1.0 Introduction
Fiscal statement is to cipher and enter the fiscal activities in the concern. Financial statement besides use to see what should the company make in the hereafter like invest more, extend concern, cut cost or cut budget. In this assignment, Continental Limited will necessitate a fiscal statement to supply utile information to the users. Beside, inquiry is besides necessitating including the five different users and regulative feature which is direction, proprietor as investor, employees, loaner and clients.
Balance sheet will come after income statement. Balance sheet is we use terminal of the twelvemonth. The map of balance sheet is to make a concluding cheque and besides to cognize the concern is in loss or net income. So the company will make the concluding determination based on the balance sheet consequence.
2.0 Content
2.1 Definition
Every concern organisation will necessitate a fiscal statement to go on the concern. The of import of fiscal statement beside to cognize net income and loss, will besides give others of import information to the direction officer. The of import information included concern program work good or invested in the right manner? The direction of an administration is a group of people who need and use fiscal statement. They are 5 types of people in the direction of an administration which is direction, employees, clients, providers and investors. Every different type of people will acquire the information that they want from fiscal statement.
2.2 Answer for undertaking 1
2.2.1 Management
The fiscal statement is the most of import tools for this group of people. Management will roll up the information from fiscal statement after that from the information direction will do opinion and concluding determination. To do a large determination and opinion direction demand every bit much as possible of information to back up their program and determination to show to the owner.Financial statement will besides give information to back up on how the program goes good and how it works better than the old. Fiscal statement will take the company to the right manner beside it will besides assist the direction people perform better program than without any information.
2.2.2 Owner of investor
If the proprietor is the 1 who make determination like CEO, director or else upper higher business officer than they no demand to worry approximately barrier to barricading them to acquire the further or deeper information. Owner can give the fiscal statement to the investor or client. Because fiscal statement will demo how good is the company running now. Profitable or loss will demo in the fiscal statement so the investor can cognize is the company potency to put or non. Normally the exclusive proprietary and partnership will be the CEO and the determination place, so if the high placement worker besides as an proprietor it got an advantage. Example like proprietor know good the company state of affairs and how they company running, so when they do any investing or spread outing they will cognize how much is the hazard pickings and besides how much the return they will derive. For others like limited company, they got a batch of portions besides they got over 100 of worker so the company will more complicated than the little company. In this state of affairs, income statement will assist the proprietor invest or non to put. It besides helps the investor to draw the concern selling the portions or purchase more portions.
2.2.3 Employee
Employee will besides concern about the consequence of the fiscal statement. Because if the concern go good, the employee will be addition, Company goes good employee will acquire excess fillip, inducement, leave or even retirement benefit. Even the retired workers besides will pay dressed ore to them because if the company addition more the retired worker will besides acquire excess pension in peculiar month.If the income statement consequence is good, employee will profit by depending on what the degree place, sum of salary, business or working place. Beside this maybe the company will besides use more worker or more installations in the company to allow the worker to bask, like more security guard, cabinet to hive away personal things, better working status and others benefits. So the employ are besides a group of people who care fiscal statement.
2.2.4 Supplier
Supplier will be another group to concern about the fiscal statement consequence. If a company are gaining they will salvage and corroborate they can acquire back the money they have been supplied. Supplier will set more attempt to fiscal statement because providers are the most unsafe group if the company acquire bad return. If fiscal statement in bad consequence, the issue that they have to confront like the company ca n’t afford to pay them back, the company will halt telling any natural stuff or order any goods from the company and others risk. So before the provider do any concern to the dialler, they will make much research like look intoing the fiscal statement to corroborate to company will able to pay back the fund.
2.2.5 Customer
Customer besides will play a function in refering fiscal statement. The client will besides desire to cognize, some of them will purchase the public portions from the public portions market. The fiscal study consequence will act upon the portions monetary value addition or lessening. Besides than consumer will trust the company offer or celebrate they got the good consequence in the past twelvemonth. Some of them will trust the company to turn bigger, so aggregate production will diminish the bring forthing monetary value at the same clip the merchandising monetary value will besides diminish.
2.3 The 5 characteristic
2.3.1 Relevance
The fiscal history is making harmonizing to accounting construct and policies. And beside is how we relate to fiscal information. This could be act upon the economic determination of the users,
2.3.2 Seasonably
Before we relevant the fiscal information to the determination devising of users, we should besides depend on timing. If timing shows in clip to allow the people get information it will be perform good. Oppositely if the fiscal information is supplying after the determination brand, it will be useless for people. If the histories are prepared to supply require information in clip, it is non relevant to the determination devising of the user.
2.3.3 Accuracy
Accuracy will be of import for the fiscal information. Accurate information will take the company do good determination and will take the concern into a good manner. Oppositely if the fiscal information is non accurate, it will take the determination into the incorrect manner and do will do the company goes to the bad manner.
2.3.4 Comparison
The fiscal history should be able to compare with the other rival or others company. Besides that the fiscal history should besides be comparison with the old twelvemonth fiscal history.
2.3.5 Understability
The fiscal histories should be ever be understand by everyone. And besides have to reasonable, knowing, and can be interpretable.
2.4 Short sum-up
The 5 characteristic relevancy, seasonably, truth, Comparability and understability and the 5 users direction, employees, clients, providers and investors who use the fiscal statement and balance sheet
2.5 Definition
In undertaking 2, income statement and balance sheet are necessitating for continental Limited for terminal of the twelvemonth 31 Dec 2010. And it ‘s for internal usage by the company higher degree employee or proprietor. It will ne’er for external usage, so the income statement and balance sheet will non enter any for external.
2.6 Answer for Task 2
Working
Closing stock should be recorded at cost or net resale value which one is lower.
Since cost RM65000 & lt ; net resale value RM70000, the cost RM65000 should be shuting stock value record in the trading history of income statement and will be under the current plus in the balance sheet.
Cash
history
RM
RM
Gross saless ( Difference )
5000
Purchase
4000
Stationery
700
Electricity
300
5000
5000
Gross saless in trading history of income statement = Rm360000 from TB + RM5000 = RM365000
Purchase in merchandising history of income statement = RM200000 from TB +RM4000 = RM204000
Stationery as disbursal put in P/L history of income statement = RM700
Electricity & A ; H2O in P/L history of income statement = RM7000 from TB +RM300 = RM7300
Gross saless committee as disbursal put in P/L history of income statement
=RM18000 paid from TB + RM1500 accrued at terminal of twelvemonth = RM19500
Then, accrued gross revenues committee RM1500 is recorded under the current liability in balance sheet
Office wages as disbursal put in P/L history of income statement
=RM28000 paid from TB- RM2000 prepaid at terminal of twelvemonth = RM26000
Then, prepaid office wage RM2000 is recorded under the current plus in balance sheet
Debtor
History
RM
RM
Balance b/d ( from TB )
75000
( – ) Bad debts
5000
Balance c/d
70000
75000
75000
Balance b/d
( debitor put under current plus in balance sheet )
70000
Bad debt
History
RM
RM
Debtor
5000
P/L history
5000
( Bad debts as disbursal put in P/L history )
Provision for bad debts shuting balance= 10 % ten Debtor shutting balance RM70000=RM7000
Provision for Bad debt history
RM
RM
31 Dec 2010
Closing balance c/d ( from computation )
7000
1 Jan 2010
Opening balance b/d ( From TB )
5000
Addition in difference ( as disbursal put in P/L history )
2000
7000
7000
1 Jan 2011
Balance b/d
7000
Deducted from debitor under current plus in balance sheet
Vehicles
History
RM
RM
Balance b/d ( from TB )
300000
Vehicle disposal a/c ( cost sold )
50000
Balance c/d
250000
300000
300000
Balance b/d
250000
( vehicles at cost put under fixed plus in balance sheet )
Provision for
Depreciation
On vehicle
History
RM
RM
Vehicle disposal history ( cost sold RM50000 x 5 % ten 5 old ages from 1 Jan 2005 to 1 Jan 2010 )
12500
1 Jan 2010
Opening balance b/d ( from TB )
60000
31 Dec 2010
Balance c/d
60000
Depreciation as disbursal put in P/Laccount ( Vehicles shuting balanceRM250000x5 % )
12500
72500
72500
1 Jan 2011
Balance b/d
60000
( Deducted from vehicle cost under fixed plus in balance sheet )
Vehicle disposal
history
RM
RM
Vehicle cost sold
50000
Provision for depreciation on vehicle sold
12500
Returns from disposal of vehicle ( TB )
35000
Difference for Loss on disposal of vehicle ( as disbursal put in P/L history )
2500
50000
50000
Provision for
Depreciation
On premises
History
RM
RM
Balance c/d
54000
1 Jan 2010
Opening balance b/d ( from TB )
40000
Depreciation as disbursal put in P/L history ( premises cost from TB RM35000 x 4 % )
14000
54000
54000
Balance b/d
54000
( Deducted from premises cost under fixed plus in balance sheet )
Taxation charge RM15300 is deducted from net net income at the underside of income statement. It is besides recorded as accumulated revenue enhancement RM15300 under the current liability in balance sheet.
Proposed dividend to be deducted from net net income at the underside of income statement
=2 % x RM500000 Share capital from TB=RM10000
Then, the proposed dividend RM10000 is recorded under current liability in balance sheet.
Income statement of Continental Limited for twelvemonth stoping 31 Dec 2010 for internal usage
RM
RM
RM
gross revenues ( refer to working )
365000
Less return inwards ( from TB )
( 10000 )
Net gross revenues
355000
Less Cost of gross revenues:
Opening stock ( from TB )
50000
+Purchases ( refer to working )
204000
-Return outwards ( from TB )
( 15000 )
+Carriage inwards ( from TB )
5000
194000
Less Closing stock ( refer to working )
( 65000 )
( 179000 )
Gross net income
176000
Add income:
5000
Dividend received ( from TB )
181000
Less Expenses:
Stationery ( refer to working )
700
Office electricity & A ; H2O ( refer to working )
7300
Office wages ( refer to working )
26000
Gross saless committee ( refer to working )
19500
Bad debts ( refer to working )
5000
Addition in proviso for bad debts ( refer to working )
2000
Loss on disposal of vehicle ( refer to working )
2500
Depreciation on vehicle ( refer to working )
12500
Depreciation on premises ( refer to working )
14000
Vehicle disbursals ( from TB )
12000
Interest charge ( from TB )
3000
( 104500 )
Net net income
76500
Less revenue enhancement charge ( refer to working )
( 15300 )
Less proposed dividend ( refer to working )
( 10000 )
Net income for the twelvemonth
51200
Add Retained net incomes brought frontward ( from TB )
100000
Retained net incomes carried frontward
151200
( put under modesty added to portion capital in balance sheet )
Balance sheet of Continental Limited as at 31 Dec 2010 for internal usage
RM
RM
Fixed assets / Non-current assets
Office premises at cost ( from TB )
350000
( – ) proviso for depreciation on premises ( refer to working )
( 54000 )
296000
Vehicles at cost ( refer to working )
250000
( – ) Provision for depreciation on vehicles ( refer to working )
( 60000 )
190000
Long-run investing ( from TB )
100000
586000
Current assets
Closing stock ( refer to working )
65000
Debtors ( refer to working )
70000
( – ) Provision for bad debts ( refer to working )
( 7000 )
63000
Bank ( from TB )
42000
Prepaid office wage ( refer to working )
2000
172000
758000
Issued portion capital
Share capital ( from TB )
500000
Add modesty
Retained net incomes carried frontward ( from the underside of income statement )
151200
Stockholders ‘ equity
651200
Add long-run liabilities/ Non-current liabilities
Loan ( from TB )
55000
Add current liabilities
Creditors ( from TB )
25000
Accrued gross revenues committee ( refer to working )
1500
Accrued revenue enhancement ( refer to working )
15300
Proposed dividend ( refer to working )
10000
21800
758000
2.7 Short sum-up
In this Task 2, working is required and the working will merely work for internal. In another word, this undertaking is merely for internal usage.
2.8 Define Task 3
The coming will be the balance sheet of Continental Limited for the terminal of the twelvemonth 31 Dec 2010 for external usage. This income statement and balance sheet are make harmonizing Task 2 and included the disbursals like stationary, office electricity and H2O and others. In this portion it will be oppositely with the old one, this will be merely for external usage and non for cyberspace usage.
2.9 Answer for Task 3
From Income Statement of Task 2
Stationery
Office electricity & A ; H2O
Office wages
Gross saless committee
Bad debts
Addition in proviso for bad debts
Loss on disposal of vehicle
Depreciation on vehicle
Depreciation on premises
Vehicle disbursals
Entire
Distribution costs
RM
–
–
–
19500
5000
2000
2500
12500
–
12000
53500
Administrative disbursals
RM
700
7300
26000
–
–
–
–
–
14000
–
48000
Income statement of Continental Limited for twelvemonth stoping 31 Dec 2010 for external coverage
Turnover ( Net gross revenues from income statement of undertaking 2 )
Cost of gross revenues ( from income statement of undertaking 2 )
Gross net income ( as in the income statement of undertaking 2 )
Distribution costs ( from the above working )
Administrative disbursals ( from the above working )
Operating net income
Divided received ( from income statement of undertaking 2 of from TB )
Interest charges ( from income statement of undertaking 2 of from TB )
Net income on ordinary activities before revenue enhancement
Taxation charge ( from income statement of undertaking 2 )
Net income on ordinary activities after revenue enhancement for the twelvemonth
Proposed divided ( from income statement of undertaking 2 )
Retained net income for the twelvemonth
Retained net income brought frontward ( from income statement of undertaking 2 of from TB )
Retained net income carried frontward ( as in the income statement of undertaking 2 )
RM
53500
48000
RM
355000
( 179000 )
176000
( 101500 )
74500
35000
79500
( 3000 )
76500
( 15300 )
61200
( 10000 )
51200
100000
151200
Balance sheet of Continental Limited for the twelvemonth stoping 31 Dec 2010 for external coverage
Fixed Assetss
Tangible Assetss:
Premisess ( after deducted proviso for depreciation from
from balance sheet of undertaking 2 )
Vehicles ( after deducted proviso for depreciation from
from balance sheet of undertaking 2 )
Investing:
Long term investing ( from balance sheet of undertaking 2 or from TB )
Current Assetss
Stock ( from balance sheet of undertaking 2 )
Debtors ( after deducted proviso for bad debts from balance
Sheet of undertaking 2 )
Prepaid office wage ( from balance sheet of undertaking 2 )
Cash at bank ( from balance sheet of undertaking 2 or from TB )
Less Creditors: Sums Falling Due Within One Year
Creditors ( from current liability in balance sheet of undertaking 2 )
Accrued gross revenues committee ( from balance sheet of undertaking 2 )
Accrued revenue enhancement ( from balance sheet of undertaking 2 )
Proposed divided ( from balance sheet of undertaking 2 )
Net Current Assetss
Entire Assets Less Current Liabilitiess
Less Creditors: Sum Falling Due After More Than One Year
Loan ( from long-run liability in balance sheet of undertaking 2 or from TB )
Capital and Militias
Called up portion capital ( from balance sheet of undertaking 2 or from TB )
RM
296000
190000
6500
6300
2000
25000
1500
15300
10000
RM
486000
100000
130000
42000
172000
( 51800 )
RM
586000
120200
706200
( 55000 )
651200
500000
Net income and Loss history ( maintained net incomes carried frontward from balance sheet of undertaking 2 ) 151200
651200
2.10 Short sum-up
Undertaking 3 will working necessitate same as Task 2, but the different with Task 2 is Task 3 are usage for external usage alternatively of internal usage.
2.11 Define Task 4
The last portion is the computation based on income statement and balance sheets that where did at Task 2 and Task 3.And the ratio for the Continental Limited Company compared with mean industrial ratios. The ratio should be based on the work that done on Task 2 and Task 3 income statement and balance sheet. The appropriate accounting ratio for twelvemonth stoping 31 Dec 2010 to measure the profitableness and liquidness of Continental Limited.
Answer for Task 4
Ratio with expression
Ratio calculated for twelvemonth 2010
Industry norm
: Percentage of gross net income on gross revenues
= gross net income x 100
Net gross revenues
176000 x 100
355000
30 %
: Percentage of operating net income on gross revenues
= Operating net income x 100
Net gross revenues
74541 x 100
355000
18 %
: Tax return on capital employed ( ROCE )
=Net net income x 100
Capital employed
9 %
: Current ratio
=Current plus: Current liability
2: 1
: Stock turnover period
90 yearss
: Debtors collection period
45 yearss
: Creditss aggregation period
60 yearss
Profitableness of Continental Limited
Percentage of gross net income on gross revenues = 49.58 %
Percentage of operating net income on sale = 20.99 %
Return capital employed = 11.26 %
Liquid of Continental Limited
Current ratio = 3.32: 1
Stock turnover period = 117.36 yearss
Debtor aggregation period = 64.6 yearss
Credit payment period = 48.18 yearss
2.12 Short sum-up
Undertaking 4 is besides the last Undertaking of the assignment. Undertaking are working required and is working for calculate ratio of the company based on the Task 2 & A ; Task 3 that we done.
3.0 Decision
In this assignment, statement and balance sheet will be the chief inquiry and reply for the full assignment. Research will be of import and helpful because there got a batch information demand to compose in and explicate farther. Especially Task 1, The 5 characteristic and the 5 users are needed to be explicating with clearly. Besides clear, it should be besides explained or it ‘s map. Undertaking 2, are computation and how to cipher the fiscal statement and balance sheet and it ‘s usage for internal. Undertaking 3 is similar to Task 2 but Task 2 is usage for internal usage and the Task 3 is usage for external usage. And the last portion Task 4 is half theory and half computation needed.
4.0 Harvard Referencing
1. Dummies.com ( n.d. ) A Connecting the Income Statement and Balance Sheet – For Dummies. [ on-line ] Available at: hypertext transfer protocol: //www.dummies.com/how-to/content/connecting-the-income-statement-and-balance-sheet.html [ Accessed: 1 Nov 2012 ] .
2. EISEN, P. J. ( 2000 ) .A Accounting. Hauppauge, N.Y. , Barron ‘s Educational Series. [ Accessed 3 Nov 2012 ]
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9. Temte and Andrew ( 2005 ) Financial Statement Analysis. [ e-book ] USA: Dearborn Trade, A Kaplan Professional Company. p.74. Available through: E-brary hypertext transfer protocol: //library.olympia.edu.my:2051/lib/olympia/docDetail.action? docID=10096107 & A ; p00=income+statement [ Accessed: 20 Nov 2012 ] .
10. Tracy and John ( 2008 ) Accounting ( 4th Edition ) . [ e-book ] Hoboken, NJ, USA: For Dummies. p.294. Available through: E-brary hypertext transfer protocol: //library.olympia.edu.my:2051/lib/olympia/docDetail.action? docID=10296724 & A ; p00=income+statement [ Accessed: 20 Nov 2012 ] .
5.0 Appendix
Appendix 1
Beginning: hypertext transfer protocol: //www.boscia.com/mwboscia/a260/IncomeStmt/incstmt.html
