BASED ON AUSTRALIAN ACCOUNTING PRINCIPLES
You should analyse questions from various lenses as necessary for instance, based on definitions, accounting principles, reporting regulations, research, examples (may include real life ones) or other possible sources. In your arguments, correct terminology and coherent expression should be interwoven throughout. Finally, it should be a synthesis of various sources, overlaid with your own view.
Answer the following:
a) in 400 WORDS and at least 2 references- ‘All costs are classified as Expense, recorded in the Income Statement and affect overall Equity of the business adversely.’ Discuss the statement.
b.) Transaction Analysis Scenario
The following information provides details of some of the activities of Ms Brown for the month
of October 2020.
Ms Brown’s accountant has advised her to maintain a monthly reporting system using the
accrual accounting basis. You must identify and record the relevant business transactions in
the workbook format using the accounting equation. You may create meaningful accounts
names as you need. Provide your assumptions if you make any.
1. The Bank balance on 1st October ‘20 is $15,000.
2. Ms Brown has to make a payment of $40,000 by 12th October ’20 to her supplier. However, the
delay in receiving payments from her clients in September have disrupted her cash flow cycle, and she needs to make arrangements to honor her invoice. On a social visit to her parents early on the morning of 5th October ’20 the Monday, in her anxiety, she discussed her situation with them. They offered $10,000 as a gift to her (their daughter) and extended another $20,000 as a short-term loan. Ms Brown grac iously accepted the offers.
3. In the afternoon of 5th October’ 20, she visited her bank branch and deposited this $30,000 to her business account. She also discussed her situation with her bank manager, and the manager suggested a few other options to meet the shortfall. The bank manager offered her an overdraft facility with a limit of $10,000, for no additional cost which allows her to overdraw her business account at any point in time. The bank manager also suggested her to subscribe for further options such as a ‘Ready line of credit’ or a ‘Credit card’. The manager
explained that she qualifies for a limit up to $20,000 and $40,000 respectively for the two options. They both have an annual fee being $100 and $250 respectively, to be paid at the time of signing the contract. She may only choose one of the options. The credit card is an
expensive option, both in terms of the annual fee and the interest rates but provides a 50 days interest free period. Ms Brown needed time to reflect on the options, and the manager prepared and handed over the contract papers for both the products to be signed and
returned later.
4. On 6th October ’20, she renewed her yearly business insurance for the period October ’20 to
September ’21 and paid $2,400. She also made a rental payment of $2,000 for her office premise for the month of November.
5. On 7th October ‘20, she finalized an appointment of a staff member whom she had interviewed last month and offered a salary package of $60,000 per annum. The newemployee will start working from the 1st November after serving notice at the current
workplace.
6. On 8th October ’20, she received a payment of $5,000 from her client for sale in September
‘20.
7. On 9th October ’20, she decided to apply for the credit card option offered to her by the bankmanager on the 2nd October ‘20 and signed the contract on that date. The Bank Manager confirmed that the processing will take some time and that she will be able to use her credit card from 1st November onwards.
8. On 12th October she paid her supplier using 70% of her then bank account balance and metthe shortfall if any by the Overdraft option.
Accounting Equation Layout:
Assets (Current or Non Current) = Liabilities (Current or Non Current) + Owners Equity (Capital/Reserve, Income Expense)
The post BASED ON AUSTRALIAN ACCOUNTING PRINCIPLES
You should analyse questions from var appeared first on Solved Students Assignments.
