Citilink has just completed its 2010/11 management accounts. The directors are going to review the financial statements in the next board meeting. You have to prepare a FINANCIAL REVIEW REPORT for presentation at the board in the capacity of the Finance Director of Citilink. In order to have a critical review, you have collected the financial statements of Grayline, the market leader in the bus transportation industry. All the financial statements are at June 30. The report should cover the following issues:
(a) Discuss the formation of financial statements by introducing debit, credit, books of prime entry, accounts and ledgers, trial balance, final accounts.
(b) As the company legal form evolved from sole trader, to partnership, and finally to corporation during the last 10 years, a lot of changes have been made on the format of financial statements. The indigenous founder requests you to explain and compare appropriate formats of financial statements for difference forms of companies.
(c) Explain how different types of finance and their costs appear in the financial statements of Citilink and the interaction of assets and liabilities on the balance sheet, using the financial statements at Appendix I to illustrate.
(d) Explain the structure and purpose of main financial statements, i.e. balance sheet, profit and loss account, cash flow statement, and notes, illustrate with the financial statements at Appendix I as far as possible.
(e) Discuss the changes to reporting requirements under the International Accounting Standards (IAS) e.g. statement of comprehensive income and statement of financial position, illustrate with the financial statements at Appendix I as far as possible
(f) Calculate and interpret with writing the financial statements at Appendix I using appropriate ratios, i.e. profitability, liquidity, efficiency and investment. Comparison should be made with prior year result and externally with Grayline. You should show clearly your working for the computation of ratios.