SydMel Ltd commences operations on 1 July 2020. One year later, on 30 June 2021, the entity prepares its first statement of comprehensive income and its first statement of financial position. The statements are prepared before considering taxation. The following information is available. Statement of Profit or Loss and other Comprehensive Income For the year ended 30 June 2021 Gross Profit $510,000 Salaries expenses (210,000) Rent expense (52,000) Long service leave expenses (50,000) Depreciation expense - Plant (30,000) Bad debt expense (19,000) Accounting Profit Before Tax $149,000 The Statement of Financial Position (Extract/partial) As at 30 June 2021 Assets: Cash $152,000 Inventories 198,000 Account receivables (net) 179,000 Prepaid rent 51,000 Plant 150,000 Accumulated depreciation - plant (30,000) 700,000 Liabilities: Revenue received in advance 52,000 Accounts payable 90,000 Loan payable 210,000 Provision for long service leave 48,000 $400,000 Additional information The company tax rate is assumed to be 30%. All salaries have been paid as at year end and are deductible for tax purposes. None of the long service leave expense has actually been paid. It is not deductible for tax purposes until it is actually paid. Rent was paid in advance on 1 July 2020. Actual amounts paid are allowed as a tax deduction. Amounts received from sales, including those on credit terms, are taxed at the time the sale is made. No bad debts were written off. The revenue received in advance is included in the taxable income. The machinery is depreciated on a straight-line basis over 5 years for accounting purposes, but over 4 years for taxation purposes. The machinery is not expected to have any residual value. Required Prepare the current tax worksheet and the journal entry to recognise current tax at 30 June 2021. Prepare the deferred tax worksheet and journal entries to adjust deferred tax accounts.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
SydMel Ltd commences operations on 1 July 2020. One year later, on 30 June 2021, the entity prepares its first statement of comprehensive income and its first
|
Statement of Profit or Loss and other Comprehensive Income For the year ended 30 June 2021 |
|
|
Gross Profit |
$510,000 |
|
Salaries expenses |
(210,000) |
|
Rent expense |
(52,000) |
|
Long service leave expenses |
(50,000) |
|
|
(30,000) |
|
Bad debt expense |
(19,000) |
|
Accounting Profit Before Tax |
$149,000 |
|
The Statement of Financial Position (Extract/partial) As at 30 June 2021 |
|
|
Assets: |
|
|
Cash |
$152,000 |
|
Inventories |
198,000 |
|
|
179,000 |
|
Prepaid rent |
51,000 |
|
Plant |
150,000 |
|
|
(30,000) |
|
|
700,000 |
|
Liabilities: |
|
|
Revenue received in advance |
52,000 |
|
Accounts payable |
90,000 |
|
Loan payable |
210,000 |
|
Provision for long service leave |
48,000 |
|
|
$400,000 |
Additional information
- The company tax rate is assumed to be 30%.
- All salaries have been paid as at year end and are deductible for tax purposes.
- None of the long service leave expense has actually been paid. It is not deductible for tax purposes until it is actually paid.
- Rent was paid in advance on 1 July 2020. Actual amounts paid are allowed as a tax deduction.
- Amounts received from sales, including those on credit terms, are taxed at the time the sale is made. No
bad debts were written off. - The revenue received in advance is included in the taxable income.
- The machinery is depreciated on a straight-line basis over 5 years for accounting purposes, but over 4 years for taxation purposes. The machinery is not expected to have any residual value.
Required
- Prepare the current tax worksheet and the
journal entry to recognise current tax at 30 June 2021. - Prepare the
deferred tax worksheet and journal entries to adjust deferred tax accounts.
Step by step
Solved in 7 steps with 8 images
