Junior Accounts Clerk Prepares Summary

A Junior Accounts Clerk Has Prepared The Following Summarised Informat

A Junior Accounts Clerk has prepared summarized financial information as at June 30, 2016, for Heaven Ltd, including details of assets, liabilities, and equity. Additional information has been provided regarding liabilities, reserves, prepayments, investments, retained earnings, profit, dividends, and expenses paid to an auditor. The task is to prepare the statement of financial position, statement of changes in equity, and notes thereto for Heaven Ltd at June 30, 2016, in accordance with AASB 101.

Paper For Above instruction

The preparation of financial statements in accordance with AASB 101 (Australian Accounting Standards Board, 2015) requires a comprehensive understanding of the classification, recognition, measurement, and disclosure principles outlined in the standard. To prepare the statement of financial position (balance sheet) and statement of changes in equity for Heaven Ltd as at June 30, 2016, we must analyze the provided summarized financial data alongside the additional disclosures. This process involves adjustments for accruals, depreciation, impairment, and other relevant accounting treatments to ensure compliance with the applicable accounting standards.

1. Preparation of the Statement of Financial Position

The statement of financial position is a snapshot of a company's assets, liabilities, and equity at a specific date. The primary task involves organizing the asset and liability data into current and non-current classifications and adjusting for any additional information that affects valuation and recognition.

Assets

The assets listed include inventories, accounts receivable, cash, land and buildings, plant and equipment, prepayments, calls in arrears, and patents. Notably, inventories are valued at lower of cost and net realizable value, in accordance with AASB 102 (Australian Accounting Standards Board, 2014). Accounts receivable are subject to impairment allowances, and plant, buildings, and patents require depreciation or amortization adjustments.

Cash of $ consists of bank balances and long-term investments such as Telstra bonds. Land and buildings are considered non-current assets, with depreciation accrued on plant and equipment and buildings. Patents are intangible assets with amortization recorded.

Liabilities

Liabilities include accounts payable, accrued expenses, mortgage loans, and reserves like employee benefits payable after July 1, 2023, and current tax liabilities. Calls in arrears and dividends payable are also accounted for, along with impairment allowances for receivables.

Equity

The equity section comprises share capital, retained earnings, and reserves. The retained earnings as at July 1, 2015, need to be adjusted for profit for the period, dividends paid, and other equity movements throughout the year.

2. Adjustments and Calculations

Accruals of expenses and impairment allowances are recognized as per the relevant accounting standards. Depreciation and amortization are calculated based on the estimated useful lives of plant, buildings, and patents. The impairment of receivables is deducted from gross receivables to arrive at net realizable value.

Retained earnings as at July 1, 2015, are adjusted by adding profit and subtracting dividends and other distributions during the year.

3. Statement of Changes in Equity

The statement of changes in equity details movements in share capital, retained earnings, and reserves over the reporting period. It begins with the opening balances, adds profit for the period, deducts dividends paid, and accounts for other comprehensive income or losses. The declaration of dividends, which do not require shareholder approval, is included under distributions.

4. Notes to the Financial Statements

Notes include detailed disclosures about accounting policies, depreciation methods, impairment, pension obligations, tax liabilities, and investments. The auditor’s fees paid for the year are disclosed, specifying the portion related to non-audit services. These notes ensure transparency and compliance with disclosure requirements under AASB 101.

Conclusion

In conclusion, preparing financial statements in accordance with AASB 101 involves meticulous analysis of the summarized data combined with the supplementary disclosures provided. Adjustments for depreciation, impairment, accruals, and investments are essential for accurate reporting, facilitating users' understanding of the company’s financial position at year-end. Proper classification, measurement, and disclosure uphold the standards’ objectives of transparency and comparability, vital for stakeholders’ decision-making.

References

  • Australian Accounting Standards Board. (2014). AASB 102 Inventories. Retrieved from https://www.aasb.gov.au/
  • Australian Accounting Standards Board. (2015). AASB 101 Presentation of Financial Statements. Retrieved from https://www.aasb.gov.au/
  • Australian Accounting Standards Board. (2014). AASB 138 Intangible Assets. Retrieved from https://www.aasb.gov.au/
  • Davia, T. (2018). Financial Statement Preparation and Disclosure. Journal of Accounting & Finance, 18(4), 45-59.
  • Gray, R., & Salter, S. (2020). Accounting Standards and Corporate Reporting. Australian Journal of Management, 45(2), 79-89.
  • Henderson, B., Peirson, G., & Brown, K. (2017). Financial Accounting: An International Introduction. McGraw-Hill Education.
  • JM Financial. (2019). Understanding Depreciation and Asset Valuations. Retrieved from https://www.jmfinancial.com/
  • Macve, R., & Sromová, T. (2021). Disclosures and Transparency in Financial Reporting. Accounting and Business Research, 51(1), 34-54.
  • Smith, M. (2019). Audits and Non-Audit Services: Implications for Financial Disclosures. Auditing: A Journal of Practice & Theory, 38(2), 123-140.
  • Walker, P., & Roberts, N. (2016). Corporate Financial Analysis. Routledge.

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