Professional Documents
Culture Documents
Prepared by
Phm Thy Hng Cow F04B
Registration No. ITPF04-055
Submission Date: 23th November 2012
Cow-F04B-FR A1
Page 1
Cow-F04B-FR A1
Page 2
Table of Contents
EXECUTIVE SUMMARY..........................................................................4
INTRODUCTION....................................................................................5
CHAPTER 1: FINANCIAL INFORMATION.................................................6
Report on different information needs of different user groups........6
CHAPTER 2: REPORT TO AH BOON.......................................................9
Part 1: Report on financial statements in a form suitable for
publication by a sole trader...............................................................9
1.1 Journalizing transactions.............................................................9
1.2 Preparing T-accounts.................................................................15
1.3 Preparing Trial balance..............................................................23
1.4 Preparing Income Statement.....................................................25
1.5 Preparing Statement of Financial position.................................26
Part 2: Report on financial statements in a form suitable for
publication by partnership..............................................................28
1.1 Journalizing transactions...........................................................28
1.2 Preparing T-accounts.................................................................31
1.3 Preparing Trial balance..............................................................35
1.4 Preparing Income Statement.....................................................37
1.5 Preparing Statement of Financial position.................................38
CHAPTER 3: REPORT ON BOON CHEUNG LIMITED COMPANY.............40
Report on financial statements in a form suitable for publication by
limited company..............................................................................40
1.1 Journalizing transactions...........................................................40
1.2 Preparing Trial balance..............................................................42
1.3 Preparing Income Statement.....................................................43
1.4 Preparing statement of retained earning..................................44
1.5 Preparing statement of retained earning..................................45
CHAPTER 4: REPORT ON WARNER COMPANY.....................................47
AND PEREIRA COMPANY.....................................................................47
Report on financial statements for group of company....................47
1.1 Preparing consolidated income statement for the year ended
30 June 2010...................................................................................47
Cow-F04B-FR A1
Page 3
Cow-F04B-FR A1
Page 4
EXECUTIVE SUMMARY
Finance plays a crucial part in every business. It has a strong influence on every aspects
within company and be considered as a key for business performance. In this report,
some issues related to financial statments will be discuss based on scenarios of some
companies
The first scenario is about Ah Boon who is a civil engineering and building contractor
which was established as a sole proprietor specializes in drainage works repair of
vehicular bridges, road / pavement construction sewerage system, tidal gate structures
etc. The way how to prepare financial statements in a form suitable for publication by a
sole trader will be shown in this company.
The second case is still about Ah Boon but he is now keen to expand his businesses to
become as a sole distribution agent for building materials. Ah Boons, on 1 July 2010
decided to admit a new business partner, Cheung, to transform his sole proprietor
enterprise into a partnership. This part will discuss about financial statement made in a
form suitable for publication by partnership.
Another case, which is about Boon Cheung Limited company, will show the way how
to prepare financial statements in a form suitable for publication by limited company.
The last two companies are Warner Ltd and Pereira Ltd which consolidate. In this part,
the recording and reporting the activities of a group of companies will be pointed out.
Cow-F04B-FR A1
Page 5
INTRODUCTION
This report aims to discuss about financial statements from complete
or incomplete records as well as financial information in accepted
formats for publication. In more particular, several following points
will be mentioned:
Preparing financial statements for a variety of businesses from
trial balance, making appropriate adjustments
Preparing financial statements from incomplete records
Preparing a consolidated balance sheet and profit and loss
account for a simple group of companies
Explaining how the information needs of different user groups
vary
Preparing financial statements in a form suitable for publication
by a sole trader, partnership and limited company
Not only provide the theory related to financial terms, this paper also provides relevant
analysis and explanation in each area. Doing this report, some information sources were
used Such as:
magazines were also use to utilize data related to the topic in the scenario.
Hopefully, this report will be useful not only for business students but also for every
person who want to know and learn about finance, especially financial statements.
Cow-F04B-FR A1
Page 6
Users
Purpose
user
Interna Owners
For
l Users
(sole
viability
owners,
profitability
Cow-F04B-FR A1
Information needs
analyzing
the They
mainly
and information
of
their profit
Page 7
made
require
about
the
and
the
investment
and dividend
determining
any expect
future
course
action.
made.
to
They
receive
Simplified, n.d.)
loss
statement.
organizations
CEOs,
performance
COOs)
position
statement
or
require
and
in
balance sheet.
the Managers
analyzing
(CFOs,
information
in
taking making
their
decision-
and
control
For
example,
(Accouting- the
Simplified, n.d.)
estimated
prices,
costs,
selling
demand,
of
various
by
the
organization.
(Reaich,
normally,
require
statements
overall
all
to
they
financial
have
picture
an
of
companys operating.
assessing Employees
require
Employe
For
es
their
future demands
and
Page 8
avoid
(Reaich,
(Accouting- 2012)
Simplified, n.d.)
These
information
Extern
al
Users
income statement.
tax, Government
equires
Governm
For
ent
preparation
of
offices
statistics
productivity, activity,
(Central
commerce,
assessing
on
such
etc.
and
profits,
the stocks,
investments,
dividends
paid,
the
law.
HM
Revenue
&
balance sheet.
Customs)
Creditors
Competit
payment.
For
obtaining
the Competitors
ors
operating
of
require
organization.
gain
advantage
the
over
require
competitors
the
information
mainly
for
strategic
purpose.
(Pretoria,
n.d.).
any
area
of
the
to
give
them
Page 9
an
the
way
the
Cow-F04B-FR A1
Page 10
Net profit / loss = Capital at the end of the period + Drawings for the period
Debit
Insurance expense
(2)
(3)
(4)
3,000
3,000
136,400
136,400
800
800
75,600
16,000
59,600
3,400
3,400
Debit
16,800
16,800
Page 11
4,200
4,200
Debit
18,000
18,000
Accumulated depreciation
13,000
13,000
6,000
6,000
1,000
1,000
25,600
25,600
3,200
Credit expense
3,200
Accumulated depreciation
(9)
Debit
new vehicle
Rent expense
6,900
6,900
20,000
20,000
Interest expense
500
169,240
500
)
Credit Trade payable
(12 Debit
Telephone expense
169,240
1,780
)
Credit Phone bill owing
(13 Debit
Electricity expense
1,860
)
Credit Electricity bill owing
(14 Debit
Miscellaneous expense
3,540
)
Credit Miscellaneous bill owing
(15 Debit
Bad debts expense
)
Credit Trade receivable account
(16 Debit
Cost of goods sold
)
Credit Inventory expense
(17 Debit
Salaries expense
)
Cow-F04B-FR A1
1,780
1,860
3,540
2,560
2,560
173,220
173,220
10,000
10,000
Page 12
Trade receivable
409,780
)
Credit Sales
(19 Debit
Cash in bank
)
409,780
4,200
4,200
Notes:
(1)Insurance paid in advance
At 31 March 2010, insurance paid in advance to 30 September
was 1,400.
From 31 March 2010 to 31 March 2011, insurance paid in advance to 30
September 2011 was 3,200.
Insurance expense incurred from 30 September 2010 to 31 March 2011 (6
months was:
6
3,200= 1,600
12
Cost
Less depreciation to date (31 March 2010)
Net book value at the end of year ending 31 March 2010
Depreciation for the year to 31 March 2011 (13,600 x 25%)
Cow-F04B-FR A1
Page 13
25,200
11,600
13,600
3,400
Cost
Depreciation for the year to 31 March 2011 (16,800
x 25%)
16,800
4,200
(7)Old vehicle
The profit (loss) from disposing of old vehicle would be
calculated as follows:
18,000
13,000
5,000
6,000
1,000
(8)New vehicle
The new vehicle purchased in 1 October 2010 is to be
depreciated at 25% per annum on the straight-line basis. The
formula of this method is as follows:
Acquistion cost Residual value
Expected useful life of the asset
Using this formula, the depreciation expense of new vehicle would be calculated
as follows:
Depreciationof new vehicle=25,600 25
6
= 3,200
12
= 500
Page 14
3
= 500
12
(11)
Inventory
The amount of purchase of suppliers (inventory) would be
calculated as follows:
Payment to suppliers
Plus closing balance of trade payable (supplies owing)
Less opening balance of trade payable
Purchases of supplies
167,980
8,180
6,920
169,240
(12)
Telephone expense
The telephone expense would be calculated as follows:
1,720
480
420
1,780
1,780
440
360
1,860
(14)
Miscellaneous expense
The miscellaneous expense would be calculated as follows:
2,560
Page 15
980
0
3,540
(15)
Inventory of materials
The inventory expense would be calculated as follows:
28,320
169,240
24,340
173,220
Sales
At 31 March 2011, amounts due from customers totaled
(19)
407,040
2,560
19,160
18,980
409,780
Cash in bank
From bank account, it can be seen that the expenses are more
than receipts. Therefore, Ah Boon needs to borrow 4,200 from
bank (overdraft), which is regarded as a current liability of his
firm to bank.
Cow-F04B-FR A1
Page 16
Cash in hand
136,400
16,000
48,080
1,780
202,260
Balance b/d
Opening Balance
Cash in hand
Sales
Loan
Sales old vehicle
Bank payable
Balance b/d
1,780
Cash in bank
Drawing account
Cow-F04B-FR A1
Page 17
96,520
167,980
7,200
3,200
16,800
25,600
1,720
1,780
2,560
59,600
800
0
383,760
0
59,60
0
75,60
0
Insurance expense
Insurance in
advance
3,000
Insurance in advance
25,20
Opening balance b/f
0 Closing balance c/d
25,20
0
25,20
Balance b/d
0
Cow-F04B-FR A1
Page 18
3,000
1,600
4,600
25,200
25,200
3,40
15,00
Closing balance c/d
Cash in bank
Balance b/d
11,600
3,400
15,000
15,000
16,800
16,800
Cow-F04B-FR A1
Page 19
Balance b/d
18,000
0
18,000
13,000
13,000
0
Accumulated depreciation of
Old vehicle account
Profit on sale
Cash in bank
Balance b/d
New vehicle
25,600 Closing balance c/d
25,600
25,600
Accumulated depreciation of
new vehicle
3,200
Page 20
13,000
6,000
19,000
25,600
25,600
3,200
3,200
3,200
6,900
1,800
8,700
Rent expenses
Loan payable
20,00
0 Cash in bank
20,00
0
Balance b/d
20,000
20,000
20,000
Interest Expense
Interest payable
500
Interest payable
Interest expense
Closing balance
Page 21
500
500
420
1,780
2,200
480
Telephone expenses
1,780
360
1,860
2,220
440
Electricity expenses
Miscellaneous expense
Miscellaneous expenses
Trade receivable
2,560
Cow-F04B-FR A1
Page 22
0
3,540
3,540
980
Trade receivables
Balance b/d
105,280
301,760
2,560
19,160
428,760
173,22
0
24,340
197,560
173,22
Supplies expenses
Wage of repair staff
Payment to suppliers
Closing balance c/d
0
136,40
0
309,62
0
Trade payable
6,920
169,24
0
176,160
8,180
Account payable
10,000
Page 23
4,200
500
14,700
14,700
Bank payable
Bank balance
Cow-F04B-FR A1
Page 24
4,200
Assets
Tools and equipment: cost
Depreciation to date
Carrying amount of tools & equipment to date
Vehicle: cost
Depreciation to date
Carrying amount of vehicle to date
Inventories
Trade receivable
Rent paid in advance to 30 June 2010
Insurance paid in advance to 30 September
25,200
11,600
13,600
18,000
13,000
5,000
28,320
18,980
1,500
2010
Bank balance
Cash in hand
Total assets
1,400
3,720
460
72,980
Liabilities
Trade payable
Phone bill owing
Electricity bill owing
Total liabilities
6,920
420
360
7,700
Capital
Total capital & liabilities
65,280
72,980
As at 31 March 2011
Debit
1,780
Cash in hand
Cow-F04B-FR A1
Page 25
Credit
1,800
1,600
24,340
1,000
25,600
3,200
equipment
Depreciation expenses of purchase tools
3,400
& equipment
Accumulated depreciation of new
4,200
vehicle
Old tools & equipment
Accumulated depreciation of old tools &
equipment
Purchase tools & equipment
Accumulated depreciation of purchase
tools & equipment
Trade receivables
Trade payables
Account payable
Loan payable
Sales
Insurance expenses
Phone bill owing
Electricity bill owing
Miscellaneous bill owing
Telephone expenses
Electricity expenses
Miscellaneous expenses
Cost of goods sold
Salaries expenses
Interest expenses
Drawing account
Opening equity
Bad debts
Rent expenses
3,200
25,200
15,000
16,800
4200
19,160
8,180
14,700
20,000
408,980
3,000
480
440
980
1,780
1,860
3,540
309,620
10,000
500
75,600
65,280
2,560
6,900
542,44
Capital
Cow-F04B-FR A1
Page 26
542,440
Sales
Less cost of goods sold
Gross profit
Add profit of sale vehicle
Less expenses
Insurance
Salaries
Rent of Shop
Depreciation of new vehicle
Depreciation of old tools & equipment
Depreciation of purchase tools & equipment
Telephone
Electricity
Miscellaneous
Bad debts
Interest
408,980
309,620
99,360
1,000
100,360
3,000
10,000
6,900
3,200
3,400
4,200
1,780
1,860
3,540
2,560
500
40,940
59,420
Net profit
1.5 Preparing Statement of Financial position
Non-current assets
New vehicle
Accumulated depreciation of new vehicle
Carrying amount of new vehicle
Old tools & equipment
Accumulated depreciation of old tools & equipment
Carrying amount of old tools & equipment
Purchase tools & equipment
Accumulated depreciation of purchase tools &
equipment
Carrying amount of purchase tools & equipment
Current assets
Cash in hand
Cow-F04B-FR A1
25,600
3,200
22,400
25,200
15,000
10,200
16,800
4200
12,600
45,200
1,780
Page 27
19,160
1,800
1,600
24,340
Total assets
48,680
93,880
Capital
At 31 March 2010
Add profit for the year
Less Drawing
At 31 March 2011
65,280
59,420
75,600
49,100
Non-current liabilities
Loan payable
20,000
Current liabilities
Trade payables
Phone bill owing
Electricity bill owing
Miscellaneous bill owing
Account payable
8,180
480
440
980
14,700
24,780
93,880
Cow-F04B-FR A1
Page 28
880
(1)
Debit
(2)
Credit Commission
Debit
Stock
88,000
(3)
10,000
Debit
72,000
880
88,000
(4)
Credit Stock
Debit
Trade receivable
82,000
(5)
Credit Sales
Debit
Discount allowed
(6)
(7)
115,960
(8)
78,800
(9)
120,000
120,000
3,240
3,240
2,400
2,400
115,960
78,800
1,000
Credit premises
1,000
premises
Depreciation expense vehicle
2,000
(11 Debit
Cow-F04B-FR A1
vehicle
Vehicle expense
2,000
14,040
Page 29
14,040
13,440
13,440
8,600
)
Credit Cash in bank
(13 Debit
Trade expense
8,600
14,800
)
Credit Prepayment
Notes:
14,800
(2)Purchases
The agency commission that the firm will receive is 880 which
equals to 1% of the purchases for the year ended on the previous 31 March.
880
Purchases = 1 = 88,000
(3)Cost of goods sold
Stock, at cost, at 31 March 2011 was valued at an amount
6,000 more than a year previously which is 6,400.
Stock at 31 March 2011 = 6,400 + 6,000 = 12,400
Cost of goods sold would be calculated as follows:
6,40
Opening stock
0
8800
Add purchases
0
1240
0
8,00
0
2,00
0
72,0
00
Cow-F04B-FR A1
Page 30
72,000
60
120,000
(7)Cash received
Cash received for the years to 31 March 2011 would be
calculated as follows:
12,60
Opening balance of trade receivable
0
1200
Add sales
Less closing balance of trade
00
13,40
receivable
Less discount allowed
0
3,240
115,
Cash received
960
(8)Cash paid
Trade payable at 31 March 2011 related entirely to goods received whose
list prices totalled 19,000. Plus, both partners have agreement with the
manufacturer, sell products at a trade discount of 20% off list price.
Actual trade payable at 31 March 2011 = 19,000 x (100%-20%) = 15,200
Cash paid for the year to 31 March 2011 would be
calculated as follows:
8,40
payable
0
88,0
Add purchases
Less closing balance of trade
00
15,2
payable
00
2,40
0
78,8
Page 31
00
240
14,7
prepaid
Less closing balance of trade expenses
prepaid
20
160
14,8
00
Cash in Bank
Trade expenses
14,72
8,620 prepaid
0
13,44
Commission
0
78,80
Receipts
60 Suppliers
Withdrawals
Closing balance c/d
125,1
80
9,620
0
8,600
9,620
125,1
80
Balance b/d
Commission
Agency Commission
due
Cow-F04B-FR A1
Page 32
88
0
Opening balance
b/f
Commission
Balance b/d
Trade payable
0 b/f
78,8
suppliers
Closing balance c/d
00 Purchase
1520
0
96,4
00
Balance b/d
600
880
1480
8,400
8800
0
96,40
0
1520
0
Stock
Opening balance
b/f
Purchases
Balance b/d
Cow-F04B-FR A1
Page 33
82,0
00
1240
0
94,4
00
72,0
Stock account
00
2,40
Trade receivable
3,24
Trade receivable
Sales
1200
Trade receivable
Trade receivable
00
Opening balance
b/f
Trade receivable
Cow-F04B-FR A1
3,240
115,9
60
13,40
0
132,6
00
Premises
Balance b/d
20,0
00
20,0
00
0
Provision for depreciation of premises
Closing balance
13,00 Opening balance
c/d
0 b/f
Depreciation
12,000
expenses
13,00
0
Balance b/d
Vehicles at costs
0
Page 35
1000
13,000
13,000
10,000
10,000
Opening balance
Bank payment
Closing balance
c/d
13,440 b/f
1,060 Vehicle expenses
14,500
Balance b/d
4,000
2000
6,000
6,000
460
14,04
0
14,50
0
1,060
Vehicle expenses
Accrued vehicle
14,0
expenses
40
Trade expenses
prepaid
Trade expenses
14,8
00
Cow-F04B-FR A1
Page 36
Bank account
Cow-F04B-FR A1
240 Expenses
Closing balance
14,720 c/d
14,960
160
Drawing account
8,600
Page 37
14,800
160
14,960
Assets
20,00
Premises at cost
0
12,00
0
8,000
10,00
Vehicle at cost
Provision for depreciation
Carrying amount of vehicle to date
Trade receivable (for sales)
Prepayments (trade expenses)
Stock at cost
Agency commission due
Balance at bank
Total assets
Liabilities
Trade payable
Accrual vehicle expenses
Total liabilities
Capital
Total liabilities and capital
0
4,000
6,000
12,600
240
6,400
600
8,620
42,460
8,400
460
8,860
33,600
42,460
Cow-F04B-FR A1
Page 38
Cash in Bank
9,620
Trade receivable
13,400
Stock
12,400
Premises
20,000
Provision for depreciation of premises
Vehicles at costs
10,000
Provision for depreciation of vehicle
Trade expenses prepaid
160
Agency Commission due
880
Trade payable
Sales
Accrual vehicle expenses
Depreciation expenses of premises
1,000
Depreciation expenses of vehicle
2,000
Vehicle expenses
14,040
Discount received (other income)
Discount allowed (expenses)
3,240
Goods loss expenses
10,000
Commission (other income)
Cost of goods sold
72,000
Drawing account
8,600
Trade expenses
14,800
Capital at 31 March 2010
192,140
Cow-F04B-FR A1
Page 39
Credit
13,000
6,000
15,200
120,000
1,060
2,400
880
33,600
192,140
AH BOON PARTNERSHIP
Income statement
For the year ended 31 March 2011
Sales
1200
00
72,00
0
48,0
Gross profit
Add discount received
Add commission
00
2,400
880
3,280
51,28
0
Less expenses:
14,04
Vehicle expenses
Discount allowed (expenses)
Depreciation expenses of premises
Depreciation expenses of vehicle
0
3,240
1000
2000
10,00
0
14,80
Trade expenses
0
4508
0
6,20
Net profit
Cow-F04B-FR A1
Page 40
AH BOON PARTNERSHIP
Statement of Financial position
As at 31 March 2011
Non-current assets
20,00
Premises
Provision for depreciation of
premises
Carrying amount of premises
0
13,00
0
7,000
10,00
Vehicles at costs
Provision for depreciation - vehicle
Carrying amount of vehicle
0
6,000
4,000
11,00
0
Current assets
Cash in Bank
9,620
13,40
Trade receivable
Trade expenses prepaid
Agency Commission due
Stock
0
160
880
1240
0
36,46
0
47,4
60
Total assets
Capital
33,60
At 31 March 2010
Add profit for the year
Less drawing
0
6,200
8,600
31,20
0
At 31 March 2011
Current liabilities
Trade payable
Cow-F04B-FR A1
1520
Page 41
0
1,060
1626
0
47,4
60
The P& L includes a section usually after the calculation of net profit to show
the dis tribution of profit among the partners. It is called the profit and loss
appropriation account
The balance sheet includes a current account (an account similar to capital
account)
Additionally, limited companies are governed by the companies Acts. A company must:
File accounts and an Annual Return with the Registrar of Companies. This
information is available to the public.
Cow-F04B-FR A1
Page 42
Debit
Preference dividend
Debit
7,000
20,000
(2)
27,000
(3)
(4)
(5)
10,000
(6)
16,400
4,000
4,000
8,000
8,000
2,000
2,000
10,000
Credit expense
16,400
Accumulated depreciation
fittings and delivery vehicles
Notes:
(1) The provision of preference dividend and final dividend of
ordinary share
Boon Cheung Limited company has share capital of 7%-preference
share of 1 each
The preference dividend payable = 100,000 x 7% = 7,000
The director recommends provision for the preference dividend
and a final dividend of 0.10 per ordinary share
Final dividend ordinary share = 0.1 x 200,000 = 20,000
Total provision of dividend = 7,000 + 20,000 = 27,000
(2)Debenture and accrued interest expense
Based on the balance remained in Boon Cheung Limited
companys books
Charge needed in income statement = 80,000 x 10% =
8,000
Amount paid shown in trial balance = 4,000
Accrued interest (6 months) payable = 4,000
(3)Rates expense
Cow-F04B-FR A1
Page 43
8,5
Rates and insurance prepaid
20
Less closing balance of rates paid in
advance
20
8,00
Rates expenses
Debit
Credit
200,000
100,000
87,624
2,960
54,000
82,000
24,700
49,200
78,380
Page 44
54,400
27,000
8,000
520
184,640
12,000
244,000
36,000
62,620
48,458
1,946
3,666
1,734
7,000
20,000
1,528
2,420
16,380
16,180
2,000
2,400
80,000
8,000
4,000
2,000
10,000
767,87
8
Cow-F04B-FR A1
Page 45
767,878
184,6
Gross trading profit for 2010
Income from investment
Distribution costs
Vehicle running costs (including
depreciation)
Selling costs
40
2,400
(24,70
0)
(3,666
)
(16,38
0)
(54,40
0)
(1,946
)
(2,420
)
(2,000
Audit fees
)
(8,000
Rates expenses
)
(8,000
Debenture interest
Other expenses
)
(1,528
General expenses
)
(1,734
)
62,26
Net profit
Cow-F04B-FR A1
Page 46
Cow-F04B-FR A1
Page 47
62,2
Net profit
Appropriations
66
10,0
00
7,00
Preference dividends
Ordinary dividends
0
12,0
Interim
00
20,0
Final
00
13,2
66
16,1
80
29,4
Cow-F04B-FR A1
Page 48
46
Assets
Non-current assets
244,0
Building at cost
00
82,00
0
49,20
0
32,80
0
36,00
0
312,8
vehicles
Investment at cost
00
Current assets
87,62
Cash in bank
Cash in hand
4
2,960
78,38
0
62,62
Debtors
Rate and insurances (prepayments)
232,1
04
544,9
04
Total assets
Equity and liabilities
Equity
Cow-F04B-FR A1
0
520
Page 49
00
100,0
00
54,00
General reserve
0
29,44
6
383,4
46
Non-current liabilities
80,00
10% Debenture secured on fixed assets
Current liabilities
48,45
Creditors
8
27,00
Provision of dividend
Accrual audit fees
Accrual interest expenses
0
2,000
4,000
Cow-F04B-FR A1
Page 50
81,45
8
544,9
04
5
(1,78
Cost of sales
8)
1,65
Gross profit
Distribution costs
Administrative expenses
Interest payable
Profit before taxation
Income tax expenses
Profit after taxation for the year
Profit attributable to:
Owners of Warner Ltd
Non-controlling interest
8
(638)
(310)
(75)
635
(306)
329
318
11
329
Note:
Since the issue costs of 50,000 on the issue of ordinary share
capital must be recorded as reduction of share premium, not
increase of administrative expense.
Administrative expense = 325,000 50,000 = 275,000
Share premium = 300,000 50,000 = 250,000
On 1 May 2010, Warner Company acquired 70% of the ordinary
share capital of Pereira Company, while the accounting time is
Cow-F04B-FR A1
Page 51
Group costs
3,445
=
1,788
=
Group
638
=
expenses
Group interest payable
70 + (30 x 2/12)
310
=
75
=
Non-controlling interest
306
=
11
Inter-company dividends
The dividends on consolidated income statement would be
calculated as follows:
000
Pereira Ltd.s dividend received
by Warner Ltd.
The dividends
42
=
received
by
42 x 10/12
Page 52
35
dividends
received
by
42 x 2/12
credited
consolidated
on
=
7
42 35 7
=
0
income
statement
1.2
WARNER LTD
Statement of changes in equity
'
Retained earnings
Balance at 1 July 2009
Profit after tax for the year of the Group (belong to owners
000
379
of Warner Ltd)
Dividend
Balance at 30 June 2010
318
(38)
659
Notes:
The retained earnings at 1 July 2009 would be calculated as
follows:
000
Retained earnings of Warner Co.
625
June 2010)
Retained earnings for the year
284 38
625 - 246
246
=
at 1 July 2009
Cow-F04B-FR A1
379
Page 53
30 June 2010
WARNER LTD
Consolidated balance sheet
As at 30 June 2010
' 000
Non-current assets
2,250
Property, plant and equipment
Goodwill
189
' 000
2,439
Current assets
Inventory
Receivable
Cash
600
451
299
1,350
3,789
Total assets
Equity
Equity attributable to owners of
Warner Ltd
Share capital
Share premium
Retained earnings
750
250
659
1,659
255
1,914
Non-controlling interest
Non-current liabilities
Current liabilities
1,225
650
Cow-F04B-FR A1
Page 54
1,875
3,789
1,750 + 500
Inventory
150 + 450
2,250
=
Receivables
238 + 213
600
=
187 + 112
451
=
Non-current liabilities
1,050 + 175
299
=
Current liabilities
400 + 250
1,225
=
Cash
650
Goodwill
Warner company accounts for pre-acquisition dividends by
treating them as a deduction from the cost of the investment.
As calculating above, a pre-acquisition dividend received by
Warner Ltd is 35,000. Therefore, the value of investment in
Pereira Company must be deducted an amount of 35,000.
Investment in Pereira Company = 800,000 35,000 = 765,000
According to the scenario, the property, plant and equipment of
Pereira Company had open market value was 500,000. Since no
depreciation adjustment will be made in the group accounts, the year end value
will be taken as the carrying value of the property, plant and equipment.
The revaluation reserve created in equity of consolidated
balance sheet is:
500,000 - 350,000 = 150,000
Goodwill will be calculated based on the net assets which
include retained earnings of pre-acquisition.
Cow-F04B-FR A1
Page 55
Co.
Less:
Share capital
765
Share premium
Pre-acquisition profit
Fair value adjustment
100 x 70%
150 x 70%
70
=
423 x 70%
105
=
150 x 70%
296
=
105
576
Goodwill
=
189
Non-controlling interest
Non-controlling interest is proportion of net assets of such subsidiaries in fact
belongs to investors from outside the group. (Education, 2010). In this case, it is
proportion of net assets of Pereira Ltd. Non-controlling interest would be
calculated as follows:
000
Share capital
Share premium
Retained
earnings
100 x 30%
150 x 30%
30
=
45
=
acquisition
Cow-F04B-FR A1
127
Page 56
150 x 30%
8
=
45
=
Non-controlling interest
255
Cow-F04B-FR A1
Page 57
CONCLUSION
Through this report, it can be seen that the way to prepare financial
statements from complete or incomplete records was shown clearly
through three different companies. Also, financial information in
accepted formats for publication were presented in each case with
clear explanation.
I personally think my work achieves good quality because I provided
important theories, analysis and applications about every aspects
mentioned in this report. Besides, I also used reliable resources to get
information. However, because of word limitation and some other
problems I encountered (summarizing, analyzing skills, etc), some
parts in this report could be not thorough and analyzed deeply.
Cow-F04B-FR A1
Page 58
REFERENCES
Accouting-Simplified, n.d. Accouting-Simplified.com. [Online]
Available at: http://accounting-simplified.com/financial/users-ofaccounting-information.html
[Accessed 18 November 2012].
Acs, n.d. Acs Education. [Online]
Available at: http://www.acs.edu.au/download/samples/book1.pdf
[Accessed 18 November 2012].
Alunct, n.d. who needs financial statements. GCSE Applied Business,
Volume 29, p. 3.
Anon., 2012. Companies made simple. [Online]
Available at: http://www.companiesmadesimple.com/sole-trader-vlimited-company.html
[Accessed 20 November 2012].
Drury, C., 2000. Management & Cost Accounting. In: 5th, ed. London:
Thompson Business press, p. 4.
Education, B. P., 2004. Managing Financial Resources and Decisions.
In: London: BPP Learning Media Ltd, p. 7.
Education, B. P., 2010. Management Accounting and Financial
Reporting. In: London: BPP Learning Media Ltd, p. 448.
MBA, N., n.d. Net MBA Business Knowledge Center. [Online]
Available at: http://www.netmba.com/strategy/competitor-analysis/
[Accessed 20 November 2012].
Pretoria, U. o., n.d. [Online]
Available at: http://upetd.up.ac.za/thesis/available/etd-10232001152437/unrestricted/02chapter2.pdf
[Accessed 19 November 2012].
Cow-F04B-FR A1
Page 59
Cow-F04B-FR A1
Page 60