Corporate Accounting Project Report: Financial Statement Analysis

This report delves into various aspects of corporate accounting, commencing with an analysis of acquisition costs, including journal entries and maintenance costs. It then explores the factors influencing debenture pricing and provides calculations for debenture issues, accompanied by relevant journal entries. The report further examines share application and allotment processes, presenting journal entries for share transactions, including forfeitures and calls in arrears. It addresses equity adjustments, differentiating between items affecting profit or loss and those directly impacting equity, such as other comprehensive income and foreign currency transactions. Finally, the report presents a cash flow statement for Fool’s Paradise Ltd, analyzing operating, investing, and financing activities to determine the company's cash position at the end of the year, offering insights into its financial performance.

Corporate Accounting

Contents
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
Week 1....................................................................................................................................................3
Week 2....................................................................................................................................................5
Week 3....................................................................................................................................................7
Week 4....................................................................................................................................................8
Week 5..................................................................................................................................................10
CONCLUSION.........................................................................................................................................12
REFERENCES..........................................................................................................................................14

INTRODUCTION
Corporate accounting is a separate business accounting division which manages corporate
accounts, prepares final reports and cash flow reports, reviewing and assessing corporate
financial performance and accounting for particular events, including amalgamation,
consolidation and presentation of financial statements (Liu, Zeng and An, 2017). The project
report is based on different types of calculations. The first part of report includes information
about acquisition cost and general entries regards to this. In the second part of report calculation
regards to debentures has been done. As well as the end part of report includes information about
preparation of cash flow of given scenario.
MAIN BODY
Week 1
(a) Calculation of acquisition cost:
Acquisition cost- The acquisition cost relates to the overall expense for buying an item.
Those involve delivery, selling and customs duty and the expense of planning, construction
and inspection of the premises (Ntim, 2016). The acquisition fees may include survey,
closing fees and paid off liabilities when acquiring the property. Below acquisition cost is
calculated that is as follows:
Particulars Amount
Cash $200000
Land $140000
Equipment $23000
Associate cost $8200

Acquisition cost of the machine on the basis of
depreciation
$221200
Working Note:
Associate cost= 5000+2500+700
= 8200
(b) Journal entries:
Journal entries in the books of Gizmo Machine
Date Particulars Debit ($) Credit ($)
Machine account DR
Depreciation account DR
Loss on exchange of equipment account DR
To cash account
To Equipment account
To Land account
To profit on exchange of
land account
To liabilities account
(Being purchase of machine)
221200
20000
7000
28200
50000
100000
40000
30000
Maintained cost calculation

Date Particulars Debit Credit
Maintenance expenses account DR
To cash account
650
650
(c) Will the maintenance cost be included in the acquisition cost of the machine?
Inside the acquisition cost of the equipment, the amount of the retained assets is not taken
into consideration as the rule in Australian accounting practice (Balakrishnan, Watts and
Zuo, 2016). Following the acquisition of the property, the expense of upkeep is minimized
and it is paid on the basis of repair expenses, and no vigilance is required. The maintenance
cost entry is reported in the independent accounts and not included in the system acquisition
costs.
Week 2
(a) What factors should be considered in determining the issue price of a debenture.
There are different types of factors that need to be considered in determining issue of
debenture. Below explanation of these factors is done in such manner:
 Credit rating- Credit rating is an estimate of a forward debtor's credit risk, a
forecast of his debt recovery potential and an implied predictor of a debtor's
default likelihood. If credit rating will be good then price of debenture will be
accordingly.
 Cash flow of company- It is also an important factor in order to determining issue
price of debenture. This is so because on the behalf of cash flow of company,
debenture’s price is determined. As well as if there will be more number of cash
inflows then it will be easier for them to keep prices of debentures at a higher
level.

 Profitability of company- The profitability of company also plays a key role in
determining issue price of debenture. The reason behind this is that on the basis of
it, debentures’ prices are determined (Killian and O'Regan, Joshi and Li, 2016).
 Management past performance- Another key factor that is being considered as a
key element in order to set issue price of debenture. This is so because if a
company is able to manage their past performance in an effective manner then it
becomes essential for them to set their prices of debentures at higher level.
So these are the main factors that play a key role in the context of determining prices of
debentures.
(b) Calculation:
(i) Determine the issue price of the debenture
Face value: 200000
Coupon rate: 8 %
Maturity period 6 years
Interest payment: Semi annually
Numbers of interest payment till debenture maturity: 6*2 = 12
Interest payment= Face value 8 coupon rate /2
200000*8%/2 = 80000
The issue price of debenture 280000

(ii) Journal entry:
Date Particular Debit Credit
Bank a/c Dr
To 8 % debenture application a/c(Being
application money received)
200000
200000
8 % Debenture application a/c Dr
Debenture interest a/c Dr
To 8 % debenture a/c
(Being debenture are redeemable with its
interest price)
200000
800000
280000
Week 3
Journal entries:
Date Particular Debit Credit
July 2018 Bank a/c Dr
To Share application a/c
(Application money being
received for 108 million shares
@ $1 each)
108000000 108000000
15-08- Share application a/c Dr
To Share capital a/c
To share allotment
108000000
90000000
180000000

(Being transfer of application
money into share capital a/c)
20-09- Share allotment a/c Dr
To Share capital
( Allotment money due already
18 million received from
application money)
72000000
722000000
20-09- Cash a/c Dr
Calls in arrears a/c Dr
To share allotment a/c
To Share capital a/c
(Being allotment money received
(72-18=54) and 18 million shares
failed to pay allotment money)
54000000
18000000
18000000
54000000
30-09- Share capital a/c Dr
To forfeited shares a/c
To Class in arrears a/c
(Being 18 million shares get
forfeited)
36000000
21600000
14400000
Week 4
Provide some examples of items that would be adjusted directly against equity, rather than being
included as part of profit or loss.

The accounting norm is used to offer guidelines and instructions to corporate
organizations in Australia so that they can manage a corporation effectively without errors and
complications in the documentation and description of accounting transacts. All terms and
conditions in the whole journal pertaining to income and loss will be contained in the profit and
loss document. Nonetheless, the items on which the International Accounting Committee has
found specific guidelines should be disqualified.
The basis is not the change in the number, which does not impact the cash flow statement since
such purchases are viewed as impractical account expenditure. Each of these components will be
known as such products that do not render a declaration about benefit and expense that are
specifically linked to the equity responsibility line (Shroff, 2017).
Many financial issues will specifically affect equity and balance sheet changes which will not
form part of the income which loss statement of the firm.
Other comprehensive income- These are the items not included as part of the benefit and loss
declaration. Such categories are mentioned below the profit and loss declaration. They can be
called unrealized business profit and loss. The benefit aerials from this commodity are used as
the part of certain extensive income for example, once the Resource is available for sale.
Unrealized profit and loss on bonds- If the valuation of the shares to be issued reduces or
decreases, they are called unrealized income.
Foreign currency transaction - When businesses sell their goods and services outside Australia,
the currency of interest increases will be viewed like an unrealized investment, so that would be
improved or lost.
Profit and loss related with pension plans- If the government changes pension schemes and rules,
the income made from those policies should be handled with additional comprehensive revenue.
Australian accounting standard also define the treatment of other comprehensive income- If the
value of businesses' assets increases after the revaluation, they should be treated in the liabilities
side of equity as other overall income and the quantity of profits accruing should be introduced.
And if the reassessment causes the reduction of asset value, then the excess heading in liability-
side equities will be viewed as deductions.

Unrealized gains or losses on derivatives held as cash flow hedges- Cash Flow Hedges: drive it
in OCI and the inefficient fraction flows via P&L while the remaining cash flow will align the
cash flow it is designed to hedge if this cash flow impacts income.
Unrealized gains or losses on derivatives held as cash flow hedges-The Fair value hedge is an
exposure hedge that could be due to a certain danger and that may impact benefit or loss through
adjustments in the fair value of a recognized commodity, responsibility or unrecognizable
undertaking or part of some such object.
Value of unclear dividend- Dividends may be defined as a part of the income earned by the
company or the company. The equity side of the financial statement should be added by unclear
divided. How is the potential dividend interest allocated to shareholders in the potential.
All these items are deemed part of the balance sheet and either contributes to the surplus assets
on the asset portion of the balance sheet or merit the benefit of income and savings or excess
funds on an asset hand. These products are used to change adverse costs and damages within
businesses.
Foreign Currency related to the translation gain and losses- The organization's operating
performance and financial status can be calculated by its usable money, the money the firm uses
in much of its commercial activities. In the case that a foreign company operates mainly
throughout one country and does not depend on the parent corporation, the exchange rate where
it operates is the exchange rate in the country in which it operates. Other international entities
also are more closely related to the parent's operations and are financed largely through the
parent or other dollar-using sources.
Week 5
Cash flows of Fool’s Paradise Ltd for the year to 31 December 2019.
Cash flow- It can be expressed in the form used to undertake strategic the cash inflow value and
outflow activity. Cash flows are used in annual reporting and can be measured for industry
explicitly and indirectly (Warren and Jones, 2018). The calculation of the required cash
generated of each project, which corresponds to the cumulative cash flow resulting from each
project, is the most critical capital expenditure assessments activity. Because businesses depend

on accrual accounts rather than on cash, modifications to extract cash flows from the traditional
accounting documents are important. Estimating cash flows is crucial since incorrect or faulty
details can corrupt the whole process of capital budgeting.
Particular Amount Total Amount
Opening balance 400000
Cash flow from operating activities
From customers
634000
0
To stock
-
630000
0
To operating expenses -105000
Expenses of interest 90000-
Net Cash flow from operating
activities -155000
Cash Flow From investing activities
Sale of plant of assets 360000
Dividend revenue -35000
Interest on deposit 25000
Purchase new plant -237500
Purchase short term investment -500000
Net cash flow from investing activities -2500

Cash flow from Financing activities
Borrow loan 850000
Issue shares 480000
Pay loan -900000
Payment of dividend -200000
Net cash flow from financing
activities 230000
Net cash balance 72500
Add value of opening balance 400000
Closing cash balance on 31st
December 2019 472500
Interpretation- On the basis of above prepared cash flow statement, this can be assessed that at
the end of year 2019, company had cash balance of 472500. The cash flow is prepared under
three activities which are operating, financing and investing activities. In the operating activities,
there is cash outflow of -155000. This is indicating that there is more number of activities which
are producing negative cash flow for the year 2019. In addition, under investing activities there
also negative cash flow that is of -2500. Same as above activities’ cash flow it is also producing
negative cash flow. In the last, cash flow under financing activity there is cash inflow that is of
230000 this is showing that there is more number of activities which are leading to better inflow
of cash for year 2019 and overall cash flow is of 472500.
CONCLUSION
On the basis of above project report this can be concluded that companies should
consider corporate accounting as one of the main accounting that needs to be applied in