Accounting Report: Financial Statement Analysis, Taxation and Goodwill

This accounting report comprehensively analyzes various financial aspects. It begins with journal entries, detailing transactions like environmental pollution damages, sales returns, and bad debts. The report then presents financial statements, including a statement of profit and loss and a statement of changes in equity, followed by a balance sheet. Notes to the accounts clarify accounting standards and methods. The report further delves into taxation, providing a statement to determine taxable income, a taxation worksheet, and related journal entries. Finally, it analyzes goodwill and presents consolidated worksheet entries. The report includes references to academic sources, demonstrating a strong understanding of accounting principles and practices.

ACCOUNTING

TABLE OF CONTENTS
QUESTION 1...................................................................................................................................1
A. Journal entries....................................................................................................................1
B. Financial statements...........................................................................................................2
C Notes to Accounts...............................................................................................................4
QUESTION 2...................................................................................................................................5
A. Statement to Determine taxable Income............................................................................5
B. Taxation worksheet............................................................................................................6
C. Journal Entries...................................................................................................................7
QUESTION 3...................................................................................................................................8
A. Analysing the goodwill or gain on bargaining..................................................................8
B. Consolidated worksheet entries.........................................................................................8
REFERENCES..............................................................................................................................10

QUESTION 1
A. Journal entries
Date Particulars
Debit
(In$)
Credit
(In$)
15-07-18 Damages for environment pollution a/c dr 150000
To Environment Protection Authority 150000
(Being claim form environment protection authority
payable)
15-07-18 Sales Return a/c dr 2000
To Account Receivables 2000
(being issue of credit note to a customer)
05-07-18 Bad Debts a/c dr 63000
To Accounts Payable a/c 63000
(being bad debt calculated in case of liquidation)
Q.2
Statement of Profit Loss for the year ended 30/06/2018 Amount
Sales Revenue 990000
Less Cost of Goods Sold 290000
Gross Profit 700000
1

Distribution Expenses 93000
Sales and marketing Expense 95000
Administration Expenses 55000
Interest Expense 55000
298000
Add Interest Revenue 98500
Net Profit 500500
B. Financial statements
Statement of changes in Equity
Particulars
Share Capital
(In$)
Retained Earnings
(In$)
Revaluation Surplus
(In$) Total Equity
Balance as at 1/07/2017 Nil Nil 50000 Nil
Changes in Equity
Issue Of Share Capital 560000 51000 50000 661000
Income for Current year 369350 369350
Revaluation surplus 15000 15000
Dividends paid ` -32000 -32000
Balance as at 30/06/018 560000 388350 65000 1013350
Statement of Financial Position Amount Amount
2

as on 30/06/2018 (In$) (In$)
Assets
Buildings 360000
Motor Vehicles 340000
Land 85000
Goodwill 50000
Cash at bank 97000
Closing Inventories 123000
Accounts Receivables 192500
Term Deposits 337000
1584500
Liabilities
Share Capital 560000
Retained Earnings 51000
Less Dividend Paid 32000
Net Profit 500500
Less Income Tax 150150 369350
deferred tax Liability 10000
Warranty Provisions 25000
Provision for doubtful debts 8000
Accounts Payable 82000
Accumulated Depreciation 54000
3

Vehicles
Accumulated Depreciation
Buildings 36000
Bank Mortgage 240000
Land Revaluation Surplus 50000
Income Tax Payable 150150
1584500
C. Notes to Accounts
1. Statement of compliance
These accounts have been prepared with accordance with applicable Australian Accounting
Standards Boards and accounting policies that are generally accepted in Australia (Minnis and
Sutherland, 2017).
2. Basis of preparation of Accounts
The measurement basis used in preparation of financial accounts is on historical cost basis
(Berger, Minnis and Sutherland, 2017).
3. Fixed Asset
Fixed assets are stated at cost and accumulated depreciation provision is made
Depreciation is calculated as per Prime Cost Method (Marzouk, Linsley and Verma, 2017).
4

4. Accounts Receivables and Prepayments
They are recognised at fair value and provisions of doubtful debts are shown separately (Ward
and Lowe, 2017).
5 Inventory
They are valued as cost or Net Realisable Value whichever is lower (Hung, 2018).
6 Investment
Investment property is measured on cost and they are recorded because they will provide
benefits in the future.
7 Deferred tax Liability
They are recognized for all temporary differences that are occurred because of Difference in
accounting and taxable profit
8 Revenue Recognition
Revenues are measured at Fair value for the consideration that are received or receive able
9 Provisions
Provision are recorded as there was present obligation for any event and is measured reliably
with all available evidence
10 Financial Statements
They present true and fair view which includes all statements P&L Balance Sheet Statements
of Equity and are made with best of our knowledge.
11 Financial Instruments
They had been recognized when entity had become part of contractual obligation which means
5

that they have right to sale.
12 Contingent Liability
There was some past events which can occur or may not occur so contingent liability is created
13 Disclosure
Any changes regrading any accounting policy has been done in accordance with AASB
14 Borrowings
They are recorded as expense in the period in which they had been incurred
15 Lease
Lease is recognized when right of use is transferred to lessee
16 Government Grants
Any Government grants that had been received or to be received had been recorded at fair
value
QUESTION 2
A. Statement to determine taxable income
Particulars
Amount
(in$)
Current tax Expense
Accounting Profit 325000
Add Long Service Leave Expense 40000
Add Warranty Expense 15000
Less Depreciation on plant -35000
6

Add Doubtful debts 5000
Taxable Income 350000
Carrying
Amount
Fair
Value Differences
Revaluation of Land 1200000 1600000 400000
Deffered Tax liability will be on 400000
Working Notes
1. Calculation of Depreciation
For Accounting Purposes 35000
For Income tax Purpose
350000/5 70000
Excess deduction can be
claimed 35000
B. Taxation worksheet
Particulars Amount
Taxable Income 350000
Tax rate 30.00%
7

Tax 105000
Creation of Deffered Tax Liability
Revaluation Profit 400000
Tax rate 30.00%
DTL 120000
C. Journal Entries
Particulars Debit Credit
P&L a/c Dr 60000
To Reversal of Long service leave expense 40000
To Warranty Expense 15000
To Doubtful debts 5000
(Being Reversal entries done for calculating timing differences)
Depreciation on Plant a/c dr 35000
To P&L 35000
(Being extra depreciation charged for tax purpose)
P&L a/c dr 105000
To Provision for income tax 105000
(Being Provision made for tax payable for current year)
8

P&L a/c Dr 120000
To Deffered Tax Liability 120000
(Being Deffered tax liability created on account of timing
Difference)
QUESTION 3
A. Analysing the goodwill or gain on bargaining
Goodwill
Amount
(in $)
Consideration transferred 152800
Add: Amount of non-controlling interests 100000
Add: Fair value of previous equity interests 120000
Less: Net assets recognized 80000
Total Goodwill 292800
B. Consolidated worksheet entries
Consolidated Worksheet
Particulars
Amount
(In $)
Current Assets
9