Essays on Small Business Accounting Essay

Download full paperFile format: .doc, available for editing

TRADING PROFIT AND LOSS ACCOUNT FOR THE YEAR TO 30TH JUNE 2012  $$sales  1349400return inwards  3000opening stock 75000 purchases 273600 return outwards 1800 closing stock 90000 cost of sales 256800 Gross profit  1089600discount received  1800gain on sale of fixtures  1800Interest on late payments.  480expenses   bad debts 13800 discount allowed 3600 utilities 6720 rent 82800 maintenance 49800 MV expenses 21600 General expense 18600 contractors payment 186000 Provision for depreciation building. 37312 motor Vehicle 20160 fixtures and fittings 8400 total expenses 448792 Net profit.  644888    Appropriation statement. Net profit.  644888add interest on drawing   Gretel 3462 Hansel 6792 less Salary   Gretel 90000 Hansel 120000    445142balance in PSR 1:1   Gretel 222571 Hansel 222571    445142    Classified cash flow statement for the year ended 30th June 2012.Cash flow from operating activities.  Receipts. $ tours and classes1020000 wool products. 289800 interest from debtors480    payments  contractor payments186000 rent75000 general expenses18600 Creditors280800 MV expenses21600 maintenance expense49800 sales returns3000 utilities9900 Net income from operating activities665580    Cash flow from investing activities.  proceeds from sale of the fixtures and fittings37800 purchase of building103200 net income for investing activities-65400    Cash flow from financing activities.  withdrawals168000 retained earnings  net increase or decrease in cash432180 cash at beginning 2400 cash at the end2400       balance sheet as at 30th June 2011ASSETS.   fixed assetscost accumulated depreciationNBV. Building535200110512424688motor Vehicle16800051360116640Fixtures and fittings  99000   640328Current assets.   Cash2400  Stock90000  Debtors94200  Prepaid rent4800  bank87096    278496 Current liabilities   trade creditors7200  accrued utilities expense1800 269496   909824LONG TERM LIABILITIES   Bank loan 207000 CAPITAL ACCOUNT   Gretel 270000 Hansel 270000 Current Account.   Gretel 312409 Hansel 225679    1285088    Partners Current account. GretelHansel GretelHanselinterest on drawing34626792Balanceb/d5340012000drawing48000120000salary90000120000balc/d 312409225679profit share220471220471            NB. credit sales=closing debtors+ bad debt written off+ Return inwards+ Discount allowed + receipts from debtors-Opening debtors. Credit purchases=Closing creditors balance + payments to creditors+ discount received+ return outwards-opening creditors balance. Closing bank balance=Opening balance+ all receipts-all payments. Drawing interest rates calculated on monthly basis. Part B. Reporting entity concept is a way of reporting business financial statements through use and adhering to certain standards either set internationally or locally.

Different reporting concepts are used by different entities. The two tiers of reporting as advocated for by the Australian Accounting Standards board include Tier 1 which involves the use of full international financial reporting standards and tier 2 which have different options like adapting the IFRS for SMEs, Status Quo and Reducing the disclosure Burden (Australian Accounting Standard Board, 2009). The two tiers apply to different entities. To begin with full IFRS reporting standards apply to the entities which are publicly accountable and to other private entities and not for profit organizations which are required by their regulators to apply the full IFRS reporting concept.

On the other hand tier 2 options are to be used by organizations which are not publicly accountable but are required to publish General Public Financial Statements (GPFS) (Australian Accounting Standard Board, 2009). It will also apply to the private companies which meet the requirements of being termed as public listed company, which have two of the following characteristics: have an assets worth $12.5M, with more than 50 employees and revenue $25M.

On top of that tier 2 will also be applicable to not for profit organizations which operate in private sector in preparing the GPFS if not required by their financiers to use full IFRS (KPMG, 2010). It also applies to the public sector organizations which are not required by the Australian Accounting Standard Board to use full IFRS, although it also depends on the regulators requirements. Introduction of differential reporting standards affects entities already reporting under full IFRS as it reduces the disclosure of the organizations financial information to the public.

Through this the crucial characteristics of the financial statements is lost. Reporting by the subsidiary firm listed or other firms owned by foreigners renders the financial statements reports to be questionable as far as their presentation relevance as well as being understandable to its users is concerned. In addition to that subsidiary could also adopt certain reporting standards which are not adopted by Mother Company ending up diluting the major purpose of the financial reporting (Picker, 2008).

Use of different reporting standards may bring about inconsistence in reporting making the financial information immaterial (Australian Accounting Standard Board, 2010). to add on that consolidated financial statementsof the parent company might not disclose the financial position of the company due to fluctuations which are caused by different reporting standards. Some entities will be categorized to use full IFRS while others will be free to use the IFRS for SMEs, different subsidiaries will therefore use different reporting standards which will make it difficult for the financial users and auditors to use them appropriately.

Download full paperFile format: .doc, available for editing
Contact Us