Reference no: EM131089728

Financial Accounting and Reporting

Learning Outcomes

1 Understand the regulatory framework for financial reporting

2 Be able to prepare financial statements from complete or incomplete records

3 Be able to present financial information in accepted formats for publication

4 Be able to interpret financial statements.

BUSINESS SCENARIO

You are a newly appointed consultant in XYZ Financial Consultant Company.

You provide financial consultancy to multiple different companies.

Below are financial statements of different clients and your Manager has requested you to provide suitable financial statements for different types of companies.

The types of companies vary from sole trader, partnership and limited liability.

TASK 1:

Individual Report -

The senior management of the company have requested you to provide a report on the following

LO 1.1 Select one or more companies that you want to invest in Dubai stock exchange.

Provide justification as to WHY you want to invest in this company or companies

Who will be the company's stakeholders?

Why would they be interested in this company?

LO 1.1-1 Describe the different users of financial statements and their needs LO 1.2 Explain the legal and regulatory influences on financial statements

LO 1.3 Assess the implications for users.
What are the advantages for this global harmonisation?

LO 1.4 Explain how different laws/regulations are dealt with by accounting and reporting standards. Please provide examples.

TASK 2: - IN CLASS ASSESSMENT

LO - 2.1 Prepare financial statements for a variety of businesses from trial balance, making appropriate adjustments

Q - 1 As at 30.3.20X7 ABC Ltd has the following balances on the ledger account

Account	Balance in $
Bank Loan	12,000
Cash	11,700
Capital	13,000
Rent	1,880
Trade Payables	11,200
Purchases	12,400
Sales	14,600
Sundry Payable	1,620
Receivables	12,000
Interest on Bank loan	1,400
Other expense	11,020
Vehicles	2,020

On 31.3.x7 the business made the following transactions

1. Bought material for $1,000 half for cash and half on credit

2. Made $1,040 sales $800 of which was for credit

3. Paid wages to shop assistants of $260 in cash

Please prepare the following financial statements

L.O 2.1 - Draw up a trial balance showing the balances as at the end of 31.3. 20x7

L.O 2.2 - Prepare a profit and loss

Q-2

Prepare a statement of financial position for the Ted Hills Hardware Store as at 31 December 20X6, This is a sole trader.

Capital as at 1 January 20X6 $ 47,600

Profit for the year to 31 December 20X6 $8,000

Freehold premises, net book value at 31 December 20X6 $50,000

Motor vehicles, net book value at 31 December 20X6 $9,000

Fixtures and fittings, net book value at 31 December 20X6 $8,000

Long-term loan (mortgage) $25,000

Bank overdraft* $2,000

Goods held in inventory for resale $ 16,000

Receivables $500

Cash in hand* $100

Payables $1,200

Taxation payable $3,500

Drawings $4,000

Accrued costs of rent $600

Prepayment of insurance $300

A shop might have cash in its cash registers, but an overdraft at the bank.

Q3 - Prepare a trial balance, P&L and a Balance sheet for Consulting Company

Cash $7,000

Accounts Receivable $3,000

Office supplies $3,000

Office Equipment $5,000

Bank Loan $5,000

Accounts payable $ 1,000

Capital $10,000

Consulting revenue $ 7,000

Rent $600

Salaries $2,500

Stationery $1,200

Utilities expenses $700

L.O 2.3 - Prepare consolidated profit or loss and Balance sheet for a company

M Ltd acquired 75% of the share capital of N Ltd on its incorporation. The Balance Sheets of the two entities as at 31 December 20X7 are as follows:

	M Ltd	N Ltd
Non - current assets	50,000	25,000
Investment in Minor Ltd at cost	15,000
Inventory	13,000	7,000
Other current assets	10,000	6,000
Total assets	88,000	38,000
Share capital - 1$ shares	45,000	20,000
Retained earnings	30,000	15,000
Current liabilities	13,000	3,000
Total equity and liabilities	88,000	38,000

M Ltd had not paid N Ltd for goods purchased therefore the sum of $6,000 is included in M's payables and in N's receivables.

Prepare a Consolidated Balance Sheet at 31 December 20X7. Show all workings.

BUSINESS SCENARIO

You are a newly appointed consultant in XYZ Financial Consultant Company. You provide financial consultancy to multiple different companies.

One of your clients is a very successful retail company that has a company structure. The board is contemplating an adaption of IFRS and more formal reporting as they are expanding the business.

The company is in retail business in the UK and has shops that sell food, clothing and house hold items.

Task 3 - LO3

Consolidated Financial Statements

LO 3.1- Explain how the information needs of different user groups vary

LO - 3.2 Prepare financial statements in a form suitable for publication by a sole trader, partnership & Limited company Below is trial balance of a sole trader

NICO is a sole trader

NICO

Trial balance as at 31 July 20x9 is given below

	Debit	Credit
Capital		100,000
Plant and Machinery Cost	155,000
Accumulated Deprecation to 1 Aug 20x8		50,000
Trade Receivables	15,000
trade Payables		3,000
Inventories 1 Aug 20x8	10,000
Cash at bank	3,400
Sales		150,000
Drawings	35,000
Allowance for receivables at 1 Aug 20x8		2,000
Bank loan repayable 2015		20,000
Purchases	40,000
Selling and Distribution	50,000
Admin expenses	15,000
Interest	1,600
Total	325,000	325,000

NICO is a sole trader

The following final adjustments are required

1. Inventories at 31 July 20x9 were valued at $12,000

2. Selling and distribution expenses of $4,000 are to be accrued

3. Administration expenses of $6,000 were prepaid

4. The allowance for the receivables is to be adjusted to 5% of the receivables

5. Depreciation on the plan and machinery is $15,000 for the year to 31 July 20x9

Prepare the Profit and Loss for the year end 31 Jul 20X9 and the Balance sheet as at 31 Jul 20x9 in a suitable for publication.

Below is a trial balance of a limited company

Prepare the financial statement suitable for publication

Paul's Guitar Shop, Inc.
Adjusted Trial Balance
December 31, 2015

	Paul's Guitar Shop, Inc. Adjusted Trial Balance December 31, 2015
Account		Debit	Credit
Cash		$32,800
Accounts Receivable		300
Prepaid Rent		1,000
Inventory		39,800
Leasehold Improvements		100,000
Accumulated Depreciation			2,000
Accounts Payable			$49,000
Accrued Expenses			450
Unearned Income			1,000
Long-term Liabilities			99,500
Common Stock			10,000
Dividends		1,000
Revenues			27,800
Cost of Goods Sold		10,200
Depreciation Expense		2,000
Rent Expense		500
Supplies Expense		500
Utilities Expense		400
Wages Expense		750
Interest Expense		500
Totals		$189,750	$ (189,750)

Un-urned income - is where the company collects money from the customer prior to the sale taking place example - deposit

The entries are DR - Cash

Cr - Unearned income

Partnership accounting

Crossly, Steel and Nabs are partners in a business sharing profits in the ratio 5:3:2 respectively. Their capital and current account balances on 1 Jan 20X1 were as follows

	Capital	Current
Crossly	24,000	2,000
Steel	18,000	1000
Nabs	13,000	1500

Interest at 10% per annum is given on the fixed capital Salaries of 8000 per annum per paid to Crossly and Steel
Crossly made a personal loan of 20,000 on the partnership on 1 July 20X1

Above loan to be paid in full on 30 June 20X4 - interest rate for this loan is 15% per annum and was credited to Crossly's account every half year

The partnership profit before charging loan interest for the year ended 31 Dec 20X1 was 63,000 and partners have made the following drawings

Crossly	16,000
Steel	16,500
Nabs	19,000

Prepare appropriate accounts and partner's capital and current accounts and the partnership statements of financial position in the respect of the year ended 31 Dec 20X1

LO 3.2 - P Co. acquired 75% of the ordinary shares of S co on that company's incorporate in 1 Jan 20x3

Q1. The summarised statements of provide and loss of the two companies for the year ended 20X3

	P company	S company
Revenue	75,000	38,000
Cost of sales	30,000	20,000
Gross profit	xxxxx	xxxxx
Distribution and Admin	14,000	9,000
Income tax expenses	10,000	2,000
Net Profit	xxxx	xxx

Require d to prepare the consolidated statement of profit and loss for the year ending 31 March.

TASK 4:

Interpretation of Financial Statements

Individual Report - submission due: 29 May 2016

calculate accounting ratios to assess the performance and position of a business

prepare a report incorporating and interpreting accounting ratios, including suitable comparisons.

Statements of Financial Position and Profit or Loss for Marks and Spencer are given below

(4.1, 4.2) You are required to calculate accounting ratios which reflect profitability, liquidity, efficiency, and gearing of the company for the financial years 2013, 2014 and 2015 Compare the ratios between two accounting periods and comment on the company's performance.

In millions of GBP (except for per share items)		Annual data  Interim data
Fluid data as 41 Mar 28 2015	2015	2014	2013
REVENUE AND GROSS PROFIT
Total revenue	10,311	10,310	10,027
OPERATING EXPENSES
Cost of revenue total	6,326	6,439	6,230
Selling, general and admin. expenses, total	2,755	2,747	2.647
Depredation/amortization	550	478	463
Unusual expense(income)	61	47	101
Other operating expenses, total	(82)	(96)	(92)
Total operating expense	9,610	9,615	9,349
Operating income	701	695	678
Other, net	(6.50)	(1.40)	(11)
INCOME TAXES, MINORITY INTEREST AND EXTRA ITEMS
Net income before taxes	600	580	547
Provision for income taxes	118	74	102
Net income after taxes	482	506	445
Minority interest	4.80	19	8.70
Net income before extra. Items	487	525	454
Total extraordinary items	-	-	-
Net income	487	525	454
Inc.avail. to common excl. extra. Items	487	525	454
Inc.avail. to common incl. extra. Items	487	525	454

Balance Sheet

In millions of GBP (except for per share items)		Annual data  Interim data
Fiscal data as of Mar 28 2015	2015	2014	2013
ASSETS
Cash And Short Term Investments	218	200	210
Total Receivables, Net	177	181	141
Total Inventory	798	846	767
Prepaid expenses	145	129	108
Other current assets. total	118	14	43
Total current assets	1,455	1,369	1,268
Property, plant & equipment, net	5,031	5,140	5,034
Goodwill, net	95	95	93
Intangibles, net	763	713	602
Long term investments	31	31	34
Note receivable - long term	57	83	30
Other long term assets	76	41	65
Total assets	8,196	7,903	7,611
LIABILITIES
Accounts payable	968	929	973
Accrued expenses	675	764	531
Notes payable/shod-term debt	0	0	0
Current portion long-term debt/capital leases	279	449	559
Other current liabilities, total	190	208	176
Total current liabilities	2,112	2,349	2,238
Total long term debt	1.746	1,655	1,727
Total debt	2,025	2,104	2.286
Deferred income tax	315	243	241
Minority interest	(0.80)	(0.60)	(19)
Other liabilities, total	825	949	885
Total liabilities	4,997	5,196	5,072

SHAREHOLDERS EQUITY

Common stock	412	408	404
Additional paid-in capital	392	356	315
Retained earnings (accumulated deficit)	8,873	8,528	8,353
Treasury stock - common	-	-	-
Unrealized gain (loss)	-	-	-
Other equity, total	(6,478)	(6,584)	(6,533)
Total equity	3,200	2,707	2,539
Total liabilities & shareholders' equity	8,196	7,903	7,611
Total common shares outstanding	1,648	1,632	1,614
Treasury shares - common primary issue	0	0	0

Cash flow

In millions of GBP (except for per share items)		Annual data - Interim data
Sisal data as of Mu 28 2015	2015	2014	2013
OPERATIONS
Net income	482	506	445
Depredation/depletion	550	505	467
Non-Cash items	197	189	339
Cash taxes paid. supplemental	71	46	106
Cash interest paid, supplemental	115	133	135
Changes in working capital	49	(70)	(111)
Total cash from operations	1,278	1,130	1,140
INVESTING
Capital expenditures	(700)	(642)	(830)
Other investing and cash flow items, total	51	27	249
Total cash from investing	(649)	(615)	(580)
FINANCING
Financing cash flow items	(170)	(183)	(207)
Total cash dividends paid	(281)	(274)	(271)
Issuance (retirement) of stock. net	17	44	23
Issuance (retirement) of debt net	(181)	(86)	(140)
Total cash from financing	(615)	(498)	(596)
NET CHANGE IN CASH
Foreign exchange effects	(2.30)	(1.60)	0.90
Net change in cash	12	15	(35)
Net cash-begin balance/reserved for future use	176	161	196
Net cash-end balance/reserved for future use	188	176	161
SUPPLEMENTAL INCOME
Depredation, supplemental	550	505	467
Cash interest paid, supplemental	115	133	135
Cash taxes paid, supplemental	71	46	106