Upload
others
View
0
Download
0
Embed Size (px)
Citation preview
ACCT 11081
CQ University
Sydney Campus
Step 7-11
Nagina Gurung
12098804
STEP 7
Before getting started with the company’s inventories, let us first discuss about the basic
terminologies to be used in the process and how they may bring affect in the figures of
the inventories of certain companies. Firstly, I would like to discuss the two types of
recording transactions: perpetual and periodic. I perpetual method, transactions are
recorded whenever they are occurred. This method helps in calculating the gross profit
of the company by subtracting the cost of goods sold from sales based on real time
while in case of periodic method, the inventories are recorded periodically by counting
each of these physically which is not possible in most of the big companies where there
is always a lot of stock, so this method is rarely in use nowadays. The cost of
inventories can be determined under four cost formulations namely:
Specific identification: This method is used to track inventory items that are either in
or out of stock.
FIFO: Under this method, the items that were first brought in the company are first sold
out to the customers.
LIFO: Under this method, the items that were purchased first are kept even if the items
purchased later are brought in the stock and are sold at the very end.
Weighted average: To calculate the weighted average, we will simply get the inventory
cost per unit of inventory sold at the particular period.
Brief preview of GrainCorp Limited
GrainCorp Limited is a public company which is listed on ASX (Australian Securities
Exchange) in Australia. The company is based on the production and distribution of
grains and its related items all over Australia and also over the world. Inventory or in
other words, stock can be called as the goods and raw materials held by any firm in
order for its resale to gain profit through them. In step 7 of the assignment, we will focus
on the inventories of a company, why and how important role they play for the
company’s benefit. In accounting, while learning inventories, we learn stages of
inventories:
1. Raw materials, basic materials and goods to be processed for making a final
product.
2. Work in progress, raw materials which have been processed for manufacturing.
3. Finished goods, final goods which are ready to be sold out in the market to the
consumers.
According to the company’s accounting policy, the inventories are valued at lower of
cost and net realisable value unless they are stated otherwise. GrainCorp Limited states
that the net realisable value is “the estimated selling price less variable selling
expenses.” (GrainCorp, 2018, p73). For the calculation of net realisable value,
estimations and various evaluations have to be made either by periodic or perpetual
methods in order to choose the lower costs. After getting basic knowledge on the
company’s accounting policy, I gave a look at the company’s balance sheet. My
company is based on the supplies of grains, so it was normal to have high inventory for
the distribution of the product. In the fiscal year, 2015-16, $6.0 million was recognised
as an expense in 30 September, 2016 as write-downs of inventories to net realisable
value, which amounted to $ 3.1 in 2015. Having more inventories is usually beneficial
for the business as it will mean to have more cash flow in the business. Similarly in
2017 and 2018, the inventories written off amounted to $ 2.9 million and $ 2.4 million
respectively. While in the business, the company may not always have satisfactory flow
of inventories not because of bad inventory management but sometimes for the
initiation of new innovations in the business. The company must have assumed the
inventories to be sold within a year, which was why they were classified as current
assets in the balance sheet. There was not much difference in the figures of inventories
besides on 2018, in 2018 the inventories were a little too high of $824.5 million, among
which the value of raw materials was found more and due to the higher amount of raw
materials in the particular year, the inventories were always added up to be more in
2018.
Step 8
MYOB Login Success
Company file
Easy setup
Sales setup
Purchase Setup
Online Training
Online Training 2
MYOB Online Test
Step 9
To complete step 9, I have chosen to work with my own assigned company, GrainCorp
Limited. I have introduced some hypothetical figures for all the balances and prepared
some hypothetical journal entries and prepared the balance sheets. The hypothetical
balance figures for the assets, liabilities and equities are given as follows:
Assets
Current Assets: GrainCorp Bank a/c = $3,709,300
Trade Debtors = $5,281,400
Inventory = $8,245,500
Deposits to Suppliers = $1,285,500
Non-Current Assets: Plant & Equipment = $15,143,100
Land = $5,029,400
Total Assets = $38,694,200
Liabilities
Current Liabilities: Mastercard #1 = $5,379,300
Trade Creditors = $4,088,300
Non-Current Liabilities: Business Loan #1 = $7,629,700
Equity
Shareholder’s Capital = $14,345,100
Retained Earnings = $7,251,800
Screenshot of suppliers and customers list:
All Journal Entries
In accounting terms, Journal is the record of all day to day financial transactions
recorded in a systematic and scientific order. I was not really confident about how to
record journals on MYOB. I had to watch the tutorials a few more times and still
struggled to get it through. I started with entering opening balances all the accounts and
then created the above hypothetical transactions with my estimated amount using
possible suppliers and consumers. I made the transactions very simple as I didn’t want
to get it wrong by complicating it. But as I went on recording, I found it easier than I
thought. I recorded the journals in purchase, sales and general journal books and finally
displayed the final report. After all the recording was done, I realized that it reflected all
my study and knowledge of dual-effect of the journal from back then in my home
country.
Balance Sheet
Balance Sheet is one of the financial statements of the company, which represents the
company’s financial position of a particular period of time. It gives a closing balance of
all the assets, liabilities and equity at a glance. I was not expecting things to go this
smoothly but to my surprise, the balance sheet was accurately balanced, which gave
me a sign of relief. My balance sheet was perfectly balanced which I was not really
expecting to happen.
Profit & Loss Statement
Profit & Loss Statement or also, Income Statement is another financial statement that
shows the profitability of the company during particular period of time. There were only
10 transactions recorded due to which there was not much difference in the amounts.
The total gross profit at the end of the month resulted to $70,000 with not much
variations in the accounts.
Statement of Cash Flow
Statement of Cash Flow is another important financial statement. This statement gives
report on the cash inflows and cash outflows of a specific period of time. These cash
inflows and outflows are categorized into Operating activities, Investing activities and
Financing activities. It is prepared under accrual basis of accounting due to which the
revenues are recorded even if they are not received and same goes for revenue. Using
MYOB in reference to cash flow statement was rather easy and it was a great
experience learning it.
Step 10
Step 10 required us to go through our company’s depreciation figures and depreciation
policies for the last recent years and analyse them. The very first piece of information
that I found was about the depreciation method that the company was applying. The
assets like plant and equipment, property etc. were depreciated on a straight-line basis
over the useful lives of the assets, which was reviewed on annual basis as:
Freehold Buildings: 3-50 years
Leasehold improvements: Term of lease
Plant & Equipment: 1-50 years
GrainCorp is a supplier of grains in many parts of the country. For such a company,
their machines are their main assets. The demand for these products doesn’t fluctuate
much in the market, everything being stable in the market being assumed. So, the
benefits also doesn’t vary much in the market. In such a stable scenario, following
straight line method is the best option for the company in which equal amount will be
depreciated each year making not so much difference in the figures of the assets each
year. In the company’s annual report, it was also written that the assets were measures
at cost less accumulated depreciation and impairment losses, which would mean that
the company would adjust their assets’ residual values annually and instead of
recording depreciation each other, they would rather point out the lump sum calculated
at the end being recorded as expenses in the income statement. There was not much
difference in the figures of the depreciation in the current years. In 2016, the total
depreciation amounted to $142.6 million increased by $3.2 million and reached $145.8
million in 2017 and then increased upto $153.2 million in 2018. These figures were
recorded as a lump sum for all the assets rather than computing them differently for all
assets like plants, machineries, equipment etc. I could not find much to point out in my
company’s depreciation figures. I couldn’t find any information on how the assets were
depreciated individually in the annual reports. So, I distributed the total depreciation
amount, $ 153.2 million manually into the three main assets of the company, Plant &
Equipment, Land & Buildings and Lease Improvements for which I prepared the journal
entries as follows:
General Journal
Date Particular DR ($m) Cr ($m)
30 Sept
2018
Depreciation expenses
Accumulated Depreciation- plant and
equipment
(Depreciation expenses for the year)
55.2
55.2
30 Sept
2018
Depreciation expenses
Accumulated Depreciation- Land and
Buildings
(Depreciation expenses for the year)
69
69
30 Sept
2018
Depreciation expenses
Accumulated Depreciation- Lease
improvements
(Depreciation expenses for the year)
29
29
Chances of Manipulation
As the study and researches have also proved this point, many multi-national
companies take depreciation as a way of manipulating its figures. More profit will mean
more taxable amount. So, in order to reduce the burden of tax, companies can
manipulate its amount by cutting down more depreciation amount by which the total
profit will decrease. The company can manipulate its depreciation by various ways
including change in the method of charging depreciation, frequent revaluation of assets,
classifying the assets wrongly and many more to mention
Step 11
Feed backs
For step 11, I posted my draft in my blog and asked my friends to provide feed backs
and also analysed their work and provided feed backs to three of them.
Feedback from: Nagina Gurung
Feedback To: Sabina Shrestha
My CommentsStep 7Inventories
Your work shows your understanding of inventories, which is a very good point. You have pointed out every policies and figures of the inventories very accurately.
Step 8 For step 8, I found that every step was done very accurately with screenshots of all the steps that you have done. Not much to say about it, I would say it was a good assignment to look after. Also, good effort for the quiz.
MYOB set upMYOB trainingMYOB quiz
Step 9Business transactions All Journals reportFinancials and discussion
I can’t say much about this step for your assignment as I could only see your journals. Just looking at the journals, you seem to be on the right track. I hope you get well with the assignment.
Step 10Depreciation
Lastly, good explanation and accurate figures used for explaining the policies of your company’s depreciation. The method of depreciation was also well-described.
Overall Overall, I would say it was a pleasure working with you as I have always got to learn from your work. GOOD LUCK!!!
Feedback from: Nagina Gurung
Feedback To: Anuj Shukla
My CommentsStep 7Inventories
The concept of inventories was well-defined and explained, which was very appealing. But rather than focusing on other terms, I would have liked it more if the policies of the company were also touched somewhere.
Step 8 For step 8, every step was properly done with all screenshots as the evidence. I got a lot of help from your assignment as well. So, keep the hard work coming to you.
MYOB set upMYOB trainingMYOB quiz
Step 9Business transactions All Journals reportFinancials and discussion
The same old thing, I couldn’t really find any flaws in this step as I myself used your work as my reference for the assignment. All the journals and the statements showed how competent you were with MYOB.
Step 10Depreciation
Contrast to inventories, your depreciation was explained well along with the figures used from your company and company policies.
Overall Overall, I would say it was a very well-done assignment. Hope to work with you in future as well.
Feedback from: Nagina Gurung
Feedback To: Samikshya Bhandari
My CommentsStep 7Inventories
I really liked how you explained your concept of inventories and also reflected it in your work with the reflections of your company’s inventories’ figures and policies. But somewhere it was getting a little too much.
Step 8 Step 8 was also a good attempt. The screenshots were accurate and it seemed that you have a good knowledge about the workings on MYOB.MYOB set up
MYOB trainingMYOB quiz
Step 9Business transactions All Journals reportFinancials and discussion
Not provided.
Step 10Depreciation
Not provided.
Overall Seems like you still have to complete your work. The starting of the assignment was good enough to expect better in the later ones. Good luck!
Feedback from: Sabina Shrestha
Feedback To: Nagina Gurung
My CommentsStep 7Inventories
Step 8MYOB set upMYOB trainingMYOB quiz
Step 9Business transactions All Journals reportFinancials and discussion
Step 10Depreciation
Overall
Feedback from: Anuj Shukla
Feedback To: Nagina Gurung
My CommentsStep 7Inventories
Step 8MYOB set upMYOB trainingMYOB quiz
Step 9Business transactions All Journals reportFinancials and discussion
Step 10Depreciation
Overall
Feedback from: Samikshya Bhandari
Feedback To: Nagina Gurung
My CommentsStep 7Inventories
Step 8MYOB set upMYOB trainingMYOB quiz
Step 9Business transactions All Journals reportFinancials and discussion
Step 10Depreciation
Overall