University Assignment: Financial Accounting Processes, ACCT6003

This assignment addresses key financial accounting processes, focusing on non-current assets, share transactions, and impairment. Part A provides detailed calculations and general journal entries for asset impairment, revaluation of plant, and share issuance, allotment, and forfeiture. The calculations include determining impairment loss, allocating the loss to individual assets, and preparing corresponding journal entries. The revaluation section includes general and closing journal entries for plant revaluation. The share transaction section covers journal entries for share applications, allotments, and calls, including the handling of forfeited shares and their subsequent reissue. Part B is a PowerPoint presentation which covers the topics in detail. The assignment demonstrates the application of accounting principles and standards, specifically AASB 136 for impairment and the accounting for equity transactions.

Running head: FINANCIAL ACCOUNTING PROCESSES
Financial Accounting Processes
Name of the Student:
Name of the University:
Authors Note:

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FINANCIAL ACCOUNTING PROCESSES
Contents
Part A:..............................................................................................................................................2
Answer 1:.....................................................................................................................................2
Answer 2:.....................................................................................................................................5
Answer 3:.....................................................................................................................................6
Part B:............................................................................................................................................10
References:....................................................................................................................................11

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FINANCIAL ACCOUNTING PROCESSES
Part A:
Answer 1:
Part a:
Impairment of asset is the process that requires an organization to conduct impairment testing on
its non-current assets to check whether the carrying value of any of its non-current assets is more
than the value of its use in business or net realizable value as on the date of the financial
statements. In case the value of an asset in use or net realizable value is less than the carrying
amount of such asset then the resultant difference is termed as impairment loss (Bond, Govendir
& Wells, 2016). In this case the impairment loss is calculated below.
Impairment loss as at June 30, 2020 of aviation division is calculated below:
Part a:
Impairment loss as at June 30, 2020
Particulars Amount ($) Amount ($)
Building cost 600,000.00
Less: Depreciation 100,000.00
500,000.00
Equipment at cost 500,000.00
Less: Depreciation 200,000.00

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FINANCIAL ACCOUNTING PROCESSES
300,000.00
Inventory 25,000.00
Land 250,000.00
Receivables 150,000.00
Goodwill 90,000.00
(A) Total value of assets at aviation division 1,315,000.00
(B) Value in use of the division 515,000.00
Impairment loss (A-B) 800,000.00
Thus, the amount of impairment loss to be recognized as at 30th June, 2020 in the books of Aero
Ltd for cash generating unit of aviation division is $800,000 as can be seen from the above
calculation (Seow, 2019).
Part b:
In this case the impairment loss is against a cash generating unit that has number of different
assets thus, it is important to allocate the amount loss to individual assets on the basis of carrying
value of these assets. Accordingly, a table of allocation to allocate the amount of impairment loss
is prepared below as per the format given in the document (Cotter, Martin & Stokes, 2019).
Assets (A) Carrying Proportion (B) Loss Adjusted carrying

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FINANCIAL ACCOUNTING PROCESSES
amount ($) allocated ($) amount ($) (A-B)
Buildings at cost less
depreciation
500,000.00 0.380228137 304,182.51 195,817.49
Equipment at cost less
depreciation
300,000.00 0.228136882 182,509.51 117,490.49
Inventory 25,000.00 0.019011407 15,209.13 9,790.87
Land 250,000.00 0.190114068 152,091.25 97,908.75
Receivables 150,000.00 0.114068441 91,254.75 58,745.25
Goodwill 90,000.00 0.068441065 54,752.85 35,247.15
Total 1,315,000.00 1 800,000.00 515,000.00
Part c:
General ledger as on June 30, 2020
Date Details Debit ($) Credit ($)
30-Jun-20 Impairment loss A/c-------Dr 800,000.00
Buildings 304,182.51
Equipment 182,509.51

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FINANCIAL ACCOUNTING PROCESSES
Inventory 15,209.13
Land 152,091.25
Receivables 91,254.75
Goodwill 54,752.85
(Being impairment loss recognized against respective assets)
30-Jun-20 Profit and loss A/c------Dr 800,000.00
Impairment loss A/c 800,000.00
(Being impairment loss charged to profit and loss account)
Answer 2:
The table below contains both general and closing journal entries in respect of revaluation of
plant:
General ledger as on June 30, 2020
Date Details Debit ($) Credit ($)
31-Dec-19 Revaluation surplus A/c----Dr 60,000.00
Loss on revaluation (150000 - 60000) 90,000.00

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FINANCIAL ACCOUNTING PROCESSES
Plant (350000 -200000) 150,000.00
(Being plant revalued at fair value)
30-Jun-20 Profit and loss A/c-----Dr 90,000.00
Loss on revaluation 90,000.00
(Being loss on revaluation adjusted against the profit and loss account)
Answer 3:
General journal entries in the books of accounts of Zobra Ltd in accordance with the constitution
of the company are recorded in the following table as per the given format in the document.
General ledger as on June 30, 2020
Date Details Debit ($) Credit ($)
31-Aug-19 Bank (560000 x 5) 2,800,000.00
Share application 2,800,000.00
(Being 560000 share applications received)
Capital reserve (1500+ 500) 2,000.00
Bank 2,000.00

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FINANCIAL ACCOUNTING PROCESSES
(Being share issue and legal costs incurred and directly transfer to capital reserve)
03-Sep-19 Share application (60000 x 5) 300,000.00
Bank 300,000.00
(Being excess share application money refunded)
04-Sep-19 Share application 2,500,000.00
Equity share capital 2,500,000.00
(Being 500000 share allotted to the remaining applicant)
25-Sep-19 Share allotment (500000 x 2) 1,000,000.00
Equity share capital 1,000,000.00
(Being share allotment money transferred to the share capital account)
25-Sep-19 Bank 1,000,000.00
Share allotment (500000 x 2) 1,000,000.00
(Being share allotment money received in full)
31-09-2019 Share first and final call (500000 x3) 1,500,000.00
Equity share capital 1,500,000.00

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FINANCIAL ACCOUNTING PROCESSES
(Being share first and final call money transferred to share capital a/c)
31-Oct-19 Bank (480000 x 3) 1,440,000.00
Share first and final call 1,440,000.00
(Being share first and final call money received except for 20000 shares)
31-Dec-19 Equity share capital (20000 x 10) 200,000.00
Share first and final call (20000 x 3) 60,000.00
Share forfeited A/c (20000 x 7) 140,000.00
(Being the 20000 shares forfeited)
31-Dec-19 Bank (20000 x 8) 160,000.00
Share forfeited A/c (20000 x 2) 40,000.00
Equity share capital 200,000.00
(Being the forfeited shares reissued)
31-Dec-19 Share forfeited A/c (Reissue cost) 1,500.00
Bank 1,500.00
(Being reissue cost incurred and adjusted against share forfeited

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FINANCIAL ACCOUNTING PROCESSES
account)
31-Dec-19 Share forfeited A/c (140000 -40000 -
1500)
98,500.00
Capital reserve 98,500.00
(Being the balance share forfeited amount refunded to the shareholders)
Note:
Generally the amount of share forfeiture subsequent to the default of shareholders in paying call
or allotment money is transferred to capital reserve account however, as per the constitution of
Zobra Ltd the share forfeited amount is refunded to shareholders accordingly, the balance
amount left in share forfeited account has been refunded to the shareholders (Guthrie & Pang,
2019).
Part B:
Please refer to attached power point presentation.

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FINANCIAL ACCOUNTING PROCESSES
References:
Bond, D., Govendir, B., & Wells, P. (2016). An evaluation of asset impairments by Australian
firms and whether they were impacted by AASB 136. Accounting & Finance, 56(1), 259-
288. doi: 10.1111/acfi.12194
Cotter, J., Martin, T., & Stokes, D. (2019). Reaction To The Mandatory Write-Down Provisions
Of AASB 1010: Accounting For The Revaluation Of Non-Current Assets. Australian
Accounting Review, 7(12), 64-70. doi: 10.1111/j.1835-2561.1995.tb00383.x
Guthrie, J., & Pang, T. (2019). Disclosure of Goodwill Impairment under AASB 136 from 2005-
2010. Australian Accounting Review, 25(5), 216-231. doi: 10.1111/j.1835-
2561.2013.00204.x
Liang, L., & Riedl, E. (2018). The Effect of Fair Value versus Historical Cost Reporting Model
on Analyst Forecast Accuracy. The Accounting Review, 91(5), 1151-1177. doi:
10.2308/accr-50687
Seow, I. (2019). Impairment Loss of Tangible Assets. SSRN Electronic Journal, 3(3), 17-20. doi:
10.2139/ssrn.924620