课件讲稿f3讲义15ep网课90ch14basic financial statements for company michelle

1、Basic Final statements for Company考试类型考题数量分值难度Section A2-4 Qs4-8 marksSection B8-14 Qs15 marksBasic Final statements for CompanyFinal statements - Sole Trader Vs.Co.01 1.1 Sole trader 1.2 Limited liability company ()Statement of profit & loss and other comp 2.1 Revenue (IAS18/IFRS15) 2.2 Income

2、tax 2.3 Gain on revaluationensive income0203Statement of final position 3.1 Relationship of SPL Vs. SOFP 3.2 Equity capital 3.3 Debt capitalStatement of changes in equity0405Notes1. Final statements - Sole Trader Vs.Co. SPL OCI1. Final statements - Sole Trader Vs.Co.Equity20X720X8Share capital ordin

3、ary share500600 Preference share 5050Share premium50100Retained earning100200Revaluation reserve (surplus)1030710980Equity20X720X8Share capital ordinary share550650Share premium50100Retained earning100200Revaluation reserve (surplus)10307109801. Final statements - Sole Trader Vs.Co.Share capitalShar

4、e premiumRetained earningRevaluation surplusTotal equityBal 31 Dec 20X75505010010710Issue of shares10050150Dividend(40)(40)Totalcompensive income13030160Transfer to retained earning10(10)0Bal 31 Dec 20X8650100200309801. Final statements - Sole Trader Vs.Co.Sole trader & Partnership (ULP)Partners

5、hip (LLP) & limited liability Co.Owner completely controls the business entityShaolders are the owners of theOwnershipbusiness entityLegal statusNot legally separated with ownersCompany is a separate entityTaxational income taxCorporate income tax &income taxalProfitOwner has complete contro

6、l over profit;Cash out of entity is not an expense but a drawingShaolders receive profit in theform of dividendsLiabilityUnlimited liabilityLimited liabilityRegulation requirementNo mandatory requirement toStringent requirement to complycomply withing standardwithing standard forfor preparation of f

7、inalpreparation of final statements;statements;Stringent disclosure requirementNo requirement to disfor annual final statements;final statementsAnnual final statements needto be audited.Basic Final statements for CompanyFinal statements - Sole Trader Vs.Co.01 1.1 Sole trader 1.2 Limited liability co

8、mpany ()Statement of profit & loss and other comp 2.1 Revenue (IAS18/IFRS15) 2.2 Income tax 2.3 Gain on revaluationensive income0203Statement of final position 3.1 Relationship of SPL Vs. SOFP 3.2 Equity capital 3.3 Debt capitalStatement of changes in equity0405Notes2. Statement of profit &

9、loss and other compensive income2.32.22.12.1 Revenue（IAS18）According to IAS18, recognition of revenue from:Sales of goods Rendering of servicesInterest, royalties and dividendsShould be recognized when certain conditions are met.2.1 Revenue（IAS18）2.1 Revenue（IAS18）2.1 Revenue（IAS18）2.1 Revenue （IFRS

10、15）IFRS15 take effect from Jan 2018, when determine the transfer price of the sale of goods or rendering of service, an entity should consider past customary business practice.When an entity enter into a sale with a customer andprompt payment discount has been offered , theamount of revenue to be re

11、cognized initially need to be estimatedtaking intoprobability of the discount being accepted.Whentheentityexpectsthatthecustomerwill thewillaccept the discount, revenue should be recorded net of the discount.2.1 Revenue （IFRS15）Example 1. Co. Jsold good with a list price of 2100, and offer100 trade

12、discount, it also offer customer 3% prompt paymentdiscount if payment iswithin 15days, base on the pastexperience, the customer is expected to take up the 3% discount(old customer: the customer is expected to take the discount) Customer not paid within 15 days DrCash2000Crreceivable1940CrSales60 Cus

13、tomer paid within 15 days DrCash1940Crreceivable1940 Initial recordingDrreceivable 1940CrSales19402.1 Revenue （IFRS15）Example 2. Co. J sold good with a list price of 2100, and offer 100trade discount, it also offer customer 3% prompt payment discountif payment iswithin 15days, base on the past exper

14、ience, thecustomer is expected to take up the 3% discount(old customer: the customer is not expected to take the discount) (new customer: not sure, assume not expected to take the discount) Customer not paid within 15 days DrCash2000Crreceivable2000 Customer paid within 15 days DrCash1940DrSales60Cr

15、receivable2000 Initial recordingDrreceivable 2000CrSales20002.2 Income tax (IAS12)Tax is charged based on companys profit.Tax should be charged to the statement of profit or loss as tax expense; tax liability unpaid is shown on statement offinal position.ing for Income taxDrCrIncome tax expenseIncom

16、e tax payable(SPL(SOFPE+)L+)Often, the actual amount of tax paid will be differentfrom the amount that was recorded in the fin statements.alThis over or under provision is adjusted in the nextfinal statements.2.2 Income tax (IAS12)Example 3. 31 Dec 20X7, Co. A has tax liability brought forward of $2

17、5,000. On 30 Sep 20X8, tax liability is finally agreed at$28,000 and paid to tax authority. On 31 Dec 20X8, Co. Aestimates its tax liability based on the current years profits to be$30,000.Require: Prepare the tax liability the effect in SPL.for the year and specifyIncome tax expenseTax payableBal c

18、/d25k31 Dec X725k31 Dec X725kto SPL 25kBal b/d30 Sep X831 Dec X825k3k 30k30 Sep X831 Dec X83k30k30 Sep X8Bal c/d 30k28kto SPL 33k31 Dec X830k2.2 Income tax (IAS12)Example 4. 31 Dec 20X7, Co. A has tax liability brought forward of $60,000. On 30 Sep 20X8, tax liability is finally agreed at $45,000 an

19、d paid to tax authority. On 31 Dec 20X8, Co. A estimates its tax liability based on the current yearsprofits to be $50,000.Require: what should tax expense be charged in SPL, what is tax liability shown in SOFP.必胜口诀Less: over provision for prior periodsEstimate for current yearIncome tax expense(X)

20、X X必胜口诀Add :Under-provision for prior periodsXEstimate for current yearXIncome tax expenseX2.3 Gains on property revaluationGains on property revaluation arise when a property is revalued.The revaluation is:Recognised as gain in revaluation , in other compincome as part of the SPL & OCIensiveSho

21、wn as increase in revaluation surplus (reserve) in SOFPshown in the statement of changes in equity as a movement in the revaluation surplus.Basic Final statements for CompanyFinal statements - Sole Trader Vs.Co.01 1.1 Sole trader 1.2 Limited liability company ()Statement of profit & loss and oth

22、er comp 2.1 Revenue (IAS18/IFRS15) 2.2 Income tax 2.3 Gain on revaluationensive income0203Statement of final position 3.1 Relationship between SPL Vs. SOFP 3.2 Equity capital 3.3 Debt capitalStatement of changes in equity0405Notes3 Statement of final position3.1 Relationship between SOFP and SPL&

23、;OICProfit for the yearProfitfortheyear,netofanydistributiontoownersisaddedtoretainedearningsinthestatement of fin Other compOther compal position at the end of the year.ensive incomeensive income, net of tax, is addedto revaluation reserve in the statement of fin position at the end of the year.al3

24、.1 Relationship between SOFP and SPL&OICUnrealized profitRealizedprofitSOFPAEquity20X7Share capital ordinary share95,000 Preference share 5,000Share premium5,000Retained earning8,750 Revaluation reserve (surplus)8,000121,750L3.2Equity capitalLiabilityEquityAsset3.2Equity capital Types of Shares

25、Ordinary SharePreference ShareOrdinaryshaoldersReceivedividendinprioritytoown businessordinary shaoldersOn winding up, receive capital priorityinreceivedividendatthediscretion of directors Usually have voting rightsDont carry voting right Equity shareFixed rate of dividends (e.g. 7%preference share)

26、3.2Equity capital3.2.1 Ordinary shares & Preference shares(1) Ordinary sharesAuthorised share capital the company may issue.um number of sharesIssued share capital number of shareually issuedto shaolders.Called up share capital the amount of issued sharecapital the company has asked sha date.old

27、ers to pay for toPaid up share capital amount of called up share capitalwhich has been paid for.Generally, authorized > issued > called-up > paid-up3.2Equity capital3.2.1 Ordinary shares & Preference shares(2) Preference sharesRedeemable preference sharesPreference shares which on a sta

28、ted maturity date, the issuing company will buy back at face value plus dividend.Redeemable preference shares have the characteristics of debts, therefore they are classified as a liability on thestatement of final position.Irredeemable preference sharesPreferencesharesthatarenotredeemable,theyarecl

29、assified as equity on the statement of final position.3.2Equity capital3.2.1 Ordinary shares & Preference shares(2) Preference sharesl Cumulative non-cumulative preference sharesIf the dividend is not paid in a given year and it isstillowed to the shaolders in the following year and mustbe paid

30、before any ordinary dividends, then the preference shares are cumulative preference shares.l non-cumulative preference sharesIf the dividend is not paid in a given year and in the following year, only that years dividend need to be paid before and ordinary dividend, then the preference shares are no

31、n-cumulative preference shares.3.2Equity capital3.2.2 Issue of shares- Issue share at face valueCo. A Statement of Final Position (extract) as at 1 June 20X8EquityShare capital 50c ordinary shares50,000Example 5. Co A started business on 1 January 20X8 issuing 100,000 ordinary shares of 50c each for

32、 50c per share.Dr Bank50,000Cr Share capital 50c ordinary shares 50,0003.2Equity capital3.2.2 Issue of shares issue share at premiumCo. A Statement of FinEquityal Position (extract) as at 1 June 20X8Share capital 50c ordinary sharesShare premium150,00060,000210,000Example 6. On 1 June 20X8, Co A iss

33、ued a further 200,000ordinary shares of 50c each for 80c per share.Dr Bank160,000Cr Share capital 50c ordinary shares 100,000 Cr Share premium60,0003.2.2 Issue of shares Bonus issue (capitalisation issue)Bonus issue is issue of new shares to existing shaolders inproportion to their existing shaoldin

34、gs for.used when a co. wishes to increase its share capital withoutneeding to raise additional finance by issuing new shares.It is a way of re-classifying some of reserves as share capital andtherefore raises no funds.The reserve that is reduced (debited) is normally the share premium. If the share

35、premium is not big enough, it is reduced tozero, and any remaining reduction of reserves isretained earnings.by reducingDrDr CrShare premiumRetained earnings1st priority!2nd priority!Share capital*increasing by nominal value of shares issued3.2.2 Issue of shares Bonus issueExample 7.Co A Statement o

36、f final position (extract)$150,00060,000200,000410,000Share capital 50c ordinary shares Share premiumRetained earningsSeveral years later Co Amakes a bonus issue on a 1 for 4 basis.Required:Show how this issue ofshares would beed for and prepare al position of Co Athe equity section of the statement

37、 of finimmediately after the issue.3.2.2 Issue of shares- Bonus issueDr. Share premium (Cr. Share capital)37,50037,500Co A Statement of final position (extract)$Share capital 50c ordinary shares (150+37.5)187,500Share premium(60-37.5)22,500Retained earnings200,000410,000答题步骤第一步：No. of bonus issue$15

38、0,000 / $0.5/4 = 75,000第二步：$ amount of bonus issue75 x $0.5 = $37,5003.2.2 Issue of shares- Bonus issueAdvantagesDisadvantagesWill allow the share price to fallNo cash inflow to the business, but still cause administrative cost in issuing bonus shares.(withoutdisadvantagingshaolder wealth) to make t

39、hecompany'ssharesmoreaffordable to new investors Sha olders will now own more shares and could sell part of their holding Bonus issue can befromThe rationale for a bonus issue thesharepremiumis not always understood bywhich has few other usesshaolders3.2.2 Issue of shares - Right issueRight issu

40、e is issue of shares for cash to existingshaolders for less than their market value.The issue price is normally lower than the market value of shares at the time of issue which gives the investors an incentive to buy new shares.Rights are offered to the existing shacan sell them if they wish.olders

41、whoDr Cr CrCashShare capital Share premium3.2.2 Issue of shares - Right issueExample 8. Co Aa rights issue on a 1 for 5 basis. The rights issueprice is $1.50. All shaolders take up theirrights.The followingstatement of final position before the issue:Co A Statement of final position (extract)$Share

42、capital 50c ordinary shares187,500Share premium22,500Retained earnings230,000440,000Required : Show statement of fining entryand preparethe equity section of theal position following the right issue.Dr.Cr.CashShare capitalShare premium (112,50037,50075,000)Co A Statement of final position (extract)$

43、 225,00097,500230,000552,500Share capital 50c ordinary shares Share premiumRetained earnings答题步骤第一步：No. of right issue$187,500 / $0.5 /5 = 75,000第二步：$ amount of right issueShare capital : 75,000 x $0.5 = $37,500Share premium: 75,000 x $1= $75,0003.2.2 Issue of shares- Right issueAdvantagesDisadvanta

44、gesA more time issue sharesefficientwaytoUnwelcomepredatorsmay acquire shares where not taken uptryto s areAssharesofferedatbelowWill cause shares are valuethe share price to issued at belowfall as marketmarket value, shaolders aremore likely to buy them Ifs are taken up Effect on future dividend po

45、licy as sha olders will maintain theircompany will have issued more shares existing percentage sha oldingunder the rights issue than it wouldhave under a fresh issue to the public More cost effective way for theLackofshaolderinterestmaycompany to raise finance than areflect badly on the companyfresh

46、 issue to the public3.2Equity capital3.2.3 Dividend ordinary shareslMany companies pay equity dividends in two stages duringtheing year:üInterim dividend, after the half-year final results areknown, the company might pay an interim dividend.üFinal dividend, at the end of the year, the comp

47、anymight propose a further final dividend. This proposed finaldividend is usually approved and paid in the next year.lOnly dividends aly declared or paid are reflected ins ; the proposed dividends are disal statements.d in the noteto fin3.2.3 Dividend Ordinary shares dividendDividends on ordinary sh

48、ares are charged directly toretained earnings as they are earned to date. (SOFP)(1) Proposedno recording(2) If declaredanappropriationofprofitsDr Retained earnings Cr Dividend payable(3) If paidDr Dividend payable CR Bank30,00030,00030,00030,000Ordinary statementshare dividends arenot an expensein t

49、heof profit or loss. Issue dividend will not effectSPL,dividenddeclareddecreaseretainedearning.Dividend paid not affect retained earning.3.2.3 Dividend Preference shares dividendnIrredeemable preference sharesIrredeemable preference shares are charged to retained earnings (SOFP)They are not an expen

50、se in the statement of profit or loss.They are shown in the statement of changes in equity (SOCIE).DrRetained earnings CrDividend payable(SOFP OE-)(SOFPL+)nRedeemable preference sharesRedeemable preference shares are debt in natureDividend on redeemable preference shares are charge to SPL as expense

51、final costDrFinal cost(SPLE+)(SOFP L+)CrDividend payable3.2.3 Dividend Effect on final statementsExample 9.20X8 Jan Co. B has following share capital information:5,000 $1 ordinary shares in issue 1,000 5% $1 preference share in issueIt has opening retained earning of $1,200During the year, ita profit of $1000Interim ordinary dividend declared and paid is 10c per share, Final dividend is declare 20 Jan 20X9what should the final statements shown:Statement of profit or loss for the year ended 31 Dec 20X8Profit for the yearStatement of fin1,000al position as at 31 Dec 2