Prepare Financial Statements for Non-reporting Entities

Assessment 1.

Part A

1. Classify the following as Asset, liability, revenue, expenses, or owners' equity.

1. List 3 Financial statements that business entities use on a regular basis. For each statement, explain at least 2 advantages and at least 2 disadvantages of using the statement.
2. What purpose do financial statements have for the following users:
3. Managers / Business Owners
4. Suppliers
5. Investors
6. Government Regulators/Agencies
7. Name the Governing body that issues Accounting Standards
8. With reference to Statement of Accounting Concepts (SAC), 1 and the Corporations Act 2001
   1. Define a Reporting Entity and contrast it to a Non-Reporting Entity
   2. Explain the reporting requirements of each type of entity.
9. Identify 2 key pieces of legislation affecting taxable transactions and summarise the key features of both pieces of legislation. For each piece of legislation, please provide at least 4

Part B

You are the bookkeeper for Delizio's Delicatessen. Your employer has asked you to prepare a range of financial ratios to help the management team understand the financial progress of the business.You are required to:

1. Complete the Ratio Calculation Sheet on the Part B tab. In the “Calculation Used” column, write the formula to be used for each ratio.
2. Calculate the ratios listed on the sheet for the 2019 and 2020 financial years and record them on the sheet. Include all your workings for each ratio, and record all answers to 2 decimal places.
3. Comment on what the ratios indicate about the operation of the business, the current position of the business of the future prospects. Identify any areas of concern.
4. Find the benchmark figures for a Delicatessen for the 2019-20 financial year and note down the following figures for a business with a turnover equivalent to Delizio's:
   • Explain the advantages and disadvantages (minimum of three) of using ratios and comparison techniques to analyze financial data. Please record your answer below.

5. 100% Average Cost of Sales,100% Average total expense

   • Average Cost of Sales
   • Average total expenses
   1. Gross Profit ratio
   2. i) Calculate the benchmark Gross Profit ratio using the calculation:
   3. ii) Compare the benchmark Gross Profit ratio calculated in i) to Delizio's Gross Profit ratio previously calculated on your spreadsheet. Comment on Delizio's performance compared to the industry standard (benchmark Gross Profit ratio).
   4. b) Net Profit ratio
   5. i) Calculate the Benchmark Net Profit ratio using the calculation:
   6. ii) Compare the benchmark Net Profit ratio calculated in i) to Delizio's Net Profit ratio previously calculated on your spreadsheet. Comment on Delizio's performance compared to the industry standard (benchmark Net Profit ratio).

Part C

It is the organizational policy of Henry Henry that they produce annual cash flow statements in accordance with the AASB 107 Statement of Cash Flows. This enables Henry Henry to demonstrate (to their external stakeholders) their ability to meet their cash flow requirements.

IGNORE GST FOR THIS QUESTION.

You are required to:

1. Reconstruct the Account Receivable General Ledger Account and the Accounts Payable General Ledger Account. The Bank figures calculated in these reconstructions will be needed for Step 2.

2. Prepare a Cash Flow Statement for the year ended 30 June 2021 in a form consistent with AASB 107.

3. Prepare a Reconciliation of Net Profit with Net Cash Flows from Operating Activities.

Assessment 2.

Part A

Bennett and Barney decide to form a partnership on 01/07/2020. You are contracted to complete the financial accounts and statements at the close of the first financial year.

Accounting Policies and Procedures Bennett and Barney operate on an accrual basis with the financial year from 1 July to the 30 June the following year.

Partnership proceeds are divided among Bennett (1/3) and Barney (2/3).

Ignore GST for this question.

You are required to:

1. Prepare the partnership Income Statement as of 30 June 2021.

2. Prepare the Profit and Loss Appropriation Account

3. Prepare the Partners' current accounts.

4. Prepare the Partnership Balance Sheet as of 30 June 2021.

5. The Partnership Deed (or Agreement) should articulate how the partnership will operate. These agreed areas of operation should also be documented in the organizational policies and procedures of a Partnership. Identify 3 critical financial aspects that must be included in the Partnership Agreement and organizational policies and procedures. Please record your answer below.

Part B

Random Crew Social Club is a four-wheel driving social club, managed by the following committee:

• President Rick Stanley
• Vice President Barbara Bonhotham
• Secretary Thomas Ford
• Treasurer Belinda Smith

Each year, you (the contracted bookkeeper) assemble their records and prepare annual reports and statements.

Accounting Policies and Procedures

Random Crew Social Club operates on an accrual basis with the financial year from 1 July to 30 June the following year.

The club is not registered for GST.

All payments must be signed/authorized by 2 sitting members of the Committee. The Annual Statements must be signed/verified by 2 sitting members of the Committee.

As the club is a not-for-profit organization they prepare a Statement of Receipts and Payments in lieu of a full Cash Flow statement.

Refer to Ch.2 underpinning knowledge required to complete this task.

You are required to:

1. Prepare a statement of Receipts and Payments

2. Complete the Members' Subscriptions account

3. Prepare a Merchandise Trading Statement as of 30 June 2021

4. Prepare an Income and Expense Statement.

5. Prepare a Statement of Assets and Liabilities.
6. Review the statements and accounts for accuracy. Identify and advise who is responsible for signing and verifying the completed financial statements. Please record your response below.
7. The organizational policies and procedures of a Not-for-Profit organization will vary from those of a Reporting Entity in a number of areas, including the preparation of accounts and financial statements. Identify and explain 3 distinguishing features of the preparation of financial accounts and statements of a not-for-profit organization. Contrast these to Reporting Entities statements. Please record your response below.

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