Financial Accounting and Reporting Assignment: One Beauty Ltd Analysis

This document presents a comprehensive solution to a financial accounting assignment. It includes the preparation of financial statements such as the Profit and Loss Account, Statement of Comprehensive Income, Statement of Changes in Equity, and Statement of Financial Position for One Beauty Limited. The solution meticulously addresses allocation of common expenses, patent amortization, and depreciation calculations. Furthermore, it provides detailed journal entries and explanations for various accounting scenarios, including adjusting events, changes in accounting estimates, error corrections, and bad debt adjustments. The assignment also includes solutions for share-related transactions and asset revaluation, offering a complete and practical guide for students studying financial accounting.

QUESTION :1 One Beauty Limited
Profit and Loss Account of One Beauty Limited for the year ended 30 June 2019
$ $
Particulars Note Amount Amount
NET REVENUE 11,06,000
Cost of Goods Sold 5,24,000
Gross Profit (GP) 5,82,000
OPERATING (EXPENSES) INCOME
Selling and distribution 1 2,25,200
Administrative 2 2,73,800
Other operating expenses (income), net 3 (30,000)
4,69,000
INCOME FROM OPERATIONS BEFORE FINANCIAL INCOME
(EXPENSES)
1,13,000
Financial income 4 8,000
Financial expenses 5 21,000
INCOME BEFORE INCOME TAX(IT) 1,00,000
Income tax 39,000
NET INCOME 61,000
STATEMENTS OF COMPREHENSIVE INCOME for the year ended 30 June 2019
NET INCOME 61,000
Other comprehensive income to be reclassified to profit or loss
in subsequent periods:
Gain on Foreign currency translation 18,000
Tax on Gain on Foreign currency translation (3,000)
Other Comprehensive Income 15,000
Total comprehensive Income 76,000
Notes:

1 Selling and distribution
Depreciation – motor vehicles 40,800
Doubtful debts expense 11,000
Rental expense 11,900
Salaries 93,500
Selling expense 68,000
2,25,200
2 Administrative
Amortization expense - patent 30,000
Depreciation – motor vehicles 27,200
Office expense 85,000
Rental expense 5,100
Salaries 93,500
Miscellaneous expense 28,000
Impairment loss – goodwill 5,000
2,73,800
3 Other operating (expenses) income, net
Gains from sales of motor vehicles 10,000
Proceeds from insurance claims 20,000
30,000
Working Notes:
A Allocation of Common
Expenses
Allocation Amount Allocation Basis
Particulars As per
Trial
Balance
Administrativ
e
Selling and
distributio
n
Administrativ
e
Selling and
distributio
n
Amortization expense -
patent
30,000 30,000 - 100% 0%
Depreciation – motor
vehicles
68,000 27,200 40,800 40% 60%
Doubtful debts
expense
11,000 - 11,000 0% 100%
Office expense 85,000 85,000 - 100% 0%
Rental expense 17,000 5,100 11,900 30% 70%
Salaries 1,87,000 93,500 93,500 50% 50%
Selling expense 68,000 - 68,000 0% 100%
Miscellaneous expense 28,000 28,000 - 100% 0%

B Patent (cost) 2,20,000
Accumulated
amortization – patent
20,000
Ammortisation in PL 18,000
Life assumed 147
Monthly
Ammortisation
1,500
Time elapsed (A) 13
Actual Life remaining
until 31 Dec 2025 from
30 June 2019 (B)
78
Total Life (A+B) 91
Ammortisation till date 32,117
Round off 32,000
Already Amortised 2,000
Amortisation in current
year PL
30,000

One Beauty Ltd
Statement of change in Equity for the company One Beauty LImited as of 30 Jun2019
Particulars Equity Share
Capital
Retained
Earnings
Currency Translation
reserve
Opening Balance as on 01 July
2018
4,00,000 52,000 10,000
Interim Dividend Paid - (16,000) -
Profit for the year - 61,000 -
Foreign currency Translation
Gain
- - 15,000
Closing balance as on 30 June
2019
4,00,000 97,000 25,000
Workings:
A Retained earnings at 16
December 2018
36,000
Add: Interim Dividend Paid 16,000
Retained earnings at 01 July
2018
52,000
One Beauty Ltd
Statement of Financial Position as ot 30 June 2019
ASSETS Note Amount ($)
Non-current Assets
Property, Plant & Equipment 6 2,69,000
Intangible Assets 7 2,63,000
Deferred tax assets 18,000
Current Assets
Cash & Cash Equivalent 8 1,34,000
Inventories 92,000
Accounts receivable (Net) 9 1,07,000
Total Assets 8,83,000
EQUITY AND LIABILITIES
EQUITY
Equity Capital 4,00,000
Retained Earnings 97,000

Other Reserves 25,000
Total Equity 5,22,000
LIABILITIES
Non-current liabilities
Bank loan 1,75,000
Deferred tax liabilities 22,000
Current liabilities
Accounts payable 1,14,000
Current tax liabilities 37,000
Bank overdraft 13,000
Total Liabilities 3,61,000
Total Equity and Liabilities 8,83,000
Working of the problem:
6 Property, Plant & Equipment
Motor vehicles 4,72,000
Accumulated depreciation – motor vehicles (2,03,000) 2,69,000
7 Intangible Assets
Patent (cost) 2,20,000
Accumulated amortization – patent (32,000)
Goodwill 1,00,000
Accumulated impairment losses – goodwill (25,000) 2,63,000
8 Cash & Cash Equivalent
Cash on hand 4,000
Bank deposits 1,30,000 1,34,000
9 Accounts receivable (Net)
Accounts receivable 1,18,000
Allowance for doubtful debts (11,000) 1,07,000
Answer 2:.
PART 1:

 The scenario is related to the events occurring after the end of the reporting period and would
fall under the category of adjusting events and to be reported in the said financial year of the
company.
 The entity has recorded a contingent liability and same has crystallise leading to an outflow of
cash and when the entity has recorded the contingent liability ,no entry is required to be
passed and to be shown as foot notes in the accounts.
 The journal entry which is required to be passed in the books of Forever young limited:
Profit and loss Account $5,00,000
To lawsuit for damages Account $5,00,000
(Being lawsuit for damages transferred to the profit and loss Account )
PART 2:
 The scenario is related to the change in accounting estimates by the company following the
advice of the expert.The entry which the company was passing previously in the books of
accounts:
Depreciation Account ……. Dr 2,00,000
To Accumulated Depreciation Account. 2,00,000
(Being assets depreciated)
 The scenario is related to the events occurring after the end of the reporting period and would
fall under the category of adjusting events and to be reported in the said financial year of the
company and is said to be adjusting events.
 The adjustment entries which is required to be passed in the books of accounts of firm are
here in below:
Accumulated Depreciation Account ……Dr 66,667
To Depreciation Account 66,667
(Being excess depreciation to be reversed in the books of accounts)
PART 3:
 The scenario is related to prior period error made by the accountant in case of Motor vehicle
expense and posted the same as expenses on profit and loss account instead of capitalising the
same.
 The following journal entry was passed in the accounts of the entity before rectification:
Repairs Account ……Dr 80,0000
To Bank Account 80,000
(Being repair done to motor vehicle)
Profit and Loss Account ……. Dr 80,0000
To Repairs Account 80.000

(Being Repairs amount transferred to profit and Loss)
 Rectification entry to be passed :
In the year 2018
Asset Account ………. Dr $80,000
To Repairs Account $80,000
(Being rectification entry for assets has been passed)
Depreciation Account…………. Dr $8,000
To Accumulated Depreciation Account $8,000
(80000*20%/2)
(Being depreciation charged )
Profit and Loss Account. …………Dr $8,000
To Depreciation Account. $8,000
(Being depreciation transferred to profit and loss Account)
Repairs Account……………Dr $80,000
To Profit and Loss Account $80,000
(Being correct entry posted )
In the year 2019
Depreciation Account……………………...Dr $16,000
To Accumulated Depreciation Account $16,000
(80000*20%)
(Being Depreciation transferred to accumulated depreciation account)
Profit and Loss Account…………… Dr $16,000
To Depreciation Account. $16,000
(Being depreciation expenses booked to profit and loss Account)

PART 4:
 The scenario is related to the events occurring after the end of the reporting period and would
fall under the category of adjusting events and to be reported in the said financial year of the
company.
 The following entry which was previously passed in the books of accounts of the firm:
PBDD Account ……Dr 25,000
To P&L Account 25,000
(Being provision adjustment done)
 Rectification entry to be passed :
Bad debt Account …... Dr $75,000
To Accounts Receivable Account $75,000
(Being bad debt entry recorded)
P&L Account……. Dr $75,000
To Bad debt Account $75,000
(Being bad debt entry transferred to profit and loss account)
P&L Account, Dr $25,000
To PBDD s Account $25,000
(Being entry for prov passed through profit and loss Account)

Answer 3:
In the books of Refresh Limited
Journal Entries
$ $
Date Particulars Dr Cr
31-07-2018 Bank A/c..Dr 15000000
To Share Application A/c 15000000
(Being application money received)
10-08-2018 Share Application A/c..Dr 15000000
To Share Capital A/c 12500000
To Share Allotment A/c 2500000
(Being Share prorata isued)
12-08-2018 Underwriting Commission A/c..Dr 17000
To Bank A/c 17000
(Being underwriting Commission
Paid)
10-09-2018 Bank A/c..Dr 2500000
To Share Allotment A/c 2500000
(Being allotment money received)
10-09-2018 Share Allotment A/c..Dr 2500000
To Share Capital A/c 2500000
(Being share alloted)
01-02-2019 Bank A/c..Dr 2490000
To Share call A/c 2490000
(Being call money received)
01-02-2019 Share Call A/c..Dr 2490000
To Share Capital A/c 2490000
(Being share fully paid up)
20-03-2019 Share Capital A/c 70000
To Share Forfeiture A/c 70000
(Being Share forfeited)
05-04-2019 Bank A/c..Dr 68000
Share Forfeiture A/c 12000
To Share Capital A/c 80000
(Being Forfeited shares issued)
05-04-2019 Share reissue Cost A/c..dr 5000
To Bank A/c..Dr 5000

(Being cost incurred for share
reissue)
12-04-2019 Share Forfeiture A/c...Dr 58000
To Share reissue cost A/c. 5000
To Bank A/c 53000
(Being Balance paid to defaulters)
Answer 4:
In the books of Nutrifresh Limited
Journal Entries
$ $
Date Particulars Dr Cr
01-07-2017 Plant A/c (A)…..Dr 800000
Plant A/c (B)…..Dr 600000
To Bank A/c 1400000
(being Machine installed)
30-06-2018 Depreciation A/c..Dr 192000
To Accumulated Depreciation A/c 192000
(Being Depreciation Charged)
Plant A
Value of Asset= 800000
Salvage Value= 80000
Life= 10 years
Depreciation = (Value- Salvage)/Life
72000
Plant B
Value of Asset= 600000
Salvage Value= 0
Life= 5 years
Depreciation = (Value- Salvage)/Life
120000
30-06-2018 Profit and Loss A/c 192000
To Depreciation A/c 192000
(being Depreciation transferred)
30-06-2018 Accumulated Depreciation A/c..Dr 32000
To Revaluation Reserve A/c 32000
(For Plant A)

30-06-2018 Revaluation Reserve A/c..Dr 32000
Profit and Loss A/c..Dr 48000
To Plant B A/c 80000
(Being Asset Recognised at Fair Value)
(480000-400000)
30-06-2019 Depreciation A/c..Dr 185000
To Accumulated Depreciation A/c 185000
(Being Depreciation Charged)
Plant A
Value of Asset= 760000
Salvage Value= 80000
Life= 8 years
Depreciation = (Value- Salvage)/Life
85000
Plant B
Value of Asset= 400000
Salvage Value= 0
Life= 4 years
Depreciation = (Value- Salvage)/Life
100000
30-06-2019 Profit and Loss A/c 185000
To Depreciation A/c 185000
(being Depreciation transferred)
30-06-2018 Accumulated Depreciation A/c..Dr 20000
To Revaluation Reserve A/c 20000
(For Plant B)
(3000000-3200000)
30-06-2018 Revaluation Reserve A/c..Dr 75000
Profit and Loss A/c..Dr 75000
To Plant B A/c
(Being Asset Recognised at Fair Value)
(760000-85000-60000)
Note: We have consider a single revaluation reserve and no product specific .