Introduction
Financial statements can represent the financial position of any entity. It also shows the capability of any entity so that it can manage their financial stability and further it can achieve its goals and objectives(Epstein and Jermakowicz, 2010). Georgie Smythe have started a new business by introducing capital in it. In the given report financial statements are made and a detailed analysis of financial statements has been carried out.
(A.) Transactions into the transaction analysis chart
Journalised Transactions of Georgie Smythe
|
Serial No. |
Particulars |
Amount |
Amount |
|
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30. |
Cash A/c Dr. To Capital A/c (capital introduced) Cash A/c Dr. To Capital A/c (capital introduced) Land and Building A/c Dr. To Loan A/c To Cash A/c (Purchase of Land and building on cash and through loan) Engineering Equipment A/c Dr. To Cash A/c (Purchase of engineering equipments) Software A/c Dr. To cash A/c (Purchase of software) Furniture A/c Dr. To cash A/c Professional Indemnity Insurance A/c Dr. To cash A/c (Payment of professional indemnity insurance) Computer A/c Dr. To cash A/c (Purchase of computer for cash) Vehicle A/c Dr. To creditor for vehicle A/c (Purchase of vehicle on cash) Debtor A/c Dr. To sales A/c (Sales made to debtors on credit terms) Stationery A/c Dr. To creditor for stationery A/c (Purchase of stationery) Equipment A/c Dr. To capital A/c (Equipments introduced by proprietor taken as capital) Debtor A/c Dr. To sales A/c (Sales made to debtors on credit terms) Cash A/c Dr. To debtor A/c (Cash received from debtors) Debtor A/c Dr. To sales A/c (Sales made to debtors) Drawings A/c Dr. To cash A/c (Drawings made by the owners) Wages A/c Dr. To cash A/c To PAYG Tax A/c (Wages paid and PAYD Tax deducted) Cash A/c Dr. To debtors A/c (Cash received from debtors) Telephone Expenses A/c Dr. To cash A/c (telephone expenses paid) Debtors A/c Dr. To sales A/c (Sales made to debtors on credit terms) Wages A/c Dr. To cash A/c To PAYG Tax A/c (Wages paid) Motor Vehicle Expenditure A/c Dr. To cash A/c (Motor vehicle expenditure paid) Cash A/c Dr. To Debtor A/c (Payment received from debtors) Drawings A/c Dr. To cash A/c (drawings made) Creditors for office stationery A/c Dr. To cash A/c (Creditors for office stationery paid) Interest on loan A/c Dr. To loan A/c Depreciation A/c Dr. To Motor vehicle A/c (depreciation charged) Depreciation A/c Dr. To Computer equipment A/c (Depreciation charged over computers) Depreciation A/c Dr. To Engineering Equipment A/c (Depreciation charged on equipments) Depreciation A/c Dr. Furniture and Fittings A/c (Depreciation charged over furnitures)
|
80000
20000
250000
10000
2400
3000
2400
15000
24000
2000
1200
6500
4800
2000
7200
1500
2300
270
8400
1800
240
2500
2200
200
950
4800
4500
1500
300 |
80000
20000
225000 25000
10000
2400
3000
2400
15000
24000
2000
1200
6500
4800
2000
7200
1500
1200 400
2300
270
8400
1300 500
240
2500
2200
200
950
4800
4500
1500
300 |
(B.) Fully classified Income Statement and Balance Sheet for March 2017 for GS Engineering
Income Statement for the year 31st March 2017 For GS Engineering
|
Particulars |
Schedule No. |
Amount |
|
Income: Sales Other Income Total Expenses: Depreciation Interest Motor vehicle expenditure Wages Telephone Expenses Stationery expenditure Professional indemnity insurance Profit/(Loss) |
|
22400 Nil 22400
(11100) (950) (240) (3400) (270) (400) (2400) 3640 |
Balance Sheet as 31st March 2017
|
Particulars |
Schedule No. |
Amount |
|
Fixed Asset Motor vehicle Computer Engineering Equipments Furniture and Fittings Land and Building Computer software Current Assets Debtors Stock of Stationery Equity and Liability Capital Current Liability creditor for stationery Non Current Liability Loan creditors of vehicle PAYG Tax |
|
19200 10500 5000 2700 250000 2400
15600 800
99940
1000
225000 24000 900 |
(C.) Differences between straight line and reducing balance depreciation methods and explain the impact on the income statement over the asset’s life
Balance sheet: Balance sheet is a summary of financial statements of a company or a organisation. It can be a sole proprietorship, a business partnership and can be a company also .Balance sheet shows the financial position of the company. A standard balance has two sides one side is assets side and the other is liability side (Chand, Patel and Patel, 2010). Usually balance sheet is calculated after every quarter, six month or in a year. Balance sheet includes Liabilities which are the obligation for the organisation which organisation has to pay to his creditors. Liabilities are of two type short term liability and long term liability. On the other hand assets include property and investments of the company and also the amount which the company will receive from his debtors.
Income statement: Income statement is a financial statement of a company that reports the financial performance of a company over a specific period of time. Income statement shows how a company is performing or shows all the revenues and loss incurred to the the company in a specific time period.
Journal entry: Journal entry is a record that keep accounting transactions in a manner as they occur. Journal entry record all the accounting transactions with showing their names,amount and also state that whether it will be debited or credited(Lisowsky, 2010). Ledger is a book or collection of financial accounts. Ledger is a record that keeps accounting transactions by account names.
Assets of an enterprise affects its income statement in various ways. Like depreciation charged on assets of enterprise is counted in income statement and change the numbers of income statement. Other than depreciation repair and maintenance cost of an assets also come under in income statement which has its own effects on income statement(Wray,2012). Debtors from assets side of balance sheet also affect income statement like some debtors become bad debts so that amount of bad debts is included in income statement of enterprise.
Conclusion
From the above mentioned income statement and balance sheet it can be analysed that through analysis of these financials an enterprise or user can implement better decisions. On the other hand assets and their impacts over the income statement is also mentioned there in.
References
- Epstein, B. J. and Jermakowicz, E. K., 2010. WILEY Interpretation and Application of International Financial Reporting Standards 2010. John Wiley & Sons.
- Chand, P., Patel, C. and Patel, A., 2010. Interpretation and application of “new” and “complex” international financial reporting standards in Fiji: Implications for convergence of accounting standards. Advances in Accounting. 26(2). pp.280-289.
- Lisowsky, P., 2010. Seeking shelter: Empirically modelling tax shelters using financial statement information. The Accounting Review. 85(5). pp.1693-1720.
- Wray, L. R., 2012. Global financial crisis: A Minskyan interpretation of the causes, the fed’s bailout, and the future.
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