Comply plc produces financial statements to 30 June annually. At 30 June 2012 Comply plc's trial balance was as follows: £000 £000 Sales revenue 14,776 Purchases 8,280 Inventory at 1 July 2011 1,390 Distribution cost 1,080 Administrative expenses 1,460 Deferred taxation 100 land at valuation 10,500 Buildings at cost 8,000 Buildings depreciation at 1 July 2011 2,130
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.
Comply plc produces financial statements to 30 June annually. At 30 June 2012 Comply plc's
| £000 | £000 | |
| Sales revenue | 14,776 | |
| Purchases | 8,280 | |
| Inventory at 1 July 2011 | 1,390 | |
| Distribution cost | 1,080 | |
| Administrative expenses | 1,460 | |
| Deferred |
100 | |
| land at valuation | 10,500 | |
| Buildings at cost | 8,000 | |
| Buildings |
2,130 | |
| Plant and equipment at cost | 12,800 | |
| Plant and equipment depreciation at 1 July 2011 | 2,480 | |
| Trade receivables and payables | 4,096 | 2,240 |
| Cash at bank | 160 | |
| Dividends paid | 100 | |
| Ordinary share capital | 14,000 | |
| Share premium account | 4,000 | |
| Revaluation reserve as at 1 July 2011 | 3,000 | |
| 3,140 | ||
| 10% debenture loan | 2,000 | |
| 47,866 | 47,866 |
The following matters remain to be adjusted for in preparing the financial statements for the year ended 30 June 2012.
1. Closing inventory at 30 June 2012 amounted to £1,576,000 at cost. A review of inventory items revealed items which had cost £80,000 and which would normally sell for £120,000 were found to have deteriorated. Remedial work costing £20,000 would be needed to enable the items to be sold for £90,000.
2. Depreciation for the year is to be charged as follows:
| buildings | 2 per cent per year on cost |
| plant and equipment | 20 per cent per year on cos |
Eighty per cent of the depreciation is to be charged to cost of sales, and 10 per cent each to distribution costs and administrative expenses.
3. The land is to be revalued to £12,000,000. No change to the value of the buildings was required.
4. Accruals and prepayments at 30 June 2012 were as follows:
| Accruals in £ | prepayments in £ | |
| Distribution Cost | 190,000 | 120,000 |
| Administrative Cost | 70,000 | 60,000 |
5. The debenture loan was taken out on 1 April 2012 and no interest has yet been paid on the loan.
6. Corporation tax for the year is estimated at £300,000. The deferred taxation provision is to be increased by £50,000.
Required:
a) Prepare a statement of comprehensive income, and a statement of changes in equity for Comply plc for the year ending 30 June 2012.
b) Prepare a
All statements should be prepared to comply with IAS 1 (revised).
Step by step
Solved in 4 steps with 3 images
