Comprehensive Review of Firm's Accounting Practices

The provided text is an analysis covering different aspects of accounting within business firms. It discusses how companies record and manage various transactions, such as sales with credit terms, cash and bank deposits, accounts receivable, and inventory purchases. The importance of lease repayment schedules in decision-making for lessors is emphasized, along with the need to account for intangible assets properly under AASB standards. The text concludes by asserting the necessity for businesses to have strong accounting practices to measure performance accurately and make informed decisions.

FINANCIAL
ACCOUNTING PROCESS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Scenerio 1........................................................................................................................................1
(a)Preparing journal entry............................................................................................................1
(b) Equity schedule......................................................................................................................2
Scenerio 2........................................................................................................................................2
Scenerio 3........................................................................................................................................3
(a)Determinatiion of sort of lease................................................................................................3
(b)Lease repayment schedule......................................................................................................4
©Preparation of journal entry......................................................................................................4
Scenerio 4........................................................................................................................................5
AASB provisions.........................................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8
Table 1Input details.........................................................................................................................1
Table 2Raw calculation...................................................................................................................1
Table 3Journal entry........................................................................................................................1
Table 4Equity schedule of firms......................................................................................................2
Table 5Input for calculation of values for journal entries...............................................................2
Table 6Journal entry........................................................................................................................3
Table 7Lease repayment schedule for the business firm.................................................................4
Table 8Journal entry for the business firm......................................................................................4

INTRODUCTION
Accounting is the one of the important discipline that is widely used by the business
firms. By using accounting tools and techniques business firms evaluate their performance and
make business decisions. In the current report, accounting for equity is done and pro rata
allotment is done. In this regard in detail tables are prepared and entire calculation is explained in
the report. By using mentioned table entire calculation of equity is done. In the second part of the
report, lease repayment is done and in this regard detailed calculations are prepared. Entire case
is linked to the facts and by considering same lase related transactions accounting is done. Thus,
it can be said that research work is carried in proper manner. In third part of the report,
intangible assets related accounting aspects are discussed in detail. It can be said that extensive
topics are covered in present research study.
Scenerio 1
(a)Preparing journal entry
Table 1Input details
Ordinary shares 800000
Price 12.87
Application 4.2
Allotment 4.9
First call 1.66
Second call 2.11
Table 2Raw calculation
100000 12.87 1287000
300000 9 2700000
460000 4.2 1932000
5919000
Table 3Journal entry
Particulars Debit Credit
Bank 5919000
To Share application and allotment as well as call A/C 5919000
Share application and allotment as well as call A/C 5919000
To Share capital A/C 3360000
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To bank 84000
To share allotment 2098000
To share call 377000
Share allotment A/C 3920000
To Share capital A/C 3920000
Bank A/C 3920000
To Share allotment A/C 1822000
To call in advance 2098000
Share call A/C 3016000
To Share capital A/C 3016000
Bank A/C 2639000
Call in advance 377000
To share first call A/C 3016000
Share issue expenses 12000
To Bank A/C 12000
(b) Equity schedule
Table 4Equity schedule of firms
Particulars Amount
Equity 10296000
It can be seen from table that equity is valued at above givcen value. This value is
computed by adding entire application, allotment and call amount. Thus, it can be said that
through different stages mentioned amount of money is collected.
Scenerio 2
Table 5Input for calculation of values for journal entries
30-Jun-16 31-Dec-16 30-Jun-17
Cost Carrying amount Carrying amount Carrying amount
Machine A 300000 180000 180000 163000
Machine B 200000 170000 155000 136500
Depreciation Depreciation Depreciation
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30000 60000 75000
20000 40000 50000
Machine A 270000 120000 105000
Machine B 180000 130000 105000
Table 6Journal entry
30-Jun-
16 Revaluation surplus 90000
Asset 90000
Revaluation surplus 10000
Asset 10000
31-Dec-
16 Impairment loss 60000
Asset 60000
Impairment loss 25000
Asset 25000
30-Jun-
17 Impairment loss 58000
Asset 58000
Impairment loss 31500
Asset 31500
Scenerio 3
(a)Determinatiion of sort of lease
Current scenerio reflct that lease is a type of financial lease because in it lessee is
assuming entire responsibility related to asset at its own level. There are two sort of lease like
operating and financial lease (Difference between operating and financial lease, 2017).
Operating lease is one of the format of lease under which entire roles and responsibility related to
lease is taken in to account by lessor himself. On other hand, financial lease is one under which
entire responsibility is taken by lessee at its own level. Hence, it can be said that there is
difference between operating and finance lease. Thus, ChiHerbal must consider its lease in
category of finance lease.
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(b)Lease repayment schedule
Table 7Lease repayment schedule for the business firm
1-Jan-16 Lease receivable 30500
1-Jan-17 Lease receivable 30500
1-Jan-18 Lease receivable 30500
1-Jan-19 Lease receivable 30500
1-Jan-20 Lease receivable 30500
©Preparation of journal entry
Table 8Journal entry for the business firm
1-Jan-16 Lease receivable 30500
Asset 30500
Cash 30500
To lease receivable 25925
To finance cost 4575
Depreciation expense 19700
To accumulated depreciation 19700
1-Jan-17 Lease receivable 30500
Asset 30500
Cash 30500
To lease receivable 25925
To finance cost 4575
Depreciation expense 19700
To accumulated depreciation 19700
1-Jan-18 Lease receivable 30500
Asset 30500
Cash 30500
To lease receivable 25925
To finance cost 4575
Depreciation expense 19700
To accumulated depreciation 19700
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1-Jan-19 Lease receivable 30500
Asset 30500
Cash 30500
To lease receivable 25925
To finance cost 4575
Depreciation expense 19700
To accumulated depreciation 19700
1-Jan-20 Lease receivable 30500
Asset 30500
Cash 30500
To lease receivable 25925
To finance cost 4575
Depreciation expense 19700
To accumulated depreciation 19700
Scenerio 4
AASB provisions
Each of these outlays can be considered as asset in the income statement. However, as
per rules all sort of expenses can not be included in category of asset. On detial analysis of all
sort of expenses and analysis of (AASB 138 par 8) it can be observed that some of the expenses
can be considered as asset while some of expenses can not be cosidered as an asset (Intangible
assets, 2015). This is because as per rules all those expenses that form part of development cost
are valuable for the firms. Means that any company if producing any specific product in its
business and it is valuable for the firm then in that case development cost incurred on same can
be consdiered as asset and can be carry forward in the business. Opposite to this, if there is any
expenses that deoes not related to the asset that have technical feasibility, itnetion to complete
and sell, ability to use and sell can not be considered as an asset in the business and will be
recorded as expense in the company books of accounts. Apart from this, there are some of the
other important parameters that need to be taken in to account like asset that is produced by the
firm must have or there must be presence of availability of technical know how and abudent
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amount of presence of financial resources in the busines. Apart from this, there must be situation
where one can fully rely on the cost that is incurred in the business. It can be seen that there are
some of the expenses that are bear by the firm on its research and development projects.
Research was conducted to develop filter and in this regard expenditure of 1,30,000 was made in
the business and it can be considered as asset because it is technically feasible and profitable in
nature. Apart from this, firm make patent of it and due to this reason it will earn good return in
its business. Hence, it can be said that it can be considered as an asset in the business. Prototype
was designed and constructed and it is one of the important part of development cost of the
project and on this basis it can be considered as an asset in the business. Fee that is paid for
patent application equal to 12000 can be considered as an expense in the business. This is
because it is not part of development cost of the machine that is developed by the firm in its
business. Research expenses that are bear in the business to modify design is equal to 34000 and
it can be included in category of asset because by modifying design its sales value is increased at
rapid rate. Legal fee to protect patent against cheap copies equal to 34000 in value can not be
considered as an asset because it is not related to development of product in the business. Hence,
on basi of application of rule it can be said that some of expenses in respect to project can be
considered as asset in books of accounts.
CONCLUSION
On the basis of above discussion it is concluded that there is significent importance of
accounting for the business firms because same is used to measure business performance and
evaluating firm operations in proper manner. While preparing company accounts multiple factors
need to be taken in to account because some of investors make payment in advance and some
make payment in latter stage. Hence, lots of things need to be taken in to consideration while
preparing company accounts. Lease repayment schedule is the one of the important approach that
must be used by the lessor to make businesss decisions. This is because in this schedule land
owner get lots of details related to transactions. Hence, it is very important to prepare these
schedules so that prudent decisions can be made on time. In every business there are intangible
assets and due to this reason it is very important to have strong knowledge of rules and
regulations that are associated to intangible assets so that accounting of same can be done in
proper manner in the business. Thus, for a business firm manager it is very important to have
sound knowledge of company accounts so that on time action can be taken to solve problem.
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REFERENCES
Online
Difference between operating and financial lease, 2017. [Online]. Available through:<
https://efinancemanagement.com/sources-of-finance/difference-between-operating-and-
financial-lease>.
Intangible assets, 2015. [PDF]. Available through:<
http://www.aasb.gov.au/admin/file/content105/c9/AASB138_08-15_COMPoct15_01-
18.pdf>
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