(a) Andalusia Sdn Bhd is involved in supplying music instrument business. The retained earning account in the Books of Andalusia Sdn Bhd showed an opening balance of RM500,000 as at 1st July 2020. During the year ended 30 June 2021, situations below were identified: i. On 10 June 2020, it was identified that the acquisition of furniture worth RM25,000 on 1 July 2018 was mistakenly treated as maintenance expenses. It is company's policy to depreciate furniture at 10% on cost. ii. Andalusia Sdn Bhd acquired motor vehicles costing RM80,000 on 1 July 2017 and depreciate over 10 years. Due to heavy usage of musical instrument delivery, management has decided to change estimation useful life from 10 years to 8 years on 1 July 2020. As an account's clerk in Andalusia Sdn Bhd you are required to: i. ii. provide necessary journal entries to rectify the situation above based on MFRS108 (show relevant calculation). propose restatement of changes in equity (extract retained earnings) for the year ended 30 June 2021.
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.
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