Financial Accounting Issues - Assignment Example

ABC LTD INCOME STATEMENT FOR THE YEAR ENDED JUNE 2012 TOTAL REVENUE 245,880.30 COST OF SALE -67,400.20 GROSS PROFIT 178,480.10 LESS EXPENSE expense 43,675.45 depreciation on: dividend paid 480 furniture 520 delivery van 210.25 building 1,600 machinery 3,860 salary and wages 52,500 contingent liability 12,000 annual leave expense 1,830 audit fee 1,230 interest on bank loan 720 interest on bank overdraft 94 provisions 1,280 legal expense 13,700 -133700 profit before tax 47780.1 Tax (30%) (0.3*47,780.1) -13,434.03 profit after tax 34,346.07 statement of changes in equity year ended June 2012 retained general ordinary dividend earning reserve share paid total bal b/d 28,411.40 8,000 18,760 1910 57,081.40 for the year 34,346.07 0 0 0 34,346.07 dividend -480 0 0 -1430 -1910 transfers 4,000 -4,000 0 0 0 bal c/d 66,277.47 4,000 18,760 480 89,517.47 STATEMENT OF FINANCIAL POSITION FOR AS AT 30TH JUNE 2012 ($000) NON-CURRENT ASSETS machinery 32,800 land 9600.4 building 24,700.90 delivery van 1,690 furniture 4,380 73,171.30 INTANGIBLE ASETS trade mark 7200 80,371.30 CURRENT ASSETS trade receivable’s 34,500.20 less: provisions -2,680.50 31,819.70 inventory 25,600.80 57,420.50 137,791.80 financed by: changes in equity 89,517.47 long-liability big bank loan 12,000 current liabilities payables 22,700.80 accrued dividend 480 bank overdraft 980 provisions for warranty expense 8,500 24,160.80 134,178.27 NOTES TO THE FINANCIAL STATEMENT 1). Corporate information. The financial statement of ABC ltd for the year just ended 30th June 2013 was certified for release to the public by the company directors on 21st September 2013.(AASB 101.138b).this is a company registered under the Australian corporation act. Summary of accounting policy adopted 1). Historical cost convention. The company books of account have been prepared under the historical concept and prudence observed in their recording except treatment of land and building in which they are measure at face value while its accumulated depreciation is deducted from the cost value. The assets disposed by the company were measured at fair value. 2).significant accounting estimate adopted. It is the requirement of Australian corporation act to ensure that all companies prepare their financial statement and make judgment and estimates on all recording of the company transaction in its books of account. This estimates and judgment are based on historical performance and other circumstance around the company that might have effect on the company performance. Making realistic provision ABC ltd makes an estimate on provisions for doubtful debt and expense based on the past performance of debtor’s balances. Provision for annual leave will reduce in the next financial year signifying that the company is making good provisions and estimates. 3. New shares The company intends to Issue new 3,000,000 shares at an issue price of $3 per share on application through a prospectuses. This process is going to be exercised in the next financial period and hence do not affect the current financial statements. 4).revenue recognition. The ABC ltd realizes revenue when the amount is entitled to the income and amount quantified with reasonable accuracy. Income is arrived at by deducting the amount of goods and service tax payable to Australian tax office 4a). Sale of asset Gain or loss on disposal of an asset is arrived at deducting the carrying amount of an asset and the proceeds value at the time of disposal 5) Expense. The expense of the company are accounted for on accrual basis, categorized in their respective classes and those expense that cannot specifically be attributed to a specific category are allocated to other expense account. 5). Trade receivables. The company account and recognize receivables at their original invoice value less provision for doubtful debt. The carrying amount at the end of the accounting period represents the fair value of receivables. DIRECTORS REPORT ABC ltd Year ended 30th June 2013 Director’s report The director presented the annual financial report of the company for the year ended June 2013 Company principle activities ABC Company limited is a registered and resident in Australia. The principle activity of the company are the manufacture and sell of consumable products. Results and appropriation The income statement, statement of financial position and cash flows for financial year ended June 2013 are set out in page in page 1 and 2.during the year, the company made an annual net profit after tax of $34,346.the directors declared and paid a final dividend of $10 cents per share to its existing shareholders. a bonus issue of 1 for every 11 held share was given to shareholders being financed from the general reserve account. Arrangements to purchase shares The company or its subsidiary company did not enter into an agreement or be a part to an agreement that will enable company director acquire benefits inform purchased shares. Fixed assets Detail of movement in property, plant and equipment of the company are displayed in the movement schedule. During the year ended, the directors disposed off some assets and had plan of acquiring a new delivery van for the company. Changes in equity and reserves The director transferred a sum of $4,000,000 from the reserve account to retained earning account, the final dividend of $480,000 were paid out of retained earnings of the company. New ordinary shares of 3,000,000 at $3per shares will be raised in the next financial year through prospectuses. No other changes were envisaged in the reserve account other than transfer for payment of dividends. Company director To the year ended June 2013 and date of reporting, the company director was Michael Brien . There being no presence of provisions in the company article of association in relation to director transfer or sequestration, Michael Brien continued to be director in the next financial year The company did not enter into ant contract with director other than that of being a director and providing services to the company. AUDITORS REPORT An independent audit report to members of ABC ltd We have audited the financial statement of ABC ltd for the year ended June 2013.The financial statement of a company constitutes statement of financial position. Income statement, Cash flow and director’s declaration to together with notes to the financial statement It is the responsibility of the directors to ensure that proper books of account are prepared and reflects a true and fair view of company’s financial position in agreement with the corporation act 2001.the responsibility includes good system of internal control that detects and prevents error and frauds and adequate accounting controls, policies and estimates adopted. We conducted an independent audit in accordance with the Australian auditing standards and corporation act 2001 to obtain reasonable assurance as to whether the books of account are free from material misstatement and express an opinion to members of the company. It is the responsibility of management to ensure that an effective internal control system is adopted; our responsibility is to perform an audit on a test basis and give an independent report. The nature of our audit is influenced by factors such as inherent limitation, performing audit on a test basis and professional judgment hence an audit cannot guarantee full detection of material misstatement. In our audit opinion, the company has disclosed all the information and adopted the Australian accounting standards as permitted by the corporation regulation. Accounts are in agreement with books and the financial statement show a true and fair view of the company state of financial position and its performance for the year ended June 2013. AA firm of associate Certified public accountant Read More