Cow-F04B-FR A1

Preparation of Financial Statements
A report on Preparation of Financial

Statement
Prepared for: Ms. Kim Oanh Vu

Unit 10: Financial Accounting and Reporting
Banking Academy, Hanoi
BTEC HND in Business (Finance)
Word number: 2,689
Prepared by
Phm Thy Hng Cow F04B
Registration No. ITPF04-055
Submission Date: 23th November 2012
Cow-F04B-FR A1
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Cow-F04B-FR A1
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Table of Contents
EXECUTIVE SUMMARY..........................................................................4
INTRODUCTION....................................................................................5
CHAPTER 1: FINANCIAL INFORMATION.................................................6
Report on different information needs of different user groups........6
CHAPTER 2: REPORT TO AH BOON.......................................................9
Part 1: Report on financial statements in a form suitable for
publication by a sole trader...............................................................9
1.1 Journalizing transactions.............................................................9
1.2 Preparing T-accounts.................................................................15
1.3 Preparing Trial balance..............................................................23
1.4 Preparing Income Statement.....................................................25
1.5 Preparing Statement of Financial position.................................26
Part 2: Report on financial statements in a form suitable for
publication by partnership..............................................................28
1.1 Journalizing transactions...........................................................28
1.2 Preparing T-accounts.................................................................31
1.5 Preparing Statement of Financial position.................................38
CHAPTER 3: REPORT ON BOON CHEUNG LIMITED COMPANY.............40
Report on financial statements in a form suitable for publication by
limited company..............................................................................40
1.1 Journalizing transactions...........................................................40
1.4 Preparing statement of retained earning..................................44
1.5 Preparing statement of retained earning..................................45
CHAPTER 4: REPORT ON WARNER COMPANY.....................................47
AND PEREIRA COMPANY.....................................................................47
Report on financial statements for group of company....................47
1.1 Preparing consolidated income statement for the year ended
30 June 2010...................................................................................47
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1.2
Preparing financial statements of equity changes..................49
1.3 Preparing consolidated balance sheet for the year ended 30

June 2010........................................................................................49
CONCLUSION......................................................................................53
REFERENCES......................................................................................54
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EXECUTIVE SUMMARY
Finance plays a crucial part in every business. It has a strong influence on every aspects
within company and be considered as a key for business performance. In this report,
some issues related to financial statments will be discuss based on scenarios of some
companies
The first scenario is about Ah Boon who is a civil engineering and building contractor
which was established as a sole proprietor specializes in drainage works repair of
vehicular bridges, road / pavement construction sewerage system, tidal gate structures
etc. The way how to prepare financial statements in a form suitable for publication by a
sole trader will be shown in this company.
The second case is still about Ah Boon but he is now keen to expand his businesses to
become as a sole distribution agent for building materials. Ah Boons, on 1 July 2010
decided to admit a new business partner, Cheung, to transform his sole proprietor
enterprise into a partnership. This part will discuss about financial statement made in a
form suitable for publication by partnership.
Another case, which is about Boon Cheung Limited company, will show the way how
to prepare financial statements in a form suitable for publication by limited company.
The last two companies are Warner Ltd and Pereira Ltd which consolidate. In this part,
the recording and reporting the activities of a group of companies will be pointed out.
Cow-F04B-FR A1
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INTRODUCTION
This report aims to discuss about financial statements from complete
or incomplete records as well as financial information in accepted
formats for publication. In more particular, several following points
will be mentioned:
Preparing financial statements for a variety of businesses from
trial balance, making appropriate adjustments
Preparing financial statements from incomplete records
Preparing a consolidated balance sheet and profit and loss
account for a simple group of companies
Explaining how the information needs of different user groups
vary
Preparing financial statements in a form suitable for publication
by a sole trader, partnership and limited company
Not only provide the theory related to financial terms, this paper also provides relevant
analysis and explanation in each area. Doing this report, some information sources were
used Such as:
Internet and books, some lectures, journal articles, and business
magazines were also use to utilize data related to the topic in the scenario.
Hopefully, this report will be useful not only for business students but also for every
person who want to know and learn about finance, especially financial statements.
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CHAPTER 1: FINANCIAL INFORMATION

Report on different information needs of different
user groups
Financial information is the heart of business management. It is
almost impossible to run a business effectively without being able to
read, understand, and analyze accounting reports and financial
statements. (Valencia, n.d.)
There are many different users for financial information and the
nature of these uses varies depending on its intended purpose. It is
the user of the financial information who determines how it is to be
used. Accounting must meet the needs of the individual users and
therefore must be flexible enough to satisfy a variety of purpose.
(Acs, n.d.)
The various user groups could be classified into two main groups:
internal users and external users. Overall, the apparently divergent
needs of internal and external users of accounting information have
resulted in the development of two subdisciplines within the
discipline, namely Management Accounting and Financial Accounting.
(Pretoria, n.d.) Drury (2000) said that Management Accounting is
concerned with the provision of information to people within the
organization, whereas Financial Accounting is concerned with the
provision of information to stakeholders outside the organization.
In more particular, there are some main users of each group and their
information needs will be discussed below:
Groups
Users
Purpose
user
Interna Owners
For
l Users
(sole
viability
owners,
profitability
Cow-F04B-FR A1
Information needs
analyzing
the They
mainly
and information
of
their profit
Page 7
made
require
about
the
and
the

partners)
investment
and dividend
determining
any expect
future
course
action.
made.
to
They
receive
of dividend payment as their
(Accouting- share of the profits. They
Simplified, n.d.)
are interested in the profit

and
loss
statement.
(Alunct, n.d.) They can find

those
income
Managers For
organizations
CEOs,
performance
COOs)
position
statement
or
require
Information that will assist

and them
and
in
balance sheet.
the Managers
analyzing
(CFOs,
information
in
taking making
appropriate measures activities.
their
decision-
and
control
For
example,
to improve company information is needed on

results.
(Accouting- the
Simplified, n.d.)
estimated
prices,
costs,
selling
demand,
competitive position and

profitability
of
various
products/ service that are

provided
by
the
organization.
(Reaich,
2012). With this type of

users,
normally,
require
statements
overall
all
to
they
financial
have
picture
an
of
companys operating.
assessing Employees
require
Employe
For
es
companys profitability information on the ability

and its consequence of the firm to meet wage
on
their
future demands
and
remuneration and job redundancies.

Cow-F04B-FR A1
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avoid
(Reaich,

security.
(Accouting- 2012)
Simplified, n.d.)
These
information
are, for examples: equity,

profit, revenue, and so on
which can be shown in
Extern
al
Users
income statement.
tax, Government
equires
Governm
For
ent
preparation
of
offices
statistics
productivity, activity,
(Central
commerce,
assessing
on
such
various information as the details of sales
etc.
and
profits,
the stocks,
investments,
dividends
paid,
the
Statistical various returns required by proportion of profits absorbed by

Office,
law.
taxation and so on. (Reaich,
HM
2012). These information can be
Revenue
found in income statement or
&
balance sheet.
Customs)
Creditors
Concern about the capacity Creditors require information on a

of a business to pay its firm's ability to meet its financial
liabilities as they fall due for obligations.(Reaich, 2012)
Competit
payment.
For
obtaining
the Competitors
ors
operating
the information on the relative
of
require
company. Using that strengths and weaknesses

information to predict of
companys
and
organization.
behavior Whereas the above users
gain
advantage
the
over
an share in the wealth of the

the company,
company. (MBA, n.d.)
require
competitors
the
information
mainly
for
strategic
purpose.
(Pretoria,
n.d.).
They are interested

in
any
area
of
the
company which could be

used
to
give
them
advantage and this

Cow-F04B-FR A1
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an

includes
the
way
the
company is financed, how

much it pays in wages,
how much it pays
for its parts, how much it
charges for its products,
and so on. (Ward, 2003)
Table 1: Different financial users
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CHAPTER 2: REPORT TO AH BOON

Part 1: Report on financial statements in a form
suitable for publication by a sole trader
A sole trader is a business that is owned by one person. This does not necessarily mean
that only one person works for the business. However, a sole trader is directly involved
in the running of the business. All the capital of the company will belong to the only
person who starts up the business. (Education, 2004)
Generally, sole trader has unlimited liability. Therefore, in its statement:
Net profit / loss = Capital at the end of the period + Drawings for the period
Opening Capital Additional capital introduced during the period

Capital = Assets Liabilities
1.1 Journalizing transactions

(1)
Debit
Insurance expense
(2)
Credit Insurance paid in advance

Debit
Cost of goods sold
(3)
Credit Cash in hand

Debit
Sales
(4)
Credit Cash in bank

Debit
Drawing
3,000
3,000
136,400
136,400
800
800
75,600
Credit Cash in hand

(5)
16,000
Credit Cash in bank

Debit
Depreciation expense of old
59,600
3,400
tools & equipment
3,400
Credit Accumulated depreciation

(6)
Debit
old tools & equipment

Purchased tools & equipment
16,800
Credit Cash in bank

Debit
16,800
Depreciation purchased tools
Credit & equipment expense

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4,200
4,200

Accumulated depreciation
(7)
Debit
purchased tools & equipment

Disposal of old vehicle account
18,000
Credit Vehicle account

Debit
18,000
13,000
Credit old vehicle

Debit
13,000
6,000
Credit Cash in bank

Debit
(8)
6,000
Credit Profit on sale of vehicle

Debit
New vehicle
1,000
1,000
25,600
Credit Cash in bank

Debit
25,600
New vehicle depreciation
3,200
Credit expense
3,200
(9)
Debit
new vehicle
Rent expense
6,900
Credit Rent shop paid in advance

(10 Debit
Cash in bank
)
6,900
20,000
Credit Loan payable

Debit
20,000
Interest expense
500
Credit Account payable

(11 Debit
Inventory
169,240
500
)
Credit Trade payable
(12 Debit
Telephone expense
169,240
1,780
)
Credit Phone bill owing
(13 Debit
Electricity expense
1,860
)
Credit Electricity bill owing
(14 Debit
Miscellaneous expense
3,540
)
Credit Miscellaneous bill owing
(15 Debit
Bad debts expense
)
Credit Trade receivable account
(16 Debit
Cost of goods sold
)
Credit Inventory expense
(17 Debit
Salaries expense
)
Cow-F04B-FR A1
1,780
1,860
3,540
2,560
2,560
173,220
173,220
10,000
10,000
Page 12

(18 Debit
Trade receivable
409,780
)
Credit Sales
(19 Debit
Cash in bank
)
409,780
4,200
4,200
Notes:
(1)Insurance paid in advance
At 31 March 2010, insurance paid in advance to 30 September
was 1,400.
From 31 March 2010 to 31 March 2011, insurance paid in advance to 30
September 2011 was 3,200.
Insurance expense incurred from 30 September 2010 to 31 March 2011 (6
months was:
6
3,200= 1,600
12
Total insurance expense for the year to 31 March 2011 is:

1,400+1,600= 3,000
(2)Wages of repair staff
Repair staff associated directly to manufacturing products, so
wages of repair staff is considered to be cost of goods sold.
(5)Old Tool & Equipment
Tools & equipment is to be depreciated at 25% per annum on
the reducing balance method. The formula for this method is as
follows:
Depreciation expense = Carrying amount at beginning of year x
Depreciation rate
Using this formula, the depreciation expense of tools &
equipment would be calculated as follows:
Cost
Less depreciation to date (31 March 2010)
Net book value at the end of year ending 31 March 2010
Depreciation for the year to 31 March 2011 (13,600 x 25%)
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25,200
11,600
13,600
3,400
(6)Purchase of tools & equipment

Similarly, the depreciation expense of purchased tools &
equipment would be calculated as follows:
Cost
Depreciation for the year to 31 March 2011 (16,800
x 25%)
16,800
4,200
(7)Old vehicle
The profit (loss) from disposing of old vehicle would be
calculated as follows:
18,000
13,000
5,000
6,000
1,000
Cost of old vehicle

Less accumulated depreciation
Net book value
Sale price
Profit on sale
(8)New vehicle
The new vehicle purchased in 1 October 2010 is to be
depreciated at 25% per annum on the straight-line basis. The
formula of this method is as follows:
Acquistion cost Residual value
Expected useful life of the asset
Using this formula, the depreciation expense of new vehicle would be calculated
as follows:
Depreciationof new vehicle=25,600 25
6
= 3,200
12
(9)Rent shop paid in advance

Rent of shop paid in advance from 31 March 2010 to 30 June
2010 (3 months) is 1,500.
1,500
Rent per month =
3
= 500
In addition, rent of shop was increased by 20% from 1 July 2010

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Rent per month from 1 July 2010 = 500 x 120% = 600
Rent from 1 July 2010 to 31 March 2011 (9 months) = 600 x 9 = 5,400
Total rent expense for the year ending 31 March 2011 =
1,500 + 5,400 = 6,900
(10)
Loan
The loan was incurred from 1 January 2010 at 10% per annum,
payable on 30 June and 31 December.
The interest expense from 1 January to 31 March 2011 (3
months) is:
20,000 10
3
= 500
12
(11)
Inventory
The amount of purchase of suppliers (inventory) would be
Payment to suppliers
Plus closing balance of trade payable (supplies owing)
Less opening balance of trade payable
Purchases of supplies
167,980
8,180
6,920
169,240
(12)
Telephone expense
The telephone expense would be calculated as follows:
1,720
480
420
1,780
Cash payments from bank for telephone

Plus closing balance of phone bill owing
Less opening balance of phone bill owing
Telephone expenses
(13)
Electricity expense
The electricity expense would be calculated as follows:
Cash payments from bank

Plus closing balance of electricity bill owing
Less opening balance of electricity bill owing
Electricity expenses
1,780
440
360
1,860
(14)
The miscellaneous expense would be calculated as follows:
2,560
Cash payments from bank

Cow-F04B-FR A1
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Plus closing balances of miscellaneous bill owing
Less opening balances of miscellaneous bill owing
Miscellaneous expenses
980
0
3,540
(15)
Inventory of materials
The inventory expense would be calculated as follows:
Opening balance of inventory

Plus purchased inventory
Less closing balance of inventory
Inventory expenses
(18)
28,320
169,240
24,340
173,220
Sales
At 31 March 2011, amounts due from customers totaled
21,720 which includes bad debts of 2,560.

The closing balance of trade receivable = 21,720 - 2,560 =
19,160
Total payments received from customers (cash in hand and
cash in bank) are:
105,280 + 301,760 = 407,040
Sales for the year ending 31 March 2011 would be calculated as follows:
Payments received from customers

Plus bad debts
Plus closing balance of trade receivables
Less opening balance of trade receivables
Sales
(19)
407,040
2,560
19,160
18,980
409,780
Cash in bank
From bank account, it can be seen that the expenses are more
than receipts. Therefore, Ah Boon needs to borrow 4,200 from
bank (overdraft), which is regarded as a current liability of his
firm to bank.
Cow-F04B-FR A1
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1.2 Preparing T-accounts
Opening balance b/f

Sales
Cash withdraw from Bank
Cash in hand
460 Wages of repair staff

105,280 Drawing
96,520 Cash paid into bank
202,260 Closing balance c/d
136,400
16,000
48,080
1,780
202,260
Balance b/d
Opening Balance
Cash in hand
Sales
Loan
Sales old vehicle
Bank payable
Balance b/d
1,780
Cash in bank
3,720 Cash in hand

48,080 Trade payable
301,760 Rent shop in advance
20,000 Insurance in advance
6,000 New Tool & Equipment
4,200 New Vehicle
Phone payable
Electricity payable
Miscellaneous payable
Drawing
Sales
Closing balance c/d
383,760
0
Drawing account
Cow-F04B-FR A1
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96,520
167,980
7,200
3,200
16,800
25,600
1,720
1,780
2,560
59,600
800
0
383,760

16,00
Cash in hand
Cash in bank
0
59,60
0
75,60
0
Insurance expense
Insurance in
advance
3,000
Insurance in advance
Opening balance b/f

1,400 Insurance expense
Payment insurance
4,600
Balance b/d
1,600
Old tools & equipment
25,20
Opening balance b/f
0 Closing balance c/d
25,20
0
25,20
Balance b/d
0
Depreciation expenses of old tools & equipment
Cow-F04B-FR A1
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3,000
1,600
4,600
25,200
25,200

Accumulated depreciation of
3,40
old tools & equipment
Accumulated depreciation of old tools & equipment
15,00
Closing balance c/d
Cash in bank
Balance b/d
0 Opening balance b/f

Depreciation expenses
15,00
0
Balance b/d
11,600
3,400
15,000
15,000
Purchased tools & equipment

16,800
16,800
16,800
16,800
Depreciation expenses of purchase tools & equipment
Accumulated depreciation of purchase

420
tools & equipment
Accumulated depreciation of purchased tools & equipment
Closing balance c/d

4200 Depreciation expenses
4200
4200
4200
Balance b/d
4200
Cow-F04B-FR A1
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Opening balance b/f
Balance b/d
Old vehicle account
18,000 Disposal of old vehicle account

Closing balance c/d
18,000
0
18,000
0
18,000
Accumulated depreciation of old vehicle
Disposal of old vehicle account 13,000 Opening balance b/f

Closing balance c/d
0
13,000
Balance b/d
13,000
13,000
0
Old vehicle account
Profit on sale
Cash in bank
Balance b/d
18,000 old vehicle

1,000 Cash paid into bank
19,000
New vehicle
25,600
25,600
Depreciation expenses of new vehicle
new vehicle
3,200
Accumulated depreciation of new vehicle

Cow-F04B-FR A1
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13,000
6,000
19,000
25,600
25,600

Closing balance c/d
3,200 Depreciation expenses

3,200
Balance b/d
Rent shop paid in advance
Opening Balance b/f

1,500 Rent shop expense
Payments rent
8,700
Balance b/d
1,800
3,200
3,200
3,200
6,900
1,800
8,700
Rent expenses
Rent paid in advance

6,900
Closing balance c/d
Loan payable
20,00
0 Cash in bank
20,00
0
Balance b/d
20,000
20,000
20,000
Interest Expense
Interest payable
500
Interest payable
Interest expense
Closing balance
Telephone bill owing (payable)

Cow-F04B-FR A1
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500
500
Payment from Bank

Closing balance c/d
Phone bill owing
1,720 Opening balance b/f

480 Telephone expense
2,200
Balance c/d
420
1,780
2,200
480
Telephone expenses
1,780
Electricity bill owing (Payable)
Payment from Bank

Closing balance c/d
440 Electricity expense
2,220
Balance b/d
360
1,860
2,220
440
Electricity bill owing

1,860
Payment from Bank

Miscellaneous payable
Closing balance c/d

980 Miscellaneous expense
3,540
Balance b/d
Miscellaneous bill owing

3,540
Bad debt expense
Trade receivable
2,560
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0
3,540
3,540
980
Trade receivables
18,980 Receipts from customers in cash

409,78
Opening balance b/f

Sales
Balance b/d
105,280
0 Receipts from customers in bank

Bad debts
Closing balance c/d
428,760
19,160
Inventory
Opening balance b/f

Trade payable
Balance b/d
28,320 Supplies expense

197,560
24,340
301,760
2,560
19,160
428,760
173,22
0
24,340
197,560
Cost of goods sold
173,22
Supplies expenses
Wage of repair staff
Payment to suppliers
Closing balance c/d
Closing balance c/d

Cow-F04B-FR A1
0
136,40
0
309,62
0
Trade payable

8,180 Inventory(purchase)
176,160
Balance b/d
6,920
169,24
0
176,160
8,180
Account payable
14,70 Salaries expenses
10,000
Page 23

0
Overdraft
Interest expenses
14,70
0
Balance b/d
4,200
500
14,700
14,700
Salary office expense
Salary office payable

10,000
Bank payable
Bank balance
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4,200

1.3 Preparing Trial balance
First of all, capital at 31 March 2010 needs to be calculated.
Based on the information of the scenario, it would be calculated as follows:
Total Capital=Total asset Total liabilities
AH BOON SOLE TRADER
Statement of financial position
As at 31 March 2010
Assets
Tools and equipment: cost
Depreciation to date
Carrying amount of tools & equipment to date
Vehicle: cost
Depreciation to date
Carrying amount of vehicle to date
Inventories
Trade receivable
Rent paid in advance to 30 June 2010
Insurance paid in advance to 30 September
25,200
11,600
13,600
18,000
13,000
5,000
28,320
18,980
1,500
2010
Bank balance
Cash in hand
Total assets
1,400
3,720
460
72,980
Liabilities
Trade payable
Phone bill owing
Total liabilities
6,920
420
360
7,700
Capital
Total capital & liabilities
65,280
72,980
Total capital at 31 March 2010 equals to 65,280

AH BOON SOLE TRADER
Trial Balance
Account
As at 31 March 2011
Debit
1,780
Cash in hand
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Credit

Insurance paid in advance
Inventory
New vehicle
Depreciation expenses of new vehicle
Depreciation expenses of old tools &
1,800
1,600
24,340
1,000
25,600
3,200
equipment
Depreciation expenses of purchase tools
3,400
& equipment
Accumulated depreciation of new
4,200
vehicle
Accumulated depreciation of old tools &
equipment
Purchase tools & equipment
Accumulated depreciation of purchase
tools & equipment
Trade receivables
Trade payables
Account payable
Loan payable
Sales
Insurance expenses
Phone bill owing
Telephone expenses
Cost of goods sold
Salaries expenses
Interest expenses
Drawing account
Opening equity
Bad debts
Rent expenses
3,200
25,200
15,000
16,800
4200
19,160
8,180
14,700
20,000
408,980
3,000
480
440
980
1,780
1,860
3,540
309,620
10,000
500
75,600
65,280
2,560
6,900
542,44
Capital
1.4 Preparing Income Statement

AH BOON SOLE TRADER
Cow-F04B-FR A1
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542,440

Income Statement
For the year ended 31 March 2011
Sales
Less cost of goods sold
Gross profit
Add profit of sale vehicle
Less expenses
Insurance
Salaries
Rent of Shop
Depreciation of new vehicle
Depreciation of old tools & equipment
Depreciation of purchase tools & equipment
Telephone
Electricity
Miscellaneous
Bad debts
Interest
408,980
309,620
99,360
1,000
100,360
3,000
10,000
6,900
3,200
3,400
4,200
1,780
1,860
3,540
2,560
500
40,940
59,420
Net profit
1.5 Preparing Statement of Financial position
AH BOON SOLE TRADER

Statement of Financial Position
As at 31 March 2011
Non-current assets
New vehicle
Accumulated depreciation of new vehicle
Carrying amount of new vehicle
Accumulated depreciation of old tools & equipment
Carrying amount of old tools & equipment
Purchase tools & equipment
Accumulated depreciation of purchase tools &
equipment
Carrying amount of purchase tools & equipment
Current assets
Cash in hand
Cow-F04B-FR A1
25,600
3,200
22,400
25,200
15,000
10,200
16,800
4200
12,600
45,200
1,780
Page 27

Trade receivables
Insurance paid in advance
Inventory
19,160
1,800
1,600
24,340
Total assets
48,680
93,880
Capital
At 31 March 2010
Add profit for the year
Less Drawing
At 31 March 2011
65,280
59,420
75,600
49,100
Non-current liabilities
Loan payable
20,000
Current liabilities
Trade payables
Phone bill owing
Account payable
8,180
480
440
980
14,700
24,780
93,880
Total capital and liabilities
Cow-F04B-FR A1
Page 28

Part 2: Report on financial statements in a form
suitable for publication by partnership
Partnership, it is an agreement between two or more persons to engage in business in
common with a view to profit. It is desirable that partners have a written partnership
agreement outlining important points such as he agreed shares of capital contributions
and shares of profit, but there is nothing in law to say that any such written agreement is
required. (Education, 2004)

Agency commission due
880
(1)
Debit
(2)
Credit Commission
Debit
Stock
88,000
(3)
Credit Trade payable

Debit
Loss expenses
10,000
Debit
72,000
880
88,000
Cost of goods sold
(4)
Credit Stock
Debit
Trade receivable
82,000
(5)
Credit Sales
Debit
Discount allowed
(6)
Credit Trade receivable

Debit
Trade payable
(7)
Credit Discount received

Debit
Cash in bank
115,960
(8)
Credit Trade receivable

Debit
Trade payable
78,800
(9)
Credit Cash in bank

Debit
Depreciation expense
120,000
120,000
3,240
3,240
2,400
2,400
115,960
78,800
1,000
Credit premises
1,000
Provision for depreciation

(10 Debit
)
premises
Depreciation expense vehicle
2,000
Credit Provision for depreciation
(11 Debit
Cow-F04B-FR A1
vehicle
Vehicle expense
2,000
14,040
Page 29

)
Credit Accrued vehicle expense

Debit
Accrued vehicle expense
14,040
13,440
Credit Cash in bank

(12 Debit
Drawing
13,440
8,600
)
Credit Cash in bank
(13 Debit
Trade expense
8,600
14,800
)
Credit Prepayment
Notes:
14,800
(2)Purchases
The agency commission that the firm will receive is 880 which
equals to 1% of the purchases for the year ended on the previous 31 March.
880
Purchases = 1 = 88,000
(3)Cost of goods sold
Stock, at cost, at 31 March 2011 was valued at an amount
6,000 more than a year previously which is 6,400.
Stock at 31 March 2011 = 6,400 + 6,000 = 12,400
Cost of goods sold would be calculated as follows:
6,40
Opening stock
0
8800
Add purchases
0
1240
Less closing stock

Less Loss expense *
0
8,00
Loss from flooding

Loss from dampness
Cost of goods sold
0
2,00
0
72,0
00
* Loss caused by flood or dampness was recorded as an

expense
(4)Sales
Cow-F04B-FR A1
Page 30

The partnership commencement obtained a gross profit of 40%
on all sales.
Sales =
72,000
60
120,000
(7)Cash received
Cash received for the years to 31 March 2011 would be
12,60
Opening balance of trade receivable
0
1200
Add sales
Less closing balance of trade
00
13,40
receivable
Less discount allowed
0
3,240
115,
Cash received
960
(8)Cash paid
Trade payable at 31 March 2011 related entirely to goods received whose
list prices totalled 19,000. Plus, both partners have agreement with the
manufacturer, sell products at a trade discount of 20% off list price.
Actual trade payable at 31 March 2011 = 19,000 x (100%-20%) = 15,200
Cash paid for the year to 31 March 2011 would be
Opening balance of trade
8,40
payable
0
88,0
Add purchases
Less closing balance of trade
00
15,2
payable
00
2,40
Less discount received
0
78,8
Cash paid for the year

(9)Depreciation of premises
Cow-F04B-FR A1
Page 31
00

Depreciation of premises is 5% on cost
Depreciation expense premises = 20,000 x 5% = 1,000
(10)
Depreciation of vehicle
Depreciation of vehicle is 20% on cost
Depreciation expense vehicle = 10,000 x 20% = 2,000
(13) Trade expense
Trade expense would be calculated as follows:
Opening balance of trade expenses

prepaid
Add Cash paid to trade expenses
240
14,7
prepaid
Less closing balance of trade expenses
prepaid
20
160
14,8
Trade expenses used for the year
00
1.2 Preparing T-accounts
Cash in Bank
Trade expenses
14,72
Opening balance b/f
8,620 prepaid
0
13,44
Commission
600 Vehicle expenses

115,9
0
78,80
Receipts
60 Suppliers
Withdrawals
Closing balance c/d
125,1
80
9,620
0
8,600
9,620
125,1
80
Balance b/d
Commission
Agency Commission
due
Cow-F04B-FR A1
Page 32
88
0

Agency Commission due
Opening balance
b/f
600 Bank payment

Closing balance
880 c/d
1480
880
Commission
Balance b/d
Trade payable
2,40 Opening balance

Discount received
Cash paid to
0 b/f
78,8
suppliers
Closing balance c/d
00 Purchase
1520
0
96,4
00
Balance b/d
600
880
1480
8,400
8800
0
96,40
0
1520
0
Stock
Opening balance
b/f
Purchases
Balance b/d
6,40 Cost of goods sold and

0 losses
88,0
00 Closing balance c/d
94,4
00
124
00
Goods loss expenses
Loss from flooding

8,000
Loss from
2,000
Cow-F04B-FR A1
Page 33
82,0
00
1240
0
94,4
00

dampness
10,00
0
Cost of goods sold
72,0
Stock account
00
Discount rereived (other income)
2,40
Trade receivable
Discount allowed (expenses)
3,24
Trade receivable
Sales
1200
Trade receivable
Trade receivable
00
Opening balance
b/f
Trade receivable
Cow-F04B-FR A1
12,600 Discount allowed

12000
0 Cash received
Closing balance
c/d
Page 34
3,240
115,9
60
13,40
0

132,60
0
13,40
Balance b/d
132,6
00
Premises
Opening balance b/f

20,000
20,00
Balance b/d
20,0
00
20,0
00
Depreciation expenses of premises
Provision for depreciation of

100
premises
0
Provision for depreciation of premises
Closing balance
13,00 Opening balance
c/d
0 b/f
Depreciation
12,000
expenses
13,00
0
Balance b/d
Vehicles at costs
10,00 Closing balance

Vehicles at costs
0 c/d
10,00
0
10,00
Balance b/d
Cow-F04B-FR A1
0
Page 35
1000
13,000
13,000
10,000
10,000
Depreciation expenses of vehicle

200
vehicle
Provision for depreciation of vehicle
Closing balance c/d

Depreciation
expenses
6,000
Balance b/d
Accrual vehicle expenses
Opening balance
Bank payment
Closing balance
c/d
13,440 b/f
1,060 Vehicle expenses
14,500
Balance b/d
4,000
2000
6,000
6,000
460
14,04
0
14,50
0
1,060
Vehicle expenses
Accrued vehicle
14,0
expenses
40
Trade expenses
prepaid
Trade expenses
14,8
00
Trade expenses prepaid
Cow-F04B-FR A1
Page 36

Opening balance
b/f
Bank payment
Balance b/d
Bank account
Cow-F04B-FR A1
240 Expenses
Closing balance
14,720 c/d
14,960
160
Drawing account
8,600
Page 37
14,800
160
14,960

First of all, capital at 31 March 2010 needs to be calculated.
Based on the information of the scenario, it would be calculated as follows:
Total Capital=Total asset Total liabilities
AH BOON PARTNERSHIP
As at 31 March 2010
Assets
20,00
Premises at cost
0
12,00

Carrying amount of premises to date
0
8,000
10,00
Vehicle at cost
Carrying amount of vehicle to date
Trade receivable (for sales)
Prepayments (trade expenses)
Stock at cost
Agency commission due
Balance at bank
Total assets
Liabilities
Trade payable
Total liabilities
Capital
Total liabilities and capital
0
4,000
6,000
12,600
240
6,400
600
8,620
42,460
8,400
460
8,860
33,600
42,460
Total capital at 31 March 2010 equals to 33,600
Cow-F04B-FR A1
Page 38

AH BOON PARTNERSHIP
Trial balance
As at 31 March 2011
Account
Debit
Cash in Bank
9,620
Trade receivable
13,400
Stock
12,400
Premises
20,000
Provision for depreciation of premises
Vehicles at costs
10,000
Provision for depreciation of vehicle
160
880
Trade payable
Sales
1,000
2,000
Vehicle expenses
14,040
Discount received (other income)
3,240
Goods loss expenses
10,000
Commission (other income)
Cost of goods sold
72,000
Drawing account
8,600
Trade expenses
14,800
Capital at 31 March 2010
192,140
Cow-F04B-FR A1
Page 39
Credit
13,000
6,000
15,200
120,000
1,060
2,400
880
33,600
192,140

AH BOON PARTNERSHIP
Income statement
For the year ended 31 March 2011
Sales
1200
00
72,00
Less Cost of goods sold
0
48,0
Gross profit
Add discount received
Add commission
00
2,400
880
3,280
51,28
0
Less expenses:
14,04
Vehicle expenses
0
3,240
1000
2000
10,00
Goods loss expenses
0
14,80
Trade expenses
0
4508
0
6,20
Net profit
Cow-F04B-FR A1
Page 40

1.5 Preparing Statement of Financial position
AH BOON PARTNERSHIP
Statement of Financial position
As at 31 March 2011
Non-current assets
20,00
Premises
premises
Carrying amount of premises
0
13,00
0
7,000
10,00
Vehicles at costs
Provision for depreciation - vehicle
Carrying amount of vehicle
0
6,000
4,000
11,00
0
Current assets
Cash in Bank
9,620
13,40
Trade receivable
Stock
0
160
880
1240
0
36,46
0
47,4
60
Total assets
Capital
33,60
At 31 March 2010
Add profit for the year
Less drawing
0
6,200
8,600
31,20
0
At 31 March 2011
Current liabilities
Trade payable
Cow-F04B-FR A1
1520
Page 41
0
1,060
Total capital and liabilities
1626
0
47,4
60
CHAPTER 3: REPORT ON BOON CHEUNG LIMITED

COMPANY
Report on financial statements in a form suitable for
publication by limited company
Limited companies is a form of business that has two ore more owners separate in law
from the people who own and control it. (Education, 2004)
About is financial statements, it is the same as sole trader except:
The P& L includes a section usually after the calculation of net profit to show
the dis tribution of profit among the partners. It is called the profit and loss
appropriation account
The balance sheet includes a current account (an account similar to capital
account)
Additionally, limited companies are governed by the companies Acts. A company must:
Keep accounting records
Produce audited accounts (if turnover > 5.6m)
File accounts and an Annual Return with the Registrar of Companies. This
information is available to the public.
Keep Statutory Books.

(Anon., 2012)
Cow-F04B-FR A1
Page 42

(1)
Debit
Preference dividend
Debit
Final ordinary shares dividend
7,000
20,000
(2)
Credit Provision dividend

Debit
Debenture interest expense
27,000
(3)
Credit Accrued interest expense

Debit
Rates expense
(4)
Credit Rates paid in advance

Debit
Audit fees
(5)
Credit Accrued audit fees

Debit
Retained earning
10,000
(6)
Credit General reserve

Debit
Fittings and delivery vehicles
16,400
4,000
4,000
8,000
8,000
2,000
2,000
10,000
Credit expense
16,400
fittings and delivery vehicles
Notes:
(1) The provision of preference dividend and final dividend of
ordinary share
Boon Cheung Limited company has share capital of 7%-preference
share of 1 each
The preference dividend payable = 100,000 x 7% = 7,000
The director recommends provision for the preference dividend
and a final dividend of 0.10 per ordinary share
Final dividend ordinary share = 0.1 x 200,000 = 20,000
Total provision of dividend = 7,000 + 20,000 = 27,000
(2)Debenture and accrued interest expense
Based on the balance remained in Boon Cheung Limited
companys books
Charge needed in income statement = 80,000 x 10% =
8,000
Amount paid shown in trial balance = 4,000
Accrued interest (6 months) payable = 4,000
(3)Rates expense
Cow-F04B-FR A1
Page 43

Based on the information in Companys books, the rates
expense would be calculated as follows:
8,5
Rates and insurance prepaid
20
Less closing balance of rates paid in
advance
20
8,00
Rates expenses
(5)Appropriated profit and general reserve

Based on the information from companys books
New value of General reserve transferring = 44,000 +
10,000 = 54,000
(6)Fittings and delivery vehicles expense
Depreciation to be provided for fittings and delivery vehicles
for 2010 at 20% per annum on cost.
Depreciation expense of fittings and delivery vehicles =
82,000 x 20% = 16,400
BOON CHEUNG LTD

Trial balance
As at 31 December 2010
Account
Debit
Ordinary share capital

Preference share capital
Cash in bank
Cash in hand
General reserve
Furniture and delivery vehicles at cost
Vehicle running costs (including depreciation)
Accumulated depreciation of furniture and
delivery Vehicles
Inventory at 31.12.2010
Cow-F04B-FR A1
Credit
200,000
100,000
87,624
2,960
54,000
82,000
24,700
49,200
78,380
Page 44

Wages and salaries of employees
Provision of dividend
Rates expenses
Rate and insurances (prepayments)
Gross trading profit for 2010
Interim ordinary dividend paid
Building at cost
Investment at cost
Debtors
Creditors
Postage and telephones
Advertising and sale promotion
Damaged inventory written off
Preference dividend
Final ordinary shares dividend
General expenses
Accounting and legal expenses
Directors' fees and salaries
Unappropriated profit b/f
Accrual audit fees
Income from investment
10% Debenture secured in fixed assets
Debenture interest expenses
Accrual interest expenses
Audit fees
Retained earning
54,400
27,000
8,000
520
184,640
12,000
244,000
36,000
62,620
48,458
1,946
3,666
1,734
7,000
20,000
1,528
2,420
16,380
16,180
2,000
2,400
80,000
8,000
4,000
2,000
10,000
767,87
8
Cow-F04B-FR A1
Page 45
767,878

BOON CHEUNG LTD

Income Statement
For year ended 3 December 2010
184,6
Gross trading profit for 2010
Income from investment
Distribution costs
Vehicle running costs (including
depreciation)
Selling costs
40
2,400
(24,70
0)
(3,666
Advertising and sales promotions

Administrative expenses
)
(16,38
Directors' fees and salaries
0)
(54,40
Wage and salaries of employees
0)
(1,946
Postage and telephones

Financial costs
)
(2,420
Accounting and legal expenses
)
(2,000
Audit fees
)
(8,000
Rates expenses
)
(8,000
Debenture interest
Other expenses
)
(1,528
General expenses
)
(1,734
Damaged inventory written off
)
62,26
Net profit
Cow-F04B-FR A1
Page 46
Cow-F04B-FR A1
Page 47

1.4 Preparing statement of retained earning
BOON CHEUNG LTD

Statement of retained earning
As at 31 March 2010
62,2
Net profit
Appropriations
66
10,0
Transfer to general reserve

Dividends
00
7,00
Preference dividends
Ordinary dividends
0
12,0
Interim
00
20,0
Final
00
13,2
Retained earnings for the year
66
16,1
Retained earnings b/f
80
29,4
Retained earnings c/d
Cow-F04B-FR A1
Page 48
46

1.5 Preparing statement of Financial position
BOON CHEUNG LTD

As at 31 March 2010
Assets
Non-current assets
244,0
Building at cost
00
82,00
Furniture and delivery vehicles at cost

Accumulated depreciation of furniture and
delivery vehicles
Carrying amount of furniture and delivery
0
49,20
0
32,80
0
36,00
0
312,8
vehicles
Investment at cost
00
Current assets
87,62
Cash in bank
Cash in hand
4
2,960
78,38
Inventory at 31Dec 2010
0
62,62
Debtors
Rate and insurances (prepayments)
232,1
04
544,9
04
Total assets
Equity and liabilities
Equity
Cow-F04B-FR A1
0
520
Page 49

200,0
Ordinary share capital
00
100,0
Preference share capital
00
54,00
General reserve
0
29,44
6
Retained earnings c/d
383,4
46
80,00
10% Debenture secured on fixed assets
Current liabilities
48,45
Creditors
8
27,00
Provision of dividend
Accrual audit fees
Accrual interest expenses
0
2,000
4,000
Total equity ad liabilities
Cow-F04B-FR A1
Page 50
81,45
8
544,9
04

CHAPTER 4: REPORT ON WARNER COMPANY
AND PEREIRA COMPANY
Report on financial statements for group of company
1.1
Preparing consolidated income statement for the year
ended 30 June 2010

WARNER LTD
Consolidated income statement
For the year ended 30 June 2010
'
000
3,44
Revenue
5
(1,78
Cost of sales
8)
1,65
Gross profit
Distribution costs
Administrative expenses
Interest payable
Profit before taxation
Income tax expenses
Profit after taxation for the year
Profit attributable to:
Owners of Warner Ltd
Non-controlling interest
8
(638)
(310)
(75)
635
(306)
329
318
11
329
Note:
Since the issue costs of 50,000 on the issue of ordinary share
capital must be recorded as reduction of share premium, not
increase of administrative expense.
Administrative expense = 325,000 50,000 = 275,000
Share premium = 300,000 50,000 = 250,000
On 1 May 2010, Warner Company acquired 70% of the ordinary
share capital of Pereira Company, while the accounting time is
Cow-F04B-FR A1
Page 51

30 June 2010. It means that all figures will be calculated for the
full year for Warner Ltd but only for two months for Pereira Ltd.
Also, based on the information given, the profit of Pereira
company may be assumed to accrue evenly over the year. It
means that the amount of revenue, expense and profit in each
month will be the same over the year of 2010.
Those explanations are for the calculating below:
000
Group revenue
3,150 + (1,770 x 2/12)
Group costs
1,610 + (1,065 x 2/12)
3,445
=
Group distribution costs
620 + (105 x 2/12)
1,788
=
Group
638
=
administrative 275 + (210 x 2/12)
expenses
Group interest payable
70 + (30 x 2/12)
310
=
Income Tax expense
283 + (135 x 2/12)
75
=
225 x 2/12 x 30%
306
=
(equals to 30% of profit
11
after taxation for year of

Pereira Ltd post-acquisition)
Inter-company dividends
The dividends on consolidated income statement would be
000
Pereira Ltd.s dividend received
by Warner Ltd.
The dividends
42
=
received
by
42 x 10/12
Warner Ltd on the time of Preacquisition

Cow-F04B-FR A1
Page 52
35

The
dividends
received
by
42 x 2/12
Warner Ltd on time of Postacquisition

Dividends
credited
consolidated
on
=
7
42 35 7
=
0
income
statement
1.2
Preparing financial statements of equity changes
WARNER LTD
Statement of changes in equity
'
Retained earnings
Balance at 1 July 2009
Profit after tax for the year of the Group (belong to owners
000
379
of Warner Ltd)
Dividend
Balance at 30 June 2010
318
(38)
659
Notes:
The retained earnings at 1 July 2009 would be calculated as
follows:
000
Retained earnings of Warner Co.
(in the balance sheet as at 30
625
June 2010)
Retained earnings for the year
284 38
Retained earnings of the group
625 - 246
246
=
at 1 July 2009
Cow-F04B-FR A1
379
Page 53

1.3
Preparing consolidated balance sheet for the year ended
30 June 2010
WARNER LTD
Consolidated balance sheet
As at 30 June 2010
' 000
Non-current assets
2,250
Property, plant and equipment
Goodwill
189
' 000
2,439
Current assets
Inventory
Receivable
Cash
600
451
299
1,350
3,789
Total assets
Equity
Equity attributable to owners of
Warner Ltd
Share capital
Share premium
Retained earnings
750
250
659
1,659
255
1,914
Current liabilities
1,225
650
Total equity and liabilities
Cow-F04B-FR A1
Page 54
1,875
3,789

Notes:
There were no intercompany transaction during the year so
there will be no deduction from assets and liabilities of Warner
Ltd and Pereira Ltd.
000
Non-current assets
1,750 + 500
Inventory
150 + 450
2,250
=
Receivables
238 + 213
600
=
187 + 112
451
=
1,050 + 175
299
=
Current liabilities
400 + 250
1,225
=
Cash
650
Goodwill
Warner company accounts for pre-acquisition dividends by
treating them as a deduction from the cost of the investment.
As calculating above, a pre-acquisition dividend received by
Warner Ltd is 35,000. Therefore, the value of investment in
Pereira Company must be deducted an amount of 35,000.
Investment in Pereira Company = 800,000 35,000 = 765,000
According to the scenario, the property, plant and equipment of
Pereira Company had open market value was 500,000. Since no
depreciation adjustment will be made in the group accounts, the year end value
will be taken as the carrying value of the property, plant and equipment.
The revaluation reserve created in equity of consolidated
balance sheet is:
500,000 - 350,000 = 150,000
Goodwill will be calculated based on the net assets which
include retained earnings of pre-acquisition.
Cow-F04B-FR A1
Page 55

Retained earnings for the year ended 30 June 2010 =
225,000 60,000 = 165,000
Retained earning pre-acquisition = 450,000 165,000 +
165,000 x 10./12= 423,000
Warner Company acquired 70% of the ordinary share capital of
Pereira Company. Based on figures calculated, goodwill would
be calculated as follows:
000
Cost of investment in Pereira
Co.
Less:
Share capital
765
Share premium
Pre-acquisition profit
Fair value adjustment
100 x 70%
150 x 70%
70
=
423 x 70%
105
=
150 x 70%
296
=
105
576
Goodwill
=
189
Non-controlling interest is proportion of net assets of such subsidiaries in fact
belongs to investors from outside the group. (Education, 2010). In this case, it is
proportion of net assets of Pereira Ltd. Non-controlling interest would be
000
Share capital
Share premium
Retained
earnings
100 x 30%
150 x 30%
30
=
pre- 423 x 30%
45
=
acquisition
Cow-F04B-FR A1
127
Page 56

Post-retained earning
165 x 30% x 2/12
Fair value adjustment
150 x 30%
8
=
45
=
255
Cow-F04B-FR A1
Page 57
CONCLUSION
Through this report, it can be seen that the way to prepare financial
statements from complete or incomplete records was shown clearly
through three different companies. Also, financial information in
accepted formats for publication were presented in each case with
clear explanation.
I personally think my work achieves good quality because I provided
important theories, analysis and applications about every aspects
mentioned in this report. Besides, I also used reliable resources to get
information. However, because of word limitation and some other
problems I encountered (summarizing, analyzing skills, etc), some
parts in this report could be not thorough and analyzed deeply.
Cow-F04B-FR A1
Page 58
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Alunct, n.d. who needs financial statements. GCSE Applied Business,
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Education, B. P., 2010. Management Accounting and Financial
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Cow-F04B-FR A1
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/NUFI.pdf
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Preparation of Financial Statements

A report on Preparation of Financial

Prepared for: Ms. Kim Oanh Vu

Word number: 2,689

Preparation of Financial Statements

Preparation of Financial Statements

Preparation of Financial Statements

Preparing financial statements of equity changes..................49

1.3 Preparing consolidated balance sheet for the year ended 30

Preparation of Financial Statements

Preparation of Financial Statements

Internet and books, some lectures, journal articles, and business

Preparation of Financial Statements

CHAPTER 1: FINANCIAL INFORMATION

Preparation of Financial Statements

of dividend payment as their

(Accouting- share of the profits. They

are interested in the profit

(Alunct, n.d.) They can find

Information that will assist

appropriate measures activities.

to improve company information is needed on

competitive position and

products/ service that are

2012). With this type of

companys profitability information on the ability

remuneration and job redundancies.

Preparation of Financial Statements

are, for examples: equity,

various information as the details of sales

Statistical various returns required by proportion of profits absorbed by

taxation and so on. (Reaich,

2012). These information can be

found in income statement or

Concern about the capacity Creditors require information on a

the information on the relative

company. Using that strengths and weaknesses

behavior Whereas the above users

an share in the wealth of the

company. (MBA, n.d.)

They are interested

company which could be

advantage and this

Preparation of Financial Statements

company is financed, how

Preparation of Financial Statements

CHAPTER 2: REPORT TO AH BOON

Opening Capital Additional capital introduced during the period

1.1 Journalizing transactions

Credit Insurance paid in advance

Credit Cash in hand

Credit Cash in bank

Credit Cash in hand

Credit Cash in bank

tools & equipment

Credit Accumulated depreciation

old tools & equipment

Credit Cash in bank

Depreciation purchased tools

Credit & equipment expense

Preparation of Financial Statements

purchased tools & equipment

Credit Vehicle account