Comprehensive Accounting Systems and Processes Analysis

This assignment solution provides a comprehensive analysis of accounting systems and processes, covering various aspects such as cell referencing in Excel, the use of parentheses for negative numbers, designing spreadsheets with separate data entry and report areas, and the application of t...Read More

RUNNING HEAD: ACCOUNTING SYSTEMS AND PROCESSES
ACCOUNTING SYSTEMS AND PROCESSES

ACCOUNTING SYSTEMS AND PROCESSES 1
Contents
Q.1.........................................................................................................................................................2
Q.2.........................................................................................................................................................2
Q.3.........................................................................................................................................................3
Q.4.........................................................................................................................................................5
Q.5.........................................................................................................................................................6
Q.6.........................................................................................................................................................7
Q.7.......................................................................................................................................................16
Q.8.......................................................................................................................................................21
Q.9.......................................................................................................................................................23
Q.10.....................................................................................................................................................24
Q.11.....................................................................................................................................................25
Q.12.....................................................................................................................................................26
Q.13.....................................................................................................................................................28
REFERENCES........................................................................................................................................35

ACCOUNTING SYSTEMS AND PROCESSES 2
Q.1.
The requirement of replacing cell reference in excel sheet with names is just to make it look
tranquil and simpler and also to make it comprehend the concept of using of formula. With
this function any individual can be able to deal with the data as well as analyse the data very
smoothly and easily. Further naming cells in spreadsheets will be very useful for the
individual for the identification of the values. Therefore, below instances of naming reference
in spreadsheets will be used by the individual for his simplicity (Microsoft, 2017).
Example No name With name
Table A4:A22 =Quarterexpenses
Reference =SUM(A4:A13) =SUM(Quarterperiodexpenses)
Spreadsheet
Example:
Normal View:
Owners’ Equity Liabilities Assets
185000 55000 240000
Formula View:
Owners’ Equity Liabilities Assets
185000 55000
=Owners_Equity+Liabilitie
s
Q.2.
Parentheses is called as brackets in spreadsheet. In accountancy, negative numbers normally
disclose credit amounts. Negative figures can be represented in many ways such as minus
signs, applying red colour or using brackets to the values. Although many formats are used
but using of brackets for denoting negative figures is categorized as standard format or

ACCOUNTING SYSTEMS AND PROCESSES 3
brackets can easily highlight the credit entries in the calculation. Further, negative amounts
can be identified very easily through using of brackets (Microsoft, 2017).
Spreadsheet
Example:
Particulars Amount
Gross Profit $ 1,00,000.00
Operating Expenses ($26,000.00)
EBIT $ 74,000.00
Interest ($15,000.00)
EBT $ 59,000.00
Taxes ($9,000.00)
EAT/Profit after tax $ 50,000.00
Q.3.
Accountant of the company should always design spreadsheets with a completely separate
data entry area and separate report area because to show clarity about the company’s financial
stability and also to provide a better picture to the users of the financial statements. Further it
can also be said that accountants can use the workbook for the purpose of lengthy
calculations by applying formulae’s and other functions. Another reason is that any data can
be inserted in the spreadsheet without any changes in the whole data and also any deletion in
the data can be made with ease and simplicity. Then all the data will be incorporated into the
report area.
Hence, separation of data entry and report area will fetch benefits and financial stability will
be easily assessed.
Spreadsheet
Example:
Normal View:

ACCOUNTING SYSTEMS AND PROCESSES 4
Century Ltd
Income Statement
For the year ended 31 March 2017
Particulars Amount
Incomes
Revenue 500000
Other Income 78500
Total (A) 578500
Expenses
Wages paid 58000
Depreciation 26500
Advertisement 1500
General Expenses 6900
Light and Power 8500
Audit Fees 9500
Total (B) 110900
Profit Before Tax (A-B) 467600
Tax 5400
Profit after Tax 462200
Formula View:
Century Ltd
Income Statement
For the year ended 31 March 2017
Particulars Amount
Incomes
Revenue 500000
Other Income 78500
Total (A) =SUM(J7:J8)
Expenses
Wages paid 58000
Depreciation 26500
Advertisement 1500
General Expenses 6900
Light and Power 8500
Audit Fees 9500
Total (B) =SUM(J11:J16)
Profit Before Tax (A-B) =J9-J17

ACCOUNTING SYSTEMS AND PROCESSES 5
Tax 5400
Profit after Tax =J18-J19
Q.4.
IF Function is considered as a logical function in Excel and can be used as formula in
spreadsheet. IF function evaluates one value if the condition is TRUE and evaluates another
value if the condition is FALSE (Microsoft, 2017).
The syntax of IF function is:
Spreadsheet
Example:
Normal View:
Century Ltd
Trial Balance
For the year 31 March 2017
Account Debit Credit
Share Capital 20,000
Furniture & Fixture 8,000
Building 15,000
Creditor 8,000
Debtors 7,000
Cash 10,000
Sales 28,000
Cost of sales 10,000
General and Administration Expense 6,000
TOTAL 56,000 56,000 TRUE
Formula View:
Century Ltd
Trial Balance
For the year 31 March 2017
Account Debit Credit

ACCOUNTING SYSTEMS AND PROCESSES 6
Share Capital 20000
Furniture & Fixture 8000
Building 15000
Creditor 8000
Debtors 7000
Cash 10000
Sales 28000
Cost of sales 10000
General and
Administration Expense 6000
TOTAL =SUM(M6:M14) =SUM(N6:N14) =IF(M15=N15,"TRUE","FALSE")
Q.5.
The periodic system is an inventory valuation system in which books of accounts are not
updated on every sales and purchases made but books of accounts will be updated at the end
of accounting period. Further in periodic inventory system, no accounting for wastages, loss
and scraps are done. This type of inventory valuation is typically used by the small businesses
(Stevenson & Hojati, 2007).
Spreadsheet
Example:
Date Particulars Amount ($)
01-04-2017
Opening
inventory
(500 units at $
12 each) 6000
15-04-2017 Purchase
(800 units at $
12 each) 9600
22-04-2017 Sales
(900 units at $
20 each) 18000
30-04-2017
Closing
inventory
(400 units at $
12 each) 4800
Periodic inventory system:
Particulars Amount ($) Particulars Amount ($)
Opening Inventory 6000 Sales 18000

ACCOUNTING SYSTEMS AND PROCESSES 7
Purchase 9600 Closing Inventory 4800
Gross profit 7200
Total 22800 Total 22800
Q.6.
A. Used Camscanner for the handwritten solution.
Report

ACCOUNTING SYSTEMS AND PROCESSES 8

ACCOUNTING SYSTEMS AND PROCESSES 9
Worksheet

ACCOUNTING SYSTEMS AND PROCESSES 10
B.
Spreadsheet
Adjustments
Normal View:
Fancy Footwear
Data Trial balance Debit Credit
Cash 12450
Accounts receivable 17650
Inventory 56980
Supplies 7560
Buildings 145000
Accumulated depreciation, building 17600
Furniture 23780
Accumulated depreciation, furniture 5760
Accounts payable 17400
Salary payable 2300
Interest payable 1400
Unearned sales revenue 10550
Note payable, long term 34000
capital 142675
Drawings 4590
Sales revenue 166000
Sales discount 3450
Sales returns 3430
Purchase 89700
Purchase discount 4015
Purchase return and allowances 7690
Selling expenses 23700
Supplies Expenses 1600
Depreciation on building 2000

ACCOUNTING SYSTEMS AND PROCESSES 11
Depreciation on furniture 1850
Salaries expenses
General expenses 14500
Supplies Expenses 800
Depreciation on building 2000
Depreciation on furniture 1850
Interest expenses
Suspense 3500
Total 412890 412890 OK
Formula View:
Fancy Footwear
Data Trial balance Debit Credit
Cash 12450
Accounts
receivable 17650
Inventory 56980
Supplies 7560
Buildings 145000
Accumulated
depreciation,
building 17600
Furniture 23780
Accumulated
depreciation,
furniture 5760
Accounts payable 17400
Salary payable 2300
Interest payable 1400
Unearned sales
revenue =7650+2900
Note payable,
long term 34000
capital 142675
Drawings 4590
Sales revenue 166000
Sales discount 3450
Sales returns 3430

ACCOUNTING SYSTEMS AND PROCESSES 12
Purchase 89700
Purchase discount 4015
Purchase return
and allowances 7690
Selling expenses 23700
Supplies Expenses =2400*2/3
Depreciation on
building =4000*0.5
Depreciation on
furniture =3700*0.5
Salaries expenses
General expenses 14500
Supplies Expenses =2400*1/3
Depreciation on
building =4000*0.5
Depreciation on
furniture =3700*0.5
Interest expenses
Suspense =+L39-SUM(L7:L37)
Total =SUM(K7:K38) =+K39 =IF(K39=L39,"OK","NOT OK")
Changes
Normal View:
Fancy Footwear
Data Trial balance Debit Credit
Cash 12450
Accounts receivable 27650
Inventory 56980
Supplies 7560
Buildings 145000
Accumulated depreciation, building 17600
Furniture 23780
Accumulated depreciation, furniture 5760
Accounts payable 24900

ACCOUNTING SYSTEMS AND PROCESSES 13
Salary payable 2300
Interest payable 1400
Unearned sales revenue 10550
Note payable, long term 34000
capital 142675
Drawings 4590
Sales revenue 166000
Sales discount 3450
Sales returns 3430
Purchase 89700
Purchase discount 4015
Purchase return and allowances 6190
Selling expenses 23700
Supplies Expenses 1600
Depreciation on building 2000
Depreciation on furniture 1850
Salaries expenses
General expenses 14500
Supplies Expenses 800
Depreciation on building 2000
Depreciation on furniture 1850
Interest expenses
Suspense 7500
Total 422890 422890 OK
Formula View:
Fancy Footwear
Dat
a Trial balance Debit Credit
Cash 12450
Accounts
receivable =17650+10000
Inventory 56980
Supplies 7560
Buildings 145000

ACCOUNTING SYSTEMS AND PROCESSES 14
Accumulated
depreciation,
building 17600
Furniture 23780
Accumulated
depreciation,
furniture 5760
Accounts payable =17400+7500
Salary payable 2300
Interest payable 1400
Unearned sales
revenue =7650+2900
Note payable,
long term 34000
capital 142675
Drawings 4590
Sales revenue 166000
Sales discount 3450
Sales returns 3430
Purchase 89700
Purchase
discount 4015
Purchase return
and allowances =7690-1500
Selling expenses 23700
Supplies Expenses =2400*2/3
Depreciation on
building =4000*0.5
Depreciation on
furniture =3700*0.5
Salaries expenses
General expenses 14500
Supplies Expenses =2400*1/3
Depreciation on
building =4000*0.5
Depreciation on
furniture =3700*0.5
Interest expenses
Suspense
=+R39-
SUM(R7:R37)
Total
=SUM(Q7:Q38
) =+Q39
=IF(Q39=R39,"OK","NOT
OK")

ACCOUNTING SYSTEMS AND PROCESSES 15
C.
Introduction
This report evaluates spreadsheet as a tool of accounting. Further spreadsheet helps
the accountant in apportioning costs to different divisions very easily (Jones, 2005). Hence,
benefits of using spreadsheet for accounting purposes are as follows:
Spreadsheet advantages in accounting:
1. Charts and diagrams can be made through spreadsheet for the simplicity or easy
understanding of the data.
2. Formulae’s built in excel can be used for making calculation and also brings the exact
results.
3. Another benefit of using spreadsheet is that any single value can be inserted or deleted
without changing the whole values in spreadsheet.
4. Large and voluminous data can be easily imported from external sources into the
spreadsheet for accounting purposes.
5. Spreadsheet also provides the facility of making notes describing every line of data.
6. All the values in the spreadsheet can be linked with each other is also an advantage of
using the spreadsheet.
Conclusion
Therefore, after analysing the advantages it can be concluded that spreadsheet is the
best source for accounting purpose. The outcomes will bring the precise results which is
beneficial to both company and the stakeholders.
Q.7.
Original Version
Normal View:

ACCOUNTING SYSTEMS AND PROCESSES 16
Bruges Inc
For the month of October
Data Particulars Units Unit cost ($)
Oct-01 Opening Inventory 60 57
Oct-03 Purchase 10 65
Oct-12 Purchase 30 70
Oct-18 Purchase 70 72
Oct-31 Inventory on hand 115
October Sales revenue $ 25,000.00
REPORTS Average Cost ($) LIFO ($) FIFO ($)
Beginning inventory 3420 3420 3420
Net Purchases 7790 7790 7790
Cost of goods available 11210 11210 11210
Ending Inventory 7583.24 6555 8280
Cost of Goods Sold 3626.76 4655.00 2930.00
(Nobes, 2011).
Calculation of Gross Profit
Particulars Average Cost ($) LIFO ($) FIFO ($)
Sales Revenue 25000.00 25000.00 25000.00
Cost of Goods sold 3626.76 4655.00 2930.00
Gross profit 21373.24 20345.00 22070.00
Working Note
1 Calculation of cost per unit
AVERAGE METHOD
Average cost = Total costs/no. of units
Average cost 65.94
Cost of goods sold = Cost of goods available - Ending Inventory
2 Calculation of cost per unit
LIFO METHOD

ACCOUNTING SYSTEMS AND PROCESSES 17
Date Particulars Units
Oct-31 Inventory on hand 115
Less: Oct-18 Purchase 70
Less: Oct-12 Purchase 30
Less: Oct-03 Purchase 10
Less: Oct-01 Purchase 5
Balance 0
Cost per unit 57
3 Calculation of cost per unit
FIFO METHOD
Date Particulars Units
Oct-31 Inventory on hand 115
Less: Oct-01 Purchase 60
Less: Oct-03 Purchase 10
Less: Oct-12 Purchase 30
Less: Oct-18 Purchase 15
Balance 0
Cost per unit 72
Formula View:
Bruges Inc
For the month of October
Data Particulars Units Unit cost ($)
37165 Opening Inventory 60 57
37897 Purchase 10 65
41185 Purchase 30 70
43376 Purchase 70 72
48124 Inventory on hand 115
October Sales revenue 25000
REPORTS Average Cost ($) LIFO ($) FIFO ($)
Beginning =D5*E5 =D5*E5 =D5*E5

ACCOUNTING SYSTEMS AND PROCESSES 18
inventory
Net Purchases
=(D6*E6)+(D7*E7)+
(D8*E8)
=(D6*E6)+(D7*E7)+
(D8*E8)
=(D6*E6)+(D7*E7)+
(D8*E8)
Cost of goods
available =SUM(D14:D15) =SUM(E14:E15) =SUM(F14:F15)
Ending Inventory =D9*C32 =D9*D46 =D9*D59
Cost of Goods Sold =D16-D17 =E16-E17 =F16-F17
Calculation of Gross Profit
Particulars Average Cost ($) LIFO ($) FIFO ($)
Sales Revenue =D11 =D11 =D11
Cost of Goods sold =D18 =E18 =F18
Gross profit =D22-D23 =E22-E23 =F22-F23
Working Note
1
Calculation of cost per
unit
AVERAGE METHOD
Average cost = Total costs/no. of units
Average cost =D16/(D5+D6+D7+D8)
Cost of goods sold = Cost of goods available - Ending
Inventory
2
Calculation of cost per
unit
LIFO METHOD
Date Particulars Units
48124
Inventory on
hand 115
Less: 43376 Purchase =D8
Less: 41185 Purchase =D7
Less: 37897 Purchase =D6
Less: 37165 Purchase 5
Balance
=E39-E40-E41-E42-
E43
Cost per unit =E5
3
Calculation of cost per
unit
FIFO METHOD

ACCOUNTING SYSTEMS AND PROCESSES 19
Date Particulars Units
48124
Inventory on
hand 115
Less: 37165 Purchase =D5
Less: 37897 Purchase =D6
Less: 41185 Purchase =D7
Less: 43376 Purchase 15
Balance
=E52-E53-E54-E55-
E56
Cost per unit =E8
Second Version
For the month of October
Data Particulars Units Unit cost ($)
Oct-01 Opening Inventory 60 57
Oct-03 Purchase 10 50
Oct-12 Purchase 30 45
Oct-18 Purchase 70 40
Oct-31 Inventory on hand 115
October Sales revenue $ 25,000.00
REPORTS Average Cost ($) LIFO ($) FIFO ($)
Beginning inventory 3420 3420 3420
Net Purchases 4650 4650 4650
Cost of goods available 8070 8070 8070
Ending Inventory 5459.12 6555 4600
Cost of Goods Sold 2610.88 1515.00 3470.00
Calculation of Gross Profit
Particulars Average Cost ($) LIFO ($) FIFO ($)
Sales Revenue 25000.00 25000.00 25000.00
Cost of Goods sold 2610.88 1515.00 3470.00
Gross profit 22389.12 23485.00 21530.00
Working Note
1 Calculation of cost per unit

ACCOUNTING SYSTEMS AND PROCESSES 20
AVERAGE METHOD
Average cost = Total costs/no. of units
Average cost 47.47
Cost of goods sold = Cost of goods available - Ending Inventory
2 Calculation of cost per unit
LIFO METHOD
Date Particulars Units
Oct-31 Inventory on hand 115
Less: Oct-18 Purchase 70
Less: Oct-12 Purchase 30
Less: Oct-03 Purchase 10
Less: Oct-01 Purchase 5
Balance 0
Cost per unit 57
3 Calculation of cost per unit
FIFO METHOD
Date Particulars Units
Oct-31 Inventory on hand 115
Less: Oct-01 Purchase 60
Less: Oct-03 Purchase 10
Less: Oct-12 Purchase 30
Less: Oct-18 Purchase 15
Balance 0
Cost per unit 40
Comment
By changing the results, it has been found that in second version gross profit has increased in
Average cost method and LIFO method whereas gross profit has decreased in FIFO method.
Q.8.
A.

ACCOUNTING SYSTEMS AND PROCESSES 21
B.
Spreadsheet
Normal View:
Melania Insurance
Data
Particulars $
Bank balance on 30 April 19670
Adjustments:
EFT Rent receipt -600
EFT Insurance payment 300
NSF Cheque from
customer -1700
Note receivable -1500
Bank error Cheque 1419 340
Bank service charges 40
Deposit in transit 19

ACCOUNTING SYSTEMS AND PROCESSES 22
outstanding cheque
Cheque no. 1420 1532
Cheque no. 1421 700
Cheque no. 1422 230
Cash account balance as
of 30 April 19031 OK
Formula View:
Melania Insurance
Data
Particulars $
Bank balance on 30 April 19670
Adjustments:
EFT Rent receipt -600
EFT Insurance payment 300
NSF Cheque from customer -1700
Note receivable -1500
Bank error Cheque 1419 340
Bank service charges 40
Deposit in transit =-1543+1562
outstanding cheque
Cheque no. 1420 1532
Cheque no. 1421 700
Cheque no. 1422 230
Cash account balance as of 30 April =SUM(C26:C38) =IF(C20=C39,"OK","NOT OK")
Changes
Normal View:
Melania Insurance
Data
Particulars $
Bank balance on april 30 19670
Adjustments:
EFT Rent receipt -900
EFT Insurance payment 600

ACCOUNTING SYSTEMS AND PROCESSES 23
NSF Cheque from
customer -2000
Note receivable -1600
Bank error Cheque 1419 540
Bank service charges 40
Deposit in transit 1743
outstanding cheque
Cheque no. 1420 432
Cheque no. 1421 300
Cheque no. 1422 206
Cash account balance as
of 30 April 19031
Q.9.
Journal Entries
1. For credit sales
Particulars Debit Credit
Accounts Receivable A/c Dr.
To Credit Sales A/c
$ 10,000
$ 10,000
2. Collection
Particulars Debit Credit
Cash Account A/c Dr.
To Accounts Receivable A/c
$ 4,500
$ 4,500
3. Written Off
Particulars Debit Credit
Allowance for doubtful amount A/c Dr.
To Accounts Receivable A/c
$ 2,000
$ 2,000
4. Reinstatement of the written off amount

ACCOUNTING SYSTEMS AND PROCESSES 24
Particulars Debit Credit
Accounts Receivable A/c Dr.
To Allowance for doubtful amount A/c
$ 2,000
$ 2,000
5. Full and Final collection
Particulars Debit Credit
Cash Account A/c Dr.
To Accounts Receivable A/c
$ 5,500
$ 5,500
Accounts receivable
T-Account
Particulars Amount in $ Particulars Amount in $
To credit sales 10,000 By balance b/d -
By Allowance for
doubtful amount
2,000 By cash 4,500
To balance c/d - By Allowance for
doubtful amount
2,000
By cash 5,500
(Weygandt, Kimmel & Kieso, 2015).
Q.10.
Two different methods of estimating bad debts are as follows:
1. Percentage of credit sales method:
This method calculates the bad debt amount from the percentage of credit sales.
For instance:
Credit sales amounting to $ 100000
Given that 1% amount is uncollectible.

ACCOUNTING SYSTEMS AND PROCESSES 25
Bad Debt amount = $ 100000 * 1% = $ 1000
Journalise:
Particulars Debit Credit
Bad debt Expense A/c Dr.
To Allowance for bad debt A/c
(Estimate of bad debts)
$ 1000
$ 1000
2. Percentage of Accounts receivable method:
This method calculates the bad debt amount from the percentage of accounts
receivable balance.
For instance:
Accounts receivable (closing balance) = $ 200000
Given that 1% amount is uncollectible.
Bad Debt amount = $ 200000 * 1% = $ 2000
Journalise:
Particulars Debit Credit
Bad debt Expense A/c Dr.
To Allowance for bad debt A/c
(Estimate of bad debts)
$ 2,000
$ 2,000
Q.11.
Many factors can be used for the assessment of the firm’s financial condition such as income
statement, balance sheet, statement of cash flows or through ratio analysis. Another source

ACCOUNTING SYSTEMS AND PROCESSES 26
for analysing firm’s financial condition are market influences, stock price variations,
consumer choices and foreign market etc.
Further accounts receivable can also be categorized to analyse financial stability of the
company.
Accounts receivable method is used to determine the solvency factors of the firm because it
reveals the actual position of cash. In other words, it helps in analysing how much cash is
available in the business, how much cash is utilized for the business purpose and how much
cash is due from the debtors. Hence, Accounts receivable is also very important for the
analysing firm’s financial stability.
Example: Suppose a company has a receivables of amount $ 500,000.
This amount can be used to evaluate financial position of the firm on the basis of two options.
These are:
 First, the amount of receivables is very huge that is it can be concluded that the
company has made huge sales during the year which is favourable to the company.
 Second, the receivables amount of $ 500,000 can be concluded that the company
collections policy from their customers is not effective.
Hence, from the above example it can be concluded that receivables can be used to evaluate
the firm’s financial position (Weygandt, Kimmel & Kieso, 2015).
Q.12.
Scenario:
Let’s assume, ABC Ltd. Sells umbrellas to PQR Ltd. for $ 20,000 (Total credit sales) with the
payment due in 90 days. After 90 days of non-payment, ABC ltd accepted the note receivable

ACCOUNTING SYSTEMS AND PROCESSES 27
from the PQR ltd for $ 20,000. It has been found that, PQR ltd had delayed the payment of
$16, 000 and balance $4,000 got dishonour.
The following journal entries are:
(1). Recording of credit sales:
Particulars Debit Credit
Notes Receivable A/c Dr.
Credit Sales Revenue A/c
$ 20,000
$ 20,000
(2). Conversion of Account receivable to Notes Receivable:
Particulars Debit Credit
Notes Receivable A/c Dr.
Account Receivable A/c
$ 20,000
$ 20,000
(3). PQR ltd only paid $ 16,000 after the due date:
Particulars Debit Credit
Account Receivable A/c Dr.
Notes Receivable A/c
$ 16,000
$ 16,000
(4). $4, 000 got dishonour. Journal for the dishonour of the note:
Particulars Debit Credit
Allowance for doubtful amount Dr.
Notes Receivable A/c
$ 4,000
$ 4,000
Note receivable
T-Account
Particulars Amount in $ Particulars Amount in $
To balance b/d - By Account
receivable
16,000

ACCOUNTING SYSTEMS AND PROCESSES 28
To Account
receivable
20,000 By Allowance for
doubtful amount
4,000
To credit sales
revenue
20,000 To balance c/d 20,000
Total 40,000 Total 40,000
Q.13.
Executive Summary
The Wesfarmers was originated in 1914. The Head office is located in Western Australia.
The Wesfarmers is one of the largest listed companies in Australia (ASX: WES). The
principal activities of Wesfarmers cover hotels liquor, supermarkets and department stores,
home improvement, business supplies and also widened its business operations in industrial
divisions such as chemicals, fertilisers, coal etc. This report will provide the financial stability
of Wesfarmers of 2016. In this report, Wesfarmers business activities, dividends, return on
Equity, EPS, corporate governance, sustainability, working capital ratio etc. are examined.
Further this report also concludes that Wesfarmers is not worth for investment opportunities
for Vikram.
Introduction
The Wesfarmers was originated in 1914. The Head office is located in Western Australia.
The Wesfarmers is one of the largest listed companies in Australia (ASX: WES). The
chairman of the company is Michael Chaney AO.
Business Operations
Wesfarmers has various business operations such as hotels, supermarkets, liquor, department
stores, office supplies etc. and also widened its business operations in industrial divisions
include chemicals, coal, fertilisers etc. Wesfarmers has employed of over 220,000 employees
in 2016 and has around 530000 shareholders (Wesfarmers, 2017).

ACCOUNTING SYSTEMS AND PROCESSES 29
Further in February 2016, two new department divisions were added to the group named as
‘Kmart’ and ‘Target’.
New acquisition was ‘Homebase’ from Home retail group Plc for AUD $ 665 million.
Comprehensive income
The total comprehensive income for the year 2016 was decreased by 3% from the previous
year.
Particulars 2016 ($ m) 2015 ($ m)
Net profit after tax 2353 2440
(Source: Annual Report, 2016; 2015).
2015 ($ m)
0
500
1000
1500
2000
2500
Net profit after tax
Other Financials
 Dividends
Particulars 2016 2015
Dividend per share 186 cents 200 cents
(Source: Annual Report, 2016; 2015).
2016 ($ m)
0
500
1000
1500
2000
2500
Net profit after tax

ACCOUNTING SYSTEMS AND PROCESSES 30
Comment: Dividends are distributed to the shareholders as part of profits. In 2016, dividend
declared only 186 cents which is less than 2015 because the company less profits as
compared to 2015.
 EPS
Particulars 2016 2015
EPS (basic) 209.5 cents 216.1 cents
(Source: Annual Report, 2016; 2015).
Comment: EPS indicates the profitability position of the company. In above table it has been
observed that in 2016 company’s profits are less than 2015 which signifies that the earnings
on share are also less as compared to 2015.
 ROE
Particulars 2016 2015
ROE 9.6% 9.8%
(Source: Annual Report, 2016; 2015).

ACCOUNTING SYSTEMS AND PROCESSES 31
Comment: ROE indicates the returns distributed to the shareholders on their investment. In
the above table it has been observed that in 2016 company has distributed only 9.6% returns
to their shareholders whereas in 2015, 9.8% returns were distributed to the shareholders. This
indicates that the current profitability position is not sound as compare to 2015.
 Risk and Mitigation
Wesfarmers has incorporated measures to reduce or eliminated avoidable risks which has a
huge impact on the company’s financials.
 Income Statement
 Particulars 2016 2015
Revenue 39242 $M 38201 $M
(Source: Annual Report, 2016; 2015).
Comment: After scrutinising income statement, the major component appears to be revenue
account. Hence, from the above table it has been observed that in current year (2016)

ACCOUNTING SYSTEMS AND PROCESSES 32
company has increased its sales by 2.73% from previous year (2015). This is a positive sign
for the company.
 Balance Sheet
Particulars 2016 2015
Free cash flow 1233 $M 1893 $M
(Source: Annual Report, 2016; 2015)
Comment: After scrutinising Balance sheet, the major component appears to be cash
account. Hence, from the above table it has been observed that in current year (2016)
company’s cash has reduced from the previous year (2015) by 34.86% which signifies a
extensive declination. This is a negative sign for the company.
 Corporate Governance
The main aim of the company is to provide the sound returns to their owners and fulfilling
the corporate governance commitments and accountabilities in the best interest of the
company as well as for their stakeholders.
Thus, Wesfarmers have been completely alignend with the third edtition of corporate
govenance principles and policies (Wesfarmers, 2016).
 Sustainability

ACCOUNTING SYSTEMS AND PROCESSES 33
In this category, the company has to be completely commited to manage the surroundings
and the community.
Hence, in this case Wesfarmers has proactively committed to maintain the surroundings,
community. Performance highlghts of the company are as follows (Wesfarmers, 2016).
Working capital ratio
The solvency position of the company is computed from the working capital ratio.
Formula: Current Assets – Current Liabilities
Particulars 2016 ($ M) 2015 ($ M)
Current Assets 9684 9093
Current Liabilities 10424 9726
Working Capital Ratio [Current
Assets/Current Liabilities]
0.93 0.93
(Source: Annual Report, 2016; 2015).
Comment: As seen from the above ratios, it can be concluded that liquidity performance of
the company is same 2015.

ACCOUNTING SYSTEMS AND PROCESSES 34
Conclusion:
Hence, it can be concluded from the above diagrams that Wesfarmers is not sound for
investment purposes. Therefore, Vikram should not invest $ 50, 000 in Wesfarmers.

ACCOUNTING SYSTEMS AND PROCESSES 35
REFERENCES
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Wesfarmers. (2015). Annual report. Retrieved on 11 September 2017 from
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sfvrsn=8.
Wesfarmers. (2017). Who we are. Retrieved on 11 September 2017 from
http://www.wesfarmers.com.au/who-we-are/who-we-are.
Wesfarmers. (2017). Our sustainability reporting. Retrieved on 11 September 2017 from
http://sustainability.wesfarmers.com.au/our-approach/our-sustainability-reporting/.
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