FNS50215 Diploma of Accounting Assignment

FNS50215 Diploma of Accounting Assignment

FNS50215 Diploma of Accounting Assignment

Case study

In the present diploma of accounting assignment it begins with the preparation of financial reports for a corporate entity. On the basis of given trial balance and adjustment information profit and loss account of the entity is prepared. Along with the P&L statement adjustment entries is presented in the General Journal.  In this assignment taxation law calculation is given and showcased through worksheet presentation and various tax adjustments are presented in general journal. Calculation of income tax is also disclosed in the profit and loss statement. In the part next to the above statements retained profits are mentioned and recorded in General Journal.

FNS50215 Diploma of Accounting Assignment

Part A

Profit and loss statement

Profit and Loss Statement

 

For the Period ended 30th June

 

Income

amount

 

Sales

600000

 

   Total Sales

600000

Cost of Goods Sold

 

Opening Stock

53000

 

Stock Purchases

460000

 

Less Closing Stock

63000

   Total Cost of Goods Sold(COGS)

450000

Gross Profit

150000

Other income

 

Service income

400000

 

Interest on deposits

2000

 

Income total

552000

Expenses

 

Advertising

10000

 

Auditor fees

20000

 

Depreciation

12000

 

Director fees

12000

 

Provision for doubtful debts

1000

 

Employee Benefit

18000

 

Insurance

13000

 

Interest on loan

25000

 

Lease payments

9000

 

Loss on sale of assets

41000

 

Repair

8000

 

Wages

48000

 

Income tax

50000

 

 Expenses total

302000

Net Profit

285000

The particular account present in above mentioned table present the income and revenue earned by the business enterprise during the business course. Generally it is prepared for a particular accounting period. For instance this accounting period need not to be for a year only, it can be presented for monthly, half yearly and annual statements. The net outcome showcased by the above mentioned task present profit or loss earned by the entity during the course of period. In the above mentioned table after taking all the expenses and income into the account the firm earned an overall net profit after taxation and interim dividend amounted to 250,000.

Impairment loss

An asset impairment emerges when there exist a sudden drop in the reasonable estimation of an asset beneath cost recorded in money related proclamations & books of records. The bookkeeping treatment for asset impairment is finished by writing off the contrast between the reasonable esteem & the recorded cost. A few impairments can be large to the point that they cause a noteworthy decrease in the detailed  asset base & productivity of a business.

Carrying amount

Carrying amount is book value. Recoverable value is the amount that is expected to be recovered from the market in future. Combination value of franchises is 225000 out of which franchise value is 190000 & remaining amount 35000 represents goodwill value.

Record profit & loss adjustment in General Journal

Particulars

Amount

Particulars

Amount

 

To Dividend

35000

By net profit (250000 + 35000)

285000

 

To Impairment loss

10000

 

 

 

To goodwill written off

15000

 

 

 

To tax expenditure (note 1)

81900

 

 

 

Profit

143100

 

 

 

Total

285000

Total

285000

 
 

Entries

note 1

 

Tax expenditure

 

Deferred tax

-7500

Income tax

89400

Total

81900

 

 

Profit and loss adjustment

Profit and loss adjustment is used to calculate the final return after considering the non operating expenses of the business. There is no tax benefit attained on such non operating expenses. Still it creates an additional cost to the company which is necessary to occur but due to taxation norms these are to be disclosed separately apart from normal profit and loss statement. This statement is prepared for the sake to management to disclose the equity share holders return. In the above case after ascertaining net profit amounted to 285,000 the calculation related to dividend, impairment loss, goodwill written off and taxation expenditure is made through profit and loss adjustment account.

Prepare taxation worksheet showing the calculation to derive income tax adjustments

No.

Particulars

Amount

 

a.

Debtor

1000

L

b.

Depreciation

6000

L

c.

Employment benefits

18000

L

d.

Total

25000

L

e.

Taxation liability (25000 * 0.30)

7500

DTL

Calculation of Income tax

adjustment

particulars

amount

 

Net profit

285000

add (+)

expenses payable

18000

add (+)

PBDD

1000

add (+)

Depreciation

12000

sub (-)

Depreciation

-18000

 

total

298000

 

Tax calculation (298000 *30%)

89400

Record the taxation adjustment in general Journal

Date

Particulars

 

Amount (Dr.)

Amount (Cr.)

1.

Deferred tax a/c                                                          

Dr.

7,500

 

 

To profit & loss adjustments  a/c

Cr.

 

7,500

 

(amount of Deferred tax transferred to profit & loss adjustment account)

 

 

 

 

 

 

 

 

2.

Profit & loss adjustments  a/c

Dr.

89,400

 

 

To Income tax payment a/c

Cr.

 

89,400

 

(created reserves liability for payment of income tax)

 

 

 

 

 

 

 

 

Deferred tax

It is calculation made on the basis of timing difference. The measure of an impairment misfortune is the contrast between an asset's conveying sum & its reasonable esteem. When organization perceives an impairment misfortune, this decreases the conveying measure of the asset, so administration of association need to modify the measure of occasional devaluation being charged against the asset to conform for this lower conveying sum.

Record retained profits adjustments in General Journal

Date

Particulars

 

Amount (Dr.)

Amount (Cr.)

1.

Retained profit a/c                                                          

Dr.

10,000

 

 

To General reserve a/c

Cr.

 

10,0000

 

(amount of retained earnings transferred to general reserve account)

 

 

 

 

 

 

 

 

2.

Retained profit a/c

Dr.

36,390

 

 

To final dividend a/c

Cr.

 

36,390

 

(paid dividend out of retained earnings made)

 

 

 

 

 

 

 

 

3.

P&L a/c

Dr.

143100

 

 

To Retained profit a/c

Cr.

 

143100

 

(amount earned during the year transferred to retained earning account)

 

 

 

 

 

 

 

 

4.

Dividend reserve a/c

Dr.

85000

 

 

To retained profit a/c

Cr.

 

85,000

 

(reserves maintained for the purpose of allocation of dividend is transferred to retained earning account)

 

 

 

Show the retained profits account for the year ended 30th June

Retained profits account

Particulars

Amount

Particulars

Amount

To general reserve

10000

By balance b/d

41000

To Final dividend

 

By P&L

143100

(0.06 * 615500)

36930

By dividend reserve

85000

To balance c/d (profit)

222170

 

 

Total

269100

 

Total

269100

 

Retained earnings showcase the amount ploughed back into the business by the organisation from the profits earned by the company. It is the amount paid after the payment of dividend to the external shareholders. The remaining of the amount is transferred or segregated into the various business reserves. It is part of shareholder capital account. In the above section posting has been made to the ledger account of retained earnings on the basis of journal entries mentioned below. The remaining amount 222170 form part of the shareholders capital account as closing balance of retained earnings.

Date

Particulars

 

Amount (Dr.)

Amount (Cr.)

1.

P&L a/c                                                          

Dr.

143100

 

 

To Retained earnings a/c

Cr.

 

143100

 

(Amount earned during the year after payment of all the expenses or net profit after taxation primarily transferred to the retained earnings account)

 

 

 

 

 

 

 

 

2.

Dividend Reserve

Dr.

85000

 

 

To Retained earnings a/c

Cr.

 

85000

 

(Dividend reserve amount which is still unpaid is transferred back to retained earning account)

 

 

 

 

 

 

 

 

3.

Retained earning

Dr

10000

 

 

To General reserve

Cr.

 

10000

 

(amount transferred to general reserve account)

 

 

 

 

 

 

 

 

 

 

 

 

 

4.

Retained earning

Dr

36930

 

 

To General reserve

Cr.

 

36930

 

(amount transferred to general reserve account)

 

 

 

Prepare a Trial Balance at 30 June (after adjustments)

Trial balance at 30th June (after adjustments)

no.

particulars

amount (dr.)

amount (cr.)

1

COGS

460000

 

2

sales turnover

 

600000

3

Advertising

10000

 

4

Auditor fees

20000

 

5

Depreciation

12000

 

6

Director's fees

12000

 

7

Doubtful debts

1000

 

8

Employee benefits

18000

 

9

Insurance expenses

13000

 

10

Interest on loan

25000

 

11

Lease payments

9000

 

12

Loss on sale of assets

41000

 

13

Repair

8000

 

14

Wages

48000

 

15

Income tax

50000

 

16

Service income

 

400000

17

Interest on deposits

 

2000

18

Interim Dividend

35000

 

19

Final Dividend

36930

 

20

Accumulated loss (Investment)

20000

 

21

Goodwill

 

35000

22

Retained profit (41000 + 143100)

 

184100

23

Ordinary shares

 

615500

24

calls in arrear

 

10000

25

dividend reserve

 

15000

26

Asset revaluation

 

90000

27

Mortgage

 

75000

28

Debenture loan

 

150000

29

Creditor

 

34500

30

Employee benefits

 

18000

31

Income tax payable

 

101900

32

Deferred tax asset

7500

 

33

Plant & machinery

60000

 

34

Accumulated depreciation

 

12000

35

Investments

40000

 

36

Debtors

25000

 

37

PBDD

 

1000

38

Cash in h&

1000

 

39

Stock

63000

 

40

Accrued interest on depreciation

5000

 

41

Deposit on call

17500

 

42

Franchise

190000

 

43

Building

400000

 

44

L&

600000

 

45

Prepaid interest

15500

 

46

Cash at bank

 

65000

 

 

2243430

2409000

The basic objective to prepare above mentioned trail balance account is to verify the arithmetical accuracy of the various ledger accounts prior to the preparation of this statement. It showcases the monetary data of all the accounts at one place. It helps in the preparation of final accounts which include profit and loss account and balance sheet balance. It is generally prepared for the purpose of general convenience.

Part B

Prepare journal entries to record the following adjustments at 30th June

L& is re-valued upward by 25 %

Date

Particulars

 

Amount (Dr.)

Amount (Cr.)

1.

L&  a/c                                                          

Dr.

150,000

 

 

To Asset Revaluation a/c

Cr.

 

150,000

 

(L& is re-valued by 25 % & increased amount is transferred to asset revaluation reserve)

 

 

 

Bonus is declared on fully paid shares

Amount of dividend = Total number of shares / 20 * 1

= 595500 / 20 *1

Amount of dividend = 29775

Date

Particulars

 

Amount (Dr.)

Amount (Cr.)

1.

Bonus Dividend  a/c                                                          

Dr.

29775

 

 

To Shareholders a/c

Cr.

 

29775

 

(Amount of dividend transferred to shareholders account)

 

 

 

 

 

 

 

 

2.

Shareholders dividend a/c

Dr.

29775

 

 

To Bank

Cr.

 

29775

 

(dividend amount paid to shareholders)

 

 

 

 

 

 

 

 

Unpaid calls made from the shareholders

3.

Share calls account a/c

Dr.

10000

 

 

To Share capital

Cr.

 

10000

 

(amount due & unpaid is called from the shareholders)

 

 

 

 

 

 

 

 

4.

Bank a/c

Dr.

10000

 

 

Share call a/c

Cr.

 

10000

 

(Call money received from the shareholders)

 

 

 

Prepare a complete financial statement comprising of

Statement of Profit & loss & other comprehensive income statement for the year ended 30th June

Profit & Loss Statement

 

 

For the Period ended 30th June

 

 

Income

 

amount

 

 

Sales

600000

 

 

   Total Sales

600000

 

Cost of Goods Sold

 

 

 

 

Opening Stock

53000

 

 

Stock Purchases

460000

 

 

Less Closing Stock

63000

 

   Total Cost of Goods Sold(COGS)

 

450000

 

Gross Profit

 

150000

 

Other income

 

 

 

 

Service income

400000

 

 

Interest on deposits

2000

 

 

Income total

552000

 

Expenses

 

 

 

 

Advertising

10000

 

 

Auditor fees

20000

 

 

Depreciation

12000

 

 

Director fees

12000

 

 

Provision for doubtful debts

1000

 

 

employee Benefit

18000

 

 

Insurance

13000

 

 

Interest on loan

25000

 

 

Lease payments

9000

 

 

Loss on sale of assets

41000

 

 

Repair

8000

 

 

Wages

48000

 

 

Income tax

50000

 

 

Interim dividend

35000

 

 

 Expenses total

302000

 

Net Profit before Tax

 

250000

 

A statement of changes in Equity

Statement of changes in equity capital

Particulars

Shares in Numbers

 

Opening balance of Equity Capital

595500

Add - Increase in share capital (calls made)

10000

Total no. of shares (closing balance)

615500

A statement of Financial position as at 30th June

 

 

 

Balance Sheet

 

As at end of Year

 

Current Assets

 

 

 

Cash

1000

 

 

 

Debtors (25000 -1000)

25000

 

 

 

 

(-) provision for doubtful debts

-1000

24000

 

 

 

Cash at bank

-15500

 

 

 

Prepaid interest

15500

 

 

 

Accrued interest on deposits

5000

 

 

 

Stock

63000

 

 

 

Total Current Assets

 

93000

 

 

Non-current Assets

 

 

 

Investment

40000

 

 

 

 

 

 

 

 

L&

600000

 

 

 

Building

400000

 

 

 

Plant & machinery

60000

 

 

 

 

(-) Depreciation

-12000

48000

 

 

 

 

 

 

 

 

Franchise

17500

 

 

 

Goodwill

200000

 

 

 

 

 

Total Non-current Assets

1305500

 

 

Total Assets

 

1398500

 

 

Current Liabilities

 

 

 

Income tax payable

12500

 

 

 

Employee benefit payable

18000

 

 

 

Creditors

34500

 

 

 

Total Current Liabilities

65000

 

 

Non-current Liabilities

 

 

 

Mortgage

75000

 

 

 

Accumulated impairment on investments

10000

 

 

 

Debenture Loan

150000

 

 

 

Total Non-current Liabilities

235000

 

 

Total Liabilities

235000

 

 

Net Assets

 

1163500

 

Shareholders’ Equity

 

 

 

Retained profit

41000

 

 

Net profit

250000

 

 

Ordinary share

615500

 

 

Calls in arrear

-10000

 

 

Dividend reserve

100000

 

 

Asset Revaluation

100000

 

 

Total Shareholders' Equity

 

1096500

Disclosure notes

1. While reporting the above financial statements a group of compliances, standards & procedures for reporting basis. The generally accepted accounting principles and forms and formats referred by IFRS were followed in this assignment.

2. This uniform system is approached by the particular company such that the management and business investors should get a level of consistent approach while comparing with the last year financial statements.

3. The use of accounting principles provides basic guidelines that provide benchmarks for the technical accounting principles for the preparation of above statements.

4. In the above statements calculation of differed tax is made which is done for calculation for future purpose. Deterioration is the principle purpose behind distinction in the benefits according to books of Accounts & Taxable benefits according to Income Tax

5. The above accounts have been prepared on the basis of accrual concept calculations. The firm has used merchantile accounting systems while preparing financial statements.

6. Fixed asset do fluctuate on the basis of external market value. Appropriate provisions are been made accordingly.

Gross profit ratio calculated above is 25 %

7. Impairment loss of investments = carrying amount – recoverable value

= 40000 – 20000

=20000

8. As per the accounting principle depreciation calculated in the books of accounts amounted to 12000 but as per the relevant taxation law of the land the depreciation calculated is amounted to 18000. The difference of 6000 is reflected in taxation statement. Similarly employee benefits were due in the current year but were not considered in the taxation statement so appropriate calculations were done in the above mentioned statements.

9. It was expected that there will be certain amount of doubtful debt as per accounting and financial statements but income tax proclamations do not support the same activity so accordingly relevant adjustments were made to reconcile both the statements.

10. As per the above case study it has been observed that there is overdraft situation that is negative bank balances