Company Accounting: Financial Statement Analysis and Consolidation

This report provides a comprehensive analysis of company accounting practices, focusing on journal entries, error correction, and the preparation of consolidated financial statements for Grape and Duck Limited. It identifies and rectifies accounting errors, including unrealized profits, incorrect asset classifications, and omissions in recording transactions. The report details consolidation entries, explaining their importance for informed decision-making and accurate financial representation. It includes a consolidation worksheet, adjusted financial accounts, and a conclusion emphasizing the significance of proper accounting for company performance evaluation and growth. References to relevant academic sources are also provided to support the analysis and findings.

Company
Accounting

INTRODUCTION
The report prepared below takes in account journal
entries prepared for the two stated companies. It
reflects the importance for preparation of accounts
which are incorrect and needs to be corrected.
Accounting is a process that involves rectifying
errors if any, having an idea about working and
functioning of different companies in a competitive
environment. It also prepares the statement of
financial position which reflects finance related
stability and sustainability of related firms and
organisations in environment.

Evaluation Report of the group
Evaluation report of Grape and Duch Limited
Account name Amount Evaluation report on why it is wrong
Revenue $55000
Unrealised profit on sale made to subsidiary must be deducted whicl making consolidated balance
sheet that is ($55000 - 10 %) / 120 * 20 = $8250. It is unrealised profit which must be elimninated
from the total sales.
Plant and Machine $28000
Investory purchase from the subsidiary wrongly charged to plant and machinery account. Hence
plant and machine to be reduced by $28000 and Investory should be increased with the same
amount. However unrelised profit on inventory must be eliminated of $8000.
Sale of Land $25000
Loss on sale of land to be recorded in the books that is $7000. Such amount is omitted to be
recorded in the books of accounts and due to this the profits of the Grape limited are increased by
$7000.
Dividend $44000
The dividend received by the grape limited will be credited in its profit and loss account as income
being duck limited is its 100 % subsidiary company. The payment made by duck limited to its
shareholder has been adjusted in the next year of $26000.
Rent Payment $1400
It will be as as unearned income in the bools of Grape limited as on accruel basis of accounting the
rental income to be booked in the income statement whether received or not because when its due
then it should be recorded.

Consolidation Entries with Narration
Particular Debit Credit
Business Purchase Dr
To Liquidator of Vendor Company
(Being 100% shares acquired of Duck Limited as on
1/07/2020 by Grape Limited)
$900000 $900000
Net Assets Taken Dr
To Business Purchase Account
(Being net assets taken over recorded at the fair value)
$940000 $940000
Goodwill Dr
To Business Purchase Account
(Being Goodwill Recoded in the books for the excess
payment being made by the Grape limited to Duck
limited shareholders)
$40000 $40000
Liquidator of Vendor Company Dr
To Equity Share Capital in Grape Limited
(Bring equity shares are being issues to the shareholder
of the Duck Limited as Consideration of PC)
$900000 $900000

Reason for the accounting processes and
consolidation entries
The reason for making these consolidation as a pat of accounting processes is
that it help the organisation in making complete economic and informed
decision for increasing the productivity of the company. The consolidated
records join all the data from the auxiliaries under the parent's influence.
Bunch accounts report the hidden business truth of the powerful control of the
parent.

Consolidation Worksheet
Grape Duck Ref Adjustments Group ($)
Ltd ($) Ltd ($) Debit ($) Credit ($)
Retained earnings
(1/7/20)
72.000 280.000
352.000
Dividend paid 0 (18.000) -18.000
Dividend declared (26.000) 0
-26.000
Retained earnings
(30/6/21)
102.280 286.220
388.500
Share capital 165.000 495.000 660.000
General reserve 30.000 125.000
155.000
BCVR 0 0
Shareholders’ equity 297.280 906.220
1511.500
Liabilities
Accounts payable 737.000 38.700
775.700
Other Payables 74.120 1.400 75.520
Dividend payable 26.000 0
26.000
Deferred Tax liability 50.000 11.000
61.000
Total liabilities 887.120 51.100 938.220
Total liabilities &
Equity
1,184,400 957.320
1185357.320
Assets
Cash 25.000 22.600 47.600
Accounts receivable 12.000 12.720
24.720
Dividend receivable 52.000 0
52.000
Other receivables 1.400 12.000
13.400
Inventories 45.000 22.000 20000 8250 11817.000
Investment in Duck Ltd 940.000 0
940.000
Land 52.000 84.000 136.000
Plant 60.000 78.000 28 110.000
Acc’d depreciation (38.000) (26.000)
-64.000
Buildings 55.000 62.000 117.000
Acc’d depreciation (20.000) (15.000)
-35.000
Goodwill 0 25.000 40 65.000
Deferred tax asset 0 680.000
680
Total assets 1,184,400
957.32 13903.720

Consolidated Financial Accounts
Grape Duck Ref Adjustments Group ($)
Ltd ($) Ltd ($) Debit ($) Credit ($)
Sales revenue 180.000 131.000 8.250 302.750
Cost of sales (88.000) (58.000) -146.000
Gross profit 92.000 73.000 165.000
Dividend revenue 24.000 0 18.000 24.000
Rent revenue 8.400 0 8.400
Proceeds from sale of
land
0 25.000
25.000
Depreciation (12.000) (8.000) -20.000
Carrying amount of
equipment sold
- (32.000)
-32.000
Rent expense (8.400) -8.400
Other expenses (32.000) (15.000) Grape 7.000 -54.000
Profit before tax 80.400 34.600 115.000
Less: Income tax
expense
24.120 10.380
34.500
Profit after tax for the
year
56.280 24.220
80.500
Retained earnings
(1/7/20)
72.000 280.000
352.000
Dividend paid 0 (18.000) -18.000
Dividend declared (26.000) 0 -26.000
Retained earnings
(30/6/21)
102.280 286.220
388.500
Share capital 165.000 495.000 660.000
General reserve 30.000 125.000 155.000
BCVR 0 0 0.000
Shareholders’ equity 297.280 906.220 1159.500

CONCLUSION
The report prepared above takes in account consolidated statements and accounts
prepared so far by both companies and how they must be well recorded so that the
performance of the companies could be judged. The report also involves the working
and adjustments that are to be made for having a clear and better picture of the work-
related activities in a firm. It also reflects how the accounts are not managed properly
and what could be done for giving a better idea about the running of various
companies in environment. It further includes the improvement of accounts being
prepared and how it would help in growth and expansion of companies in market. It
also explains terms such as sales, revenue, rent paid, plant and machineries, dividend,
sale of land.

References
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accounting information system: A case study in sumber indah perkasa
manufacturing, Indonesia. Journal of Asian Finance, Economics and
Business, 7(8), pp.419-424.
 Ernawatiningsih, N.P.L. and Kepramareni, P., 2019. Effectiveness of
accounting information systems and the affecting factors. International
Journal of Applied Business and International Management
(IJABIM), 4(2), pp.33-40.
 Gaol, F.L., Abdillah, L. and Matsuo, T., 2021. Adoption of Business
Intelligence to Support Cost Accounting Based Financial Systems—
Case Study of XYZ Company. Open Engineering, 11(1), pp.14-28.