Financial Accounting Newsletter - Appliances Limited, 2018

This financial accounting newsletter provides a comprehensive overview of developments in financial reporting from May to July 2018. It details updates to Australian Accounting Standards Board (AASB) frameworks, including the finalization of standard-setting frameworks and new compilations for reporting periods starting from January 1, 2018. Key changes in AASB 9, AASB 107, and AASB 16 are highlighted, along with an interpretation on foreign currency transactions. The report includes journal entries, depreciation calculations, a statement of profit and loss, a balance sheet, and a statement of changes in equity for Appliances Limited, demonstrating the practical application of accounting principles. References to relevant accounting standards and literature are also included, providing a complete analysis of financial accounting practices and updates.

Financial Accounting
News Letter

NAME OF THE STUDENT
NAME OF THE UNIVERSITY
AUTHORS NOTE
COURSE ID

NEWS LETTER
AASB Standard Setting frameworks Finalised: 9th May
2018:
The Australian Accounting Standard Board has finalized the
standard setting framework on 9th May 2018. After developing
through the public consultation the Australian (Aasb.gov.au,
2018) Accounting Standard Board has finalized the framework
for setting standard for the non-profit companies as well as the
for-profit companies. The framework set by AASB lay down that
how the AASB makes the use of the IFRS standards in the form
of base for developing, issuing and maintaining the Accounting
standards of Australian. The standard setting framework helps in
identifying when the Australian accounting standard board
should take up the project of modifying the IFRS along with the
form and degree of such amendments.
New compilations for reporting periods commencing
from or after 1-1-18: 17th May:
AASB has released new
compilations for the
accounting period
commencing from 1-1-18
where AASB 15 is
mandatorily applicable to
the for-profit making
companies. The AASB 15
mandatory implementation
for non-profit companies
has been deferred by a year
to the accounting period
commencing from or after
1-1-19 (Aasb.gov.au,
2018). The AASB 111 and
AASB 118 following the
amendments on 1-1-18 is
applicable for additional one
year for non-profit
companies for the period
commencing from or after
Summary of development and news in the environment of financial reporting
Period 1st May to 31st July 2018:

1-1-18 but prior to 1-1-19 following which they are out of date
for the non-profit companies.
Amendment in AASB 16 Leases:
In the latest amendment, AASB 16 eliminates the
classifications of the leases as the operating or the financial
leases and treating effectively all the leases as the financial
leases. Leases that are of short term or less than 12 months
and leases that are of lower value assets namely the
personal computers are exempted from the requirements of
the lease accounting (Aasb.gov.au, 2018). There is also the
change in the accounting the lease life as well. Particularly,
companies are now required to identify the front loaded
pattern of the expenditure for majority of the leases even
though they pay the continuous yearly rentals.
AASB 22 Interpretation: Transactions relating to
Foreign Currency and Advance Considerations:
The amendments explain that in ascertaining the rate of spot
exchange for use on initial recognition of the related assets,
expenditure or income on de-recognizing the non-financial assets
or liability related to advance considerations that transaction date
must be recognized (Aasb.gov.au, 2018). The transaction date
represents the date on which a company first identifies the non-
monetary assets or the non-financial liabilities originating from
the advance considerations. On noticing multiple payments or
receipts in advance, the company should then ascertain the

transaction date for each of receipts or payment for the advance considerations.
Answer to Question 2:
Answer to requirement I:
In the Books of Appliances Limited
Journal Entries
For the year ended 30 June 2018
Serial
Number Particulars
Debit
amount
Credit
amount
1
Depreciation Expense
Account…………………………………………..Dr
$
30,000
To Accumulated Depreciation-
Buildings Account
$
30,000
(To record depreciation expense)
2
Depreciation Expense
Account…………………………………………...D
r
$
2,55,000
To Accumulated Depreciation- Plant
and Equipment Account
$
2,55,000
(To record depreciation expense)
3
Income Tax Expense
Account…………………………………………….
Dr
$
8,35,800
Deferred Tax Asset
Account………………………………………...……
Dr
$
1,42,200
To Current Tax Liability Account
$
9,78,000
(To record tax expense for the year)
Calculation of Depreciation for the year ended 30 June 2018
Particulars Buildings Plant and Equipment
Cost of acquisition $ 9,00,000 $ 26,00,000
Useful life (in years) 30 10
Residual value $ - $ 50,000
Depreciation $ 30,000 $ 2,55,000

Particulars Debit amount Credit amount
Sales of goods 122,30,000$
Interest income 7,000$
Cost of sales 46,85,000$
Marketing expense 6,23,000$
Salaries and wages 27,40,000$
Administration expenses 1,43,000$
Annual leave expense 2,10,000$
Doubtful debts expense 62,000$
Depreciation expense 2,85,000$
Interest expense 64,000$
Other borrowing expenses 6,000$
Other expenses 95,000$
Warranty expense 64,000$
Income tax expense 8,35,800$
Cash on hand 41,000$
Cash management account 1,93,000$
Trade debtors 32,76,000$
Allowance for doubtful debts 2,19,000$
Raw material inventory 6,24,000$
Finished goods inventory 12,50,000$
Land 5,00,000$
Buildings 9,00,000$
Accumulated depreciation - buildings 30,000$
Plant and equipment 26,00,000$
Accumulated depreciation - plant and equipment 2,55,000$
Patents 1,50,000$
Deferred tax asset 1,42,200$
Bank loan 4,00,000$
Trade creditors 6,15,000$
Provision for annual leave 2,00,000$
Provision for warranty 55,000$
Current tax liability 9,78,000$
Dividends paid 5,00,000$
Share capital 50,00,000$
Total 199,89,000$ 199,89,000$
In the Books of Appliances Limited
Draft Trial Balance
For the year ended 30 June 2018

Answer to requirement II:
In the Books of Appliances Limited
Statement of Profit and Loss and Other Comprehensive Income
For the year ended 30 June 2018
Particulars Amount Amount
Revenue:
Sales $ 122,30,000
Less: Cost of sales $ 46,85,000
Gross profit $ 75,45,000
Add: Interest income $ 7,000
Total income $ 75,52,000
Less: Expenses
Salaries and wages $ 27,40,000
Administration expenses $ 1,43,000
Marketing expense $ 6,23,000
Annual leave expense $ 2,10,000
Doubtful debts expense $ 62,000
Depreciation expense $ 2,85,000
Interest expense $ 64,000
Other borrowing expenses $ 6,000
Other expenses $ 95,000
Warranty expense $ 64,000 $ 42,92,000
Profit before tax $ 32,60,000
Tax expense:
Current tax $ 9,78,000
Deferred tax -$ 1,42,200 $ 8,35,800
Net profit for the period $ 24,24,200
Other comprehensive income $ -
Total comprehensive income $ 24,24,200
In the Books of Appliances Limited
Balance Sheet Statement
For the year ended 30 June 2018
Particulars Amount
Assets:
Current assets:
Inventories $ 18,74,000
Trade and other receivables $ 30,57,000
Cash and cash equivalents $ 2,34,000
Total current assets $ 51,65,000
Non-current assets:

Property, plant and equipment $ 37,15,000
Intangible assets $ 1,50,000
Deferred tax asset $ 1,42,200
Total non-current assets $ 40,07,200
Total assets $ 91,72,200
Liabilities and Equity:
Liabilities:
Current liabilities:
Trade and other payables $ 6,15,000
Provisions $ 2,55,000
Current tax liabilities $ 9,78,000
Total current liabilities $ 18,48,000
Non-current liabilities:
Bank loan $ 4,00,000
Total non-current liabilities $ 4,00,000
Total liabilities $ 22,48,000
Equity:
Share capital $ 50,00,000
Retained earnings $ 19,24,200
Total equity $ 69,24,200
Total liabilities and equity $ 91,72,200
In the Books of Appliances Limited
Statement of Change in Equity
For the year ended 30 June 2018
Particulars Share Capital Retained Earnings
Balance as at 1 July 2017:
Shares issued during the year $ 50,00,000
Profit for the year $ 24,24,200
Other comprehensive income $ -
Amount transferred to reserves $ -
Total comprehensive income for the year $ -
Dividends paid -$ 5,00,000
Balance as at 30 June 2018 $ 50,00,000 $ 19,24,200

References and Bibliographies:
Aasb.gov.au/. (2018). Retrieved from http://www.aasb.gov.au/News/Hot-Topic-update--
Applying-the-IASB-s-Revised-Conceptual-Framework-and-Solving-the-Reporting-Entity-
and-Special-Purpose-Financial-Statement-Problems?newsID=277156
Accounting standards. (2018). Retrieved from
http://www.aasb.gov.au/Pronouncements/Current-standards.aspx
Deegan, C. (2013). Financial accounting theory. McGraw-Hill Education Australia.
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial
accounting. Pearson Higher Education AU.
Hoskin, R. E., Fizzell, M. R., & Cherry, D. C. (2014). Financial Accounting: a user
perspective. Wiley Global Education.
Mullinova, S. (2016). Use of the principles of IFRS (IAS) 39" Financial instruments:
recognition and assessment" for bank financial accounting. Modern European
Researches, (1), 60-64.