Financial Accounting Report: NewCat Ltd Financial Statements

This report provides a comprehensive overview of financial accounting principles and their application to a specific case study, NewCat Ltd. The report begins with an introduction to financial accounting and its importance, followed by an analysis of human capital reporting according to the AASB conceptual framework. It also outlines the limitations of financial position statements. The core of the report includes the preparation of a trial balance, income statement, statement of changes in equity, and statement of financial position for NewCat Ltd. Each financial statement is presented with detailed figures and calculations. The report also includes working notes to clarify the calculations. The conclusion summarizes the key findings, and the report includes a list of references. This report is a valuable resource for students studying financial accounting and provides practical examples of how to apply accounting principles in real-world scenarios. The report covers topics such as depreciation, share capital, and revaluation of assets, providing a complete picture of the company's financial performance and position.

FINANCIAL
ACCOUNTING FOR
REPORTING ENTITIES

Table of Contents
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
1. Reporting of Human Capital in Financial Statement of Company.........................................3
2. Two limitations of financial Position Statements...................................................................4
PART B............................................................................................................................................4
1. Trial Balance...........................................................................................................................4
2. Income Statement....................................................................................................................6
3. Statement of Change in Equity...............................................................................................7
4. Statement of Financial Position..............................................................................................8
5. Notes.......................................................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Financial Accounting is a type of accounting through which business organisations can
keep record of their overall financial transactions. Under this method of accounting financial
transaction of companies can be analysed, interpreted and presented with the helps of Financial
Statements such as income statement, Statement of Financial Position and Statement of Equity.
This report explains accounting framework of Human Capital according to AASB conceptual
framework. Further, the below report includes limitation of Statement of Financial Position.
Furthermore, this report prepare a Trial Balance. Moreover, this report present Income Statement
. Further, this report shows change in equity of company with the help of statement of Change in
Equity. Furthermore, this report highlight Assets & Liabilities of NewCat Ltd by presenting
Statement of Financial Position. At last this report highlight Working Notes.
PART A
1. Reporting of Human Capital in Financial Statement of Company
Human Capital is a liability of company as company is require to pay salary & wages to
its employees. But according to conceptual framework of AASB in 21st century Human Capital
such as employees & CEO of an organisation is an asset of company thus, Steve Jobs is an asset
of Apple Inc. As Steve Jobs is foundation of company and companies profits & brand image is
dependent on him, his death causes profitability and performance of Apple Inc. which in has a
negative impact on shares of company(Moroney and Trotman, 2016).
As Human Capital is an Asset of company it is accounted and recorded in assets side of
balance sheet. It is an intangible asset thus, it is difficult to calculate value of this asset. Value of
Intangible asset is calculated on the basis of skills knowledge of this people. In case of Apple
Inc. Value of Steve Jobs is calculated on the basis of decrease in share price of company. If share
price of company is highly affected with the death its CEO than it is find out that most of the
investors are investing in companies shares just because of its CEO(Lakis and Masiulevičius,
2017).
According to conceptual framework of AASB assets gives economic benefit to company
in future and it also helps in achieving future objective of company. Thus, it is essential to record
Human Capital in Accounts of company to find out actual value of firm.

2. Two limitations of financial Position Statements
Historical Cost- Values of assets & liabilities of a company may vary with the change in
time and that changing value is not recorded in Statement of Financial Position of Company
(Balance Sheet). Financial statement record actual cost or historical value of assets & liabilities
as it does not give true & fair value of firm. Thus, it is a limitation of Balance sheet. For
Example- Value of assets such as Plant & Machinery gets reduced with their use and that is
recorded on cost which does not show actual profits and expenses of company(Berger, Minnis
and Sutherland, 2017).
If true value is not revealed in financial statement than investors or users does not show
interest in company. This limitation affects customer base and efficiency of Apple Inc. as
Balance Sheet does not show up gradation and devaluation in amount of its assets which reduces
interest of investors(Vanauken Ascigil and Carraher, 2016).
Intangible Assets are not Recorded- Intangible assets such as Human Capital, Goodwill
and many other assets are not valued & recorded in Financial Statement which affects credit
worthiness and brand image of company. Further, value of these assets cannot be calculated
which does not show overall financial position of Apple Inc. which is also a major limitation for
Statement of Financial Position of company. It also does not show value of its employees and
other members which is a disadvantage for company.
Intangible Assets also contributes in growth of company so if it is not recorded in
Balance sheet than firms profits gets reduced. Thus, it is important to record value of intangible
assets in Balance Sheet(Minnis and Sutherland, 2017).
PART B
1. Trial Balance
NewCat Ltd - Trial Balance as at 30 June 2019
Particulars Amount (Dr) Amount (Cr)
$’000 $’000
Other Income 723

Sales of goods 4265
Cost of sales 1800
Administration charges 285
Selling and distribution expenses 130
Employee entitlement expenses – (selling) 95
Depreciation expense plant and equipment –
(selling)
178
Depreciation expense building – (administration) 500
Wages and salaries – (selling) 212
Wages and salaries – (administration) 210
Doubtful debts expense 120
Interest expense 160
Other borrowing expense 20
Income tax expense 120
Cash on hand 20
Cash on deposit, at call 25
Trade debtors 950
Allowance for doubtful debts 120
Other debtors 50
Inventory 985

Financial assets held for trading 100
Land 50
Building 1000
Accumulated depreciation – buildings 1100
Plant and equipment 890
Accumulated depreciation – plant and equipment 598
Patents 55
Amortisation of patent 2
Bank loans 180
Other loans 289
Trade creditors 253
Provision for employee benefits 95
Warranty provision 30
Current tax payable 95
Deferred tax liability 25
Land revaluation reserve 20
Share Capital 270
Dividends paid 10
Retained earnings, transfer to general reserve 10
General reserve 10

Suspense account 123.64
Total 8087 8087
2. Income Statement
NewCat Ltd - Income Statement as at 30 June 2019
Particulars Amount ($000)
Sales 4265
Less-Cost of Goods Sold -1800
Gross Profit 6065
Less-Operating Expenses
Selling & distribution expenses 130
Employee entitlement expenses 95
Wages & salaries(selling & admin) 422
Administration Charges 285
Depreciation 678
Net Operation Income(A) 4455
Add- Interest Income 723
Less- Interest Expenses 160
Net Non Operating Income(B) 563
Net Income before Tax (A+B) 5018
Less- Tax Expenses @ 33% 120

Net Income after Interest & Tax (C) 4898
3. Statement of Change in Equity
NewCat Ltd - Statement of Change in Equity as at 30 June 2019
Share
Capital
($000)
Retained
Earnings
($000)
Revaluation
Surplus ($000)
Dividend
($000)
Total
Equity
($000)
Balance at 1
July 2018
200 10 Nil 210
Changes in
Accounting
Policy
Correction in
Prior Period
Error
Restated
Balance
200 10 Nil Nil 210
Changes in
Equity for the
year end 2019
10 10
Issues of Share
Capital
70 Nil Nil Nil
Transferred to
General
Reserves
-10
Revolution Nil Nil 20 Nil 80

Gain (Land)
Balance at 30
June 2019
270 Nil 20 10 300
4. Statement of Financial Position
NewCat Ltd - Statement of Financial Position as at 30 June 2019
Assets ($000)
Non Current Assets
Land 70
Building 1000
Plant & Equipment 890
Less- Depreciation -678
Current Assets
Debtors 950
Less- Allowance of Doubtful Debt -120
Financial Assets 100
Inventory 985
Patent 55
Total 3252
Equity & Liabilities
Owner's Equity

Share Capital 270
General Reserves 10
Retained Earning 957
Non Current Liabilities
9% Bank Loan 900
Other Loan 489
Trade Creditors 253
Land Revaluation Reserve 20
Deferred Tax Liability 25
Provision for Employee Benefit 95
Warranty Provision 30
Current Tax Payable 95
Amortisation of Patent 2
Dividend 25
Interest Payable 81
Total Equity & Liability 3252
Notes
1. Depreciation Expenses
Plant & Equipment
Year Book Value Depreciation Depreciation Accumulated Book Value

at the
Beginning
($000)
Rate ($000) Expenses
($000)
Depreciation
($000)
at the End
($000)
1 890 20.00% 178 178 712
2 712 20.00% 142.4 320.4 569.6
3 569.6 20.00% 113.92 434.32 455.68
4 455.68 20.00% 91.14 525.46 364.54
5 364.54 20.00% 72.9 598.36 291.64
Building
Year Book Value
at the
Beginning
($000)
Depreciation
Rate
Depreciation
Expenses
Accumulated
Depreciation
Book Value
at the End
1 1000 50.00% 500 500 500
2 500 50.00% 250 750 250
3 250 50.00% 175 925 175
4 175 50.00% 87.5 1012.5 87.5
5 87.5 50.00% 43.75 1056.25 43.75
6 43.75 50.00% 21.88 1078.13 21.88
7 21.88 50.00% 10.94 1089.06 10.94
8 10.94 50.00% 5.47 1094.53 5.47

9 5.47 50.00% 2.73 1097.27 2.73
10 2.73 50.00% 1.37 1098.63 1.37
11 1.37 50.00% 0.68 1099.32 0.68
12 0.68 50.00% 0.34 1099.66 0.34
13 0.34 50.00% 0.17 1099.83 0.17
14 0.17 50.00% 0.09 1099.91 0.09
15 0.09 50.00% 0.04 1099.96 0.04
16 0.04 50.00% 0.02 1099.98 0.02
17 0.02 50.00% 0.01 1099.99 0.01
18 0.01 50.00% 0.01 1099.99 0.01
19 0.01 50.00% 0 1100 0
20 0 50.00% 0 1100 0
2. Share Capital
Issued Capital 1,00,000 @ $2.00 shares = $2,00,000
Additional Issued Capital 35,000 @ $2.00 shares= $70,000
Total Share Capital= $2,70,000
3. Cost of Land= $50,000
Add- Revaluation= $20,000
Total=$70,000