Preparing Financial Statements for Non-Reporting Entities

Transcription

1 A step by step approach to Preparing Financial Statements for Non-Reporting Entities using MYOB AccountRight v19.8 Software Publications Pty Ltd, July 2015 All rights reserved. No part of this material may be reproduced or copied in any form or by any means (graphic, electronic or mechanical, including photocopying or by information retrieval systems) without permission in writing from Software Publications. Originating author: Marian Brown Dip T (Commerce), MICB BAS Agent Cert IV Workplace Training and Assessment, Cert IV in Financial Services (Bookkeeping) MYOB Certified Consultant for 16 years MYOB Accredited Author, MYOB Accredited Trainer Revised by: Software Publications writing team, Leanne Berry and Rochelle Park Publishers: Software Publications Pty Ltd (ABN ) Unit 3, 25 Gibbes Street Chatswood NSW SUITABLE FOR FNSACC404 ISBN FNSACC404A Prepare financial statements for non-reporting entities Software Publications Pty Ltd,

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3 Purpose of this workbook The financial data for the year has been gathered and entered and all account balances are reconciled. It is now your task to prepare the financial statements for the year. This workbook covers the skills and knowledge required to prepare the following financial statements: profit and loss statement (statement of financial performance); balance sheet (statement of financial position); and statement of cash flows in accordance with organisational policies and procedures and financial legislation. In this workbook, you will be preparing the financial statements for a partnership and a nonprofit organisation, both non-reporting entities This workbook has been written specifically for the FNS10 Certificate IV in Bookkeeping and Certificate IV in Accounting in association with the following workbook: A step by step approach to FNSBKG402/403A Establish and maintain a cash and accrual accounting system using MYOB AccountRight v19.8 available from Software Publications. This workbook is also suitable for use with other texts. Delivery of this workbook This course is designed to be trainer-led or self-paced and learners follow a set sequence of exercises and enter data and print reports. As a guide, this workbook may take about 35 hours to complete. 10 Unit 1 Software Publications 2013

4 Relationship to Competency Standards This workbook is designed to provide the competencies in the following unit of competency. FNSACC404A Prepare financial statements for non-reporting entities This unit describes the performance outcomes, skills and knowledge required to develop a range of commonly required financial reports for entities that do not have a statutory duty to file financial reports with government agencies and regulators. This unit may apply to job roles subject to licensing, legislative, regulatory or certification requirements so Commonwealth, State or Territory requirements should be confirmed with the relevant body. Element Performance Criteria Workbook content 1. Compile data 1.1 Data is systematically coded, classified and checked for accuracy and reliability in accordance with organisational policies and procedures 1.2 Internal and external financial data is checked to ensure consistency and accuracy 2. Prepare reports 2.1 Charts, diagrams and supporting data are presented in an appropriate manner 2.2 Reports are prepared following a clear and appropriate structure and format and to conform with organisation requirements 2.3 Statements and data are error free and comprehensive with the full report crosschecked against original data and accounting standards 2.4 Any necessary corrections are made and verified and authorised by relevant persons Units 5 and 10 Unit 5 Unit 9 Units 3, 4, 6, 7, 8 and 10 Units 6 and 7 Units 6 and 7 Software Publications Pty Ltd, 2013 Unit 1 11

5 Required skills and knowledge Required skills communication skills to: determine and confirm report requirements, using questioning and active listening as required liaise with others, share information, listen and understand use language and concepts appropriate to cultural differences literacy skills to: read and interpret documentation from a variety of sources read and interpret financial statements and reports well-developed writing skills for preparing reports and recommendations, recording and classifying financial information numeracy skills for financial calculations and analysis Required knowledge Assessment Workbook content Unit 6 Units 6 and 9 Units 6 and 9 Units 6, 7 and 9 IT skills for setting up and analysing spreadsheets Units 7 and 9 estimating, forecasting and analysis skills Units 6 and 9 organisational skills, including the ability to plan and sequence work and meet organisational timelines ethical considerations for the handling of financial matters including conflict of interests financial legislation including for: taxable transactions reporting requirements Units 3, 4, 6, 7, 8 and 10 Units 2 and 4 Units 2 and 4 forecasting and analysis techniques Units 6 and 9 methods of presenting financial data Units 3 and 4 options, methods and practices for deductions, Unit 6 benefits and depreciations organisational guidelines and procedures Units 2, 5, 6 principles of double-entry bookkeeping and Unit 5 accrual accounting Competency in FNSACC404A may be assessed using a combination of observation and practical exercises throughout this workbook. An assessment tool is also available on the training resource CD corresponding to this workbook which is available to trainers/assessors. 12 Unit 1 Software Publications 2013

6 @ Research statutory compliance requirements sole trader Print pages 8 to 12 Features of Different Business Structures of the Tax basics for small business downloaded on the previous page. Using the information in this ATO publication, complete the following table. Business Structure: Sole Trader A sole trader for tax purposes is Requirement/Obligation ABN (Australian Business Number) Details How/what do you apply or register Tax File Number Income Tax Drawings GST Effect of registering for GST Superannuation. Employee PAYG Withholding Solutions can be found in the Appendix. 32 Unit 2 Software Publications 2013

7 @ Research statutory compliance requirements company Using the information in the ATO publication Tax basics for small business, complete the following table. Business Structure: Company (private and public) An incorporated company is Requirement/Obligation ABN (Australian Business Number) ACN (Australian Company Number) Details How/what do you apply or register Tax File Number Income Tax Drawings There are no Drawings in a company. Directors and Shareholders are considered employees of the company and must draw a Wage, deduct PAYG Withholding the same as other employees. N/A GST Effect of registering for GST Superannuation Superannuation on all wages including directors must be paid to a complying Superannuation Fund Company must register as a Superannuation Employer. Solutions can be found in the Appendix. Software Publications Pty Ltd, 2013 Unit 2 33

8 @ Research statutory compliance requirements of a trust Using the information in this ATO publication Tax basics for small business, complete the following table. Business Structure: Trust A trust is Requirement/Obligation ABN (Australian Business Number) Details How/what do you apply or register Tax File Number Income Tax GST Effect of registering for GST Superannuation Superannuation on all wages including beneficiaries if employed by Trust must be paid to a complying Superannuation Fund Trust must register as a Superannuation Employer. Invoices and reports must display the following format: XYZ Pty Ltd ACN xxx xxx xxx as Trustee for XYZ Trust t/a (trading as) Business Name ABN xx xxx xxx xxx Solutions can be found in the Appendix. 34 Unit 2 Software Publications 2013

9 @ Research obligations of a non-profit organisation Use the internet to access the ATO website Search for NAT 7966 and NAT 7966ADD. Download the PDF files. Using the information in these ATO publications Tax basics for non-profit organisations and Addendum to Tax basics for non-profit organisations complete the following table. Business Structure: Non-Profit Organisation A non-profit organisation is an organisation is Research topic Answers to research Do non-profit organisations pay income tax? Briefly, what is a Charity What do the letter DGR stand for? Do non-profit organisations have to register for GST? What is the role of the Australian Charities and Not-for-Profits Commission (ACNC)? Further reading for ACNC available from Under the reform changes, describe who is entitled to an ABN? Under the reform changes, list the types of non-profit organisations Solutions can be found in the Appendix. Software Publications Pty Ltd, 2013 Unit 2 35

10 The Business Framework In this unit you have been researching the statutory compliance regulations of the following business structures also known as business entities: sole trader; partnership (RT Engineering); company (a separate legal entity formed (or incorporated) under the Corporations Act public company (designated by the term Ltd) - private company (designated by the term Pty Ltd); trust; and non-profit organisations (which may be incorporated or unincorporated). Each business operates within a business framework comprising the following: 1. Legal Aspect Laws underpin all activities of the business. Laws legislated by Parliament are called Acts. In this unit you have made reference to the Corporations Act 2001 above and the Business Names Act on page 11. The Trade Practice Act and the Goods and Services Act influence the activities of RT Engineering on a day-to-day basis. 2. Ethical Aspect Ethics are standards of behaviour that should be observed by individuals in their dealings with each other. As a BAS Agent there is a BAS Agent Code of Conduct set down by the Tax Practitioners Board. Professional Bodies such as the Institute of Certified Bookkeepers (ICB) have a Code of Conduct for you, as the bookkeeper, to follow. 3. Industrial Aspect Fair Work Australia regulate conditions of work set down in Modern Awards. The payment of wages to employees of RT Engineering will be regulated by agreements based on the appropriate award. 4. Safety Aspect Occupational Health and Safety legislation requires employers to provide a safe work environment. RT Engineering will be required to follow strick OHS requirements because of the nature of their business. 5. Anti-discrimination Aspect Anti-discrimation legislation outlaws discrimination in the workplace on the basis of a person s sex, marital status, sexuality, pregnancy, physical impairment, race or ethnic origin. RT Engineering need to be aware of the legislation in all their business dealings. 6. Environmental Aspect Businesses must comply with environmental protection legislation. Failure to comply can result in large fines and clean-up costs. RT Engineering needs to comply with standards set down for their business. 36 Unit 2 Software Publications 2013

11 Adjustments as per Policies and Procedures On page 35 you made a list of the activities and reports needed at the end of June as set out in the Policies and Procedures. Your list looked something like this: Reconcile Bank A/c (done in Unit 5). Check if there are any unpresented cheques more than 15 months old (NO). Any cheques more than 15 months old should be reversed. Check for outstanding purchase orders NO. Draw up a list of Retentions held on 30 June (complete and ). Invoice No Date Customer Retention Amount Retention Date List prepaid and accrued income and expenses and private use: - advertising paid for 12 months - wages on 30 June not paid - steel taken for private use - private use of mobile phone Stocktake is required late June or early July Journal Adjustment to be entered. Print a list of outstanding debtors as at 30 June. Make a provision of 5% of balance excluding GST. Reconcile Asset Register (not done in this workbook) with General Ledger and print Depreciation Journal to be entered in MYOB. (Business could use MYOB AssetManager Pro or Excel.) Make provision for long service leave and annual leave. Work through the list. Summary of accounting rules used to enter journal entries: Type of Account Group Nature of Account Group To Increase the Value To Decrease the Value EQUITY Cr Cr Dr ASSET Dr Dr Cr LIABILITY Cr Cr Dr EXPENSE Dr Dr Cr REVENUE/Income Cr Cr Dr Open the RT Engineering198 company file. Make a backup of your company file before you start entering adjustment entries. In this unit, you will have to refer to the Accounts List starting on page Unit 6 Software Publications Pty Ltd, 2013

12 Prepaid and accrued income and expenses: - advertising paid for 12 months - wages on 30 June not paid Applying the Matching Principle discussed in Unit 4: Expenses are recognised in the books of the business when the obligation to pay has been incurred. These expenses are then offset against revenue generated from these expenses. Therefore, the advertising paid in Unit 5 is re-allocated as an expense for the month of June to acknowledge the portion of expense belonging to that period. Advertising paid for 12 months In Unit 5, the following payment was entered. At the end of June, an adjustment will be entered to account for the advertising amount for June Amount would be ($2,640 10% GST) divided by 12 (to get a monthly expense figure) = $200. Complete the Journal Entry at?. Transaction: Account for the advertising expense for June $200 (no GST) GENERAL JOURNAL Date Particulars Ref Debit Credit June 30? (increase expense) Prepaid Expenses (decrease asset) (Account for advertising for June.) Software Publications Pty Ltd, 2013 Unit 6 87

13 Now enter the above journal in MYOB. (i) (ii) (iii) Select Accounts Command Centre. Select Record Journal Entry. Key in the following and record. Advertising paid for 12 months June expense accounted for. Wages on 30 June owing Gross Amount $2,000 (Income Tax never accounted for here, and superannuation has not been accounted for in this exercise.) Transaction: Account for $2,000 Gross Wages owing on 30 June. Complete the journal. GENERAL JOURNAL Date Particulars Ref Debit Credit June 30? (increase expense) ,000.00? (increase liability) , (Account for wages owing on 30 June) Now enter the above journal in MYOB. Note: When the wages are paid in July a corresponding adjustment will be required. (Reverse entry.). This entry is to offset the wages expensed when they are actually paid in the month of July. So, the wages were accrued in June (that is, the expense was incurred), but not paid until July. Hence the need for the journal in June to increase wages expense, and in July to remove that part of wages expense already allocated to June. 88 Unit 6 Software Publications Pty Ltd, 2013

14 Do not enter in this workbook. Wages on 30 June not paid Gross Amount = $2,000. Stock taken for personal use When stock is taken for personal use, the Cost of Sales account is credited to reduce the value of purchases. In this entry there is a GST issue. Transaction: Richard took steel to the value of $2,200 inc GST for personal use. GENERAL JOURNAL Date Particulars Ref Debit Credit June 30 Drawings R Brown (decrease equity) , Purchases - Steel (decrease expenses) , GST Paid (increase liability) (Account for steel taken from stock by Richard) Enter this transaction in MYOB. Because there is GST involved, you have to be very careful with this entry. Software Publications Pty Ltd, 2013 Unit 6 89

15 @ Presentation of Data Data can be presented in the format already used in this workbook. (i) (ii) Go to Select and download the 2012 Financial Statements (iii) Review the following reports: - Group income statement - Group cash flow statement - Group statement of financial position (Balance Sheet) - Directors declaration (page 224 of the Financial Statements) (iv) (v) (vi) (vii) Read these reports and note that although Rio Tinto is a public company and needs to meet the reporting requirements of a Reporting Entity you will still be able to relate what you have been learning in this workbook. Note the use of tables. Note the Group cash flow statement produced use the direct method. Note the Directors report and comment on the company. 148 Unit 9 Software Publications Pty Ltd, 2013

16 To assist with interpretation, graphs and charts are often used. Set out below are some very simple graphs which could be added to your financial reports. If you do not have Excel knowledge, please ask your trainer for assistance. Graph 1: Bar Graph showing the Total Revenue, Gross Profit, Overhead Expenses and Net Profit for the 2013 Financial Year of RT Engineering. (a) In your RT Engineering company file, display the Profit and Loss (Accrual) for the financial year. You only need a Level 1 report to give you the above figures. Your report will look like this: (b) Send the above report to Excel and produce a simple chart. $400, $350, $300, $250, $200, $150, $100, $50, $0.00 Of course you can add Headings, Legends etc. to make the graph eye-catching. Software Publications Pty Ltd, 2013 Unit 9 149

17 Graph 2: Pie Graph showing the relationship between assets, liabilities and equity for the 2013 Financial Year of RT Engineering. (a) (b) In your RT Engineering company file, display the Standard Balance Sheet for the financial year. You only need a Level 1 report to give you the above figures. Your report will look like this: (c) Send to Excel and produce a simple chart. Assets Liabilities Equity 150 Unit 9 Software Publications Pty Ltd, 2013

18 Graph 3: Column chart to present the Net Profit Margin of RT Engineering for the financial years 2012 and Net Profit Margin = Net Profit /Total Revenue as a percentage (a) In your RT Engineering company file, display the Profit and Loss Last Year for the financial year including period 13 adjustments at Level 1. (b) Send to Excel and add 2 columns in which you work out the Net Profit ratios for the 2 years NP Margin 2013 NP Margin 2012 Income $376, $585, Cost Of Sales $178, $195, Gross Profit $198, $390, Expenses $190, $195, Net Profit/(Loss) $8, $195, % 33% (c) Chart the 2 Ratios to produce a simple column chart: Net Profit Margin 40% 30% 20% 10% 0% 2% 33% Software Publications Pty Ltd, 2013 Unit 9 151

19 FNS Financial Services Training Package Supplement This workbook can be used by learners completing a qualification in the FNS Financial Services Training Package. Software Publications Pty Ltd,

20 FNSACC404 Prepare financial statements for non-reporting entities Application This unit describes the skills and knowledge required to develop a range of commonly required financial reports for entities that do not have a statutory duty to file financial reports with government agencies and regulators. It applies to individuals who use specialised knowledge and systematic approaches to collate and prepare financial information. Work functions in the occupational areas where this unit may be used are subject to regulatory requirements. Refer to the FNS Implementation Guide Companion Volume or the relevant regulator for specific guidance on requirements. 212 Software Publications Pty Ltd, 2013

21 Elements and Performance Criteria Element Elements describe the essential outcomes. Performance criteria Performance criteria describe the performance needed to demonstrate achievement of the element. 1. Compile data 1.1 Systematically code, classify and check data for accuracy and reliability in accordance with organisational policy and procedures 2. Prepare reports 1.2 Check internal and external financial data to ensure consistency and accuracy 2.1 Present charts, diagrams and supporting data in appropriate manner 2.2 Prepare reports, following clear and appropriate structure and format that conforms with organisational requirements 2.3 Ensure statements and data are error free and comprehensive, and cross-check full report against original data and accounting standards 2.4 Make any necessary corrections and obtain verification and authorisation by relevant persons Workbook reference Units 5 and 10 Assessment tasks option 1 Task 4 Task 6 Task 7 Task 10 Task 11 Task 12 Unit 5 Task 6 Task 7 Task 8 Unit 9 Task 3 PO 1 PO 4 PO 5 PO 6 PO 7 PO 8 Task 19 Units 3, 4, 6, 7, 8 and 10 Units 6 and 7 Units 6 and 7 Task 3 Task 4 Task 5 Task 8 Task 10 Task 11 Task 12 Task 13 Task 14 Task 16 Task 18 Task 7 Task 8 Task 17 Assessment tasks option 2 Task 4 Task 6 Task 7 Task 10 Task 11 Task 12 Task 6 Task 7 Task 8 Task 3 PO 1 PO 4 PO 5 PO 6 PO 7 PO 8 Task 19 Task 3 Task 4 Task 5 Task 8 Task 10 Task 11 Task 12 Task 13 Task 14 Task 16 Task 18 Task 7 Task 8 Task 17 Software Publications Pty Ltd,

22 Foundation skills Skill Performance criteria Description Reading 1.1, 1.2, 2.3 Analyses, matches and interprets information from a variety of sources, paying attention to accuracy and reliability of data Writing 2.1, 2.2, 2.4 Accurately records, classifies and checks financial information in written documents Oral communication Numeracy 1.1, 1.2, Navigate the world of work Get the work done Uses clear language and logical structure in preparing reports and presentations to convey information 2.1, 2.4 Presents information using clear language and correct terminology Uses questioning and active listening to convey and clarify information and instructions Performs mathematical calculations and uses estimating and forecasting techniques to consolidate and analyse financial data 1.1 Recognises and complies with relevant protocols, policies and procedures 1.1, 1.2, 2.2, 2.3 Plans, sequences and implements tasks to meet organisational requirements Recognises and responds to predictable problems and implements solutions to address accuracy issues Uses digital systems and programs to assist with planning, implementing, monitoring and reporting Workbook page reference Units 6 and 9 Units 6, 7 and 9 Units 3, 4, 6 and 9 Unit 6 Unit 6 Units 6, 7 and 9 Units 2, 5 and 6 Units 3, 4, 6, 7, 8 and 10 Units 6 and 7 Throughout workbook 214 Software Publications Pty Ltd, 2013

23 Assessment requirements v1.0 Performance evidence Evidence of the ability to: access, analyse and compile relevant financial data draft comprehensive and accurate reports and financial statements that comply with generally accepted accounting principles. Assessment tasks option 1 Throughout assessment Part F Task K and answers to theory questions Assessment tasks option 2 Throughout assessment Part F Task K and answers to theory questions Knowledge evidence To complete the unit requirements safely and effectively, the individual must: To complete the unit requirements safely and effectively, the individual must: identify and describe the key features of financial legislation covering: taxable transactions reporting requirements compare and contrast: Assessment tasks option 1 Part B Assessment tasks option 2 Part B ratios and comparison techniques Parts I, J and K Parts I, J and K methods of presenting financial data Part F Part F describe different methods of calculating depreciation describe the key features of organisational guidelines and procedures relating to preparing financial statements for non-reporting entities outline the process and principles of doubleentry bookkeeping and accrual accounting. Part F Throughout assessment Parts D and F Part F Throughout assessment Parts D and F Software Publications Pty Ltd,