IFRS adoption in Canada: An
empirical analysis of the impact on financial statements. Certified General Accountants
Association of Canada, pp.1-68.
Fung, B., 2014. The demand and need for transparency and disclosure in corporate
governance. Universal Journal of Management, 2(2), pp.72-80.
Handley, K., 2013. Accounting standards for Australian SMEs: identifying, considering and
incorporating the needs of users into financial statements. Macquarie University, Faculty of
Business and Economics, Department of Accounting and Corporate Governance.
Miller Jr, E.L. and Segall, L.N., 2017. Mergers and Acquisitions,+ Website: A Step-by-Step
Legal and Practical Guide. John Wiley & Sons.
Palea, V., 2014. Fair value accounting and its usefulness to financial statement users. Journal of
Financial Reporting and Accounting, 12(2), pp.102-116.
Shkvir, V. and Borshchuk, I., 2018, February. Methodology of construction accounting
nomenclature codes of non-automatic informational base of computer accounting system.
In Economics, Entrepreneurship, Management (Vol. 5, No. 2, pp. 51-58). Lviv Politechnic
Publishing House.