This is the spreadsheet link available for editing:
https://1drv.ms/x/s!AtU_KuJ5iHjkghQnVK699gYQDWs6
Friday 4 August 2017
ASS#Step 5 Draft
Well, I've learned that you just can't do everything yourself. Sometimes you need to reach out to understand. So that's what I have done. Now I know why most accountants wear glasses and no doubt before the semester is out, I too shall be donning respectable spectacles. The Trial Balance has attracted some errors. I know they're there because it doesn't balance!!!! I know it's just a draft but it is annoying and I want to find out why. For now, I will take a step back, take a deep breath and start from the beginning. Happy to accept any advice please!!!!
This is the spreadsheet link available for editing:
https://1drv.ms/x/s!AtU_KuJ5iHjkghQnVK699gYQDWs6
This is the spreadsheet link available for editing:
https://1drv.ms/x/s!AtU_KuJ5iHjkghQnVK699gYQDWs6
Thursday 3 August 2017
ASS#Step4
Step
4
practising the recording process
Sharon Field - Q89038205 | ACCT110811 - Introductory to
Financial
The chart of
accounts organizes transactions into manageable sub-categories relevant to the
activities useful for monitoring purposes. For example, I sell Nutrimetics
cosmetics as a supplement to my income (but also because it’s a bit of fun and
free stuff!!!), so I like to keep track of sales and orders. The sales being
the revenue side and orders the expense. It’s not a big business and some
months I may have no sales or orders, so I just use my personal bank account to
collect monies and pay for orders. I also thought it’s good to keep
entertainment expenses separate from living expenses as it’s a luxury and as
such, I can forgo that expense to suit my income budget. Other suitable
purposes for separate categories are donations for tax purposes, child care
fees for checking rebates and insurance to make sure premiums have not sneakily
changed. It’s also good to follow the ever changing use of mobile phones and
internet charges. Better deals are constantly presented and I find as my
knowledge grows with the use of technology, I need to be updating regularly.
So, in some ways my chart of accounts is similar, yet so very different
according to what I need. I’m sure as life changes, so will my personal chart
of accounts.
In the example chart of accounts, I might change the way vehicle
expenses is represented. My car is my biggest asset, I don’t own my own home or
have huge investments, and it might be useful to keep all vehicle related
expenses in the same category. Last year I bought a new car. The old car was
more expensive to register, maintain repairs and used more fuel. I know this
because I collected the data and made an informed decision to improve my
vehicle expense. Of course, I factored in trading the car for public transport
but with children and my busy lifestyle, it just wasn’t practical.
I am curious to understand what the percentages mean. I am happy
with 19% income with my side business and coupled with part time working earns slightly
more than government assistance. I hope to improve on that percentage when I
gain more meaningful employment. Does the 80% mean that is how much of my
income is spent on expenses? It makes me feel as though I’m living at a break-even
point, something a profitable business might strive for. If I am more conscious
of frivolous expenses can this percentage be improved? What does improving this
percentage mean for my standard of living? This has definitely been an
eye-opening experience. I find myself questioning how I spend my money and am I
getting my money’s worth afterwards. I think it has been a useful exercise and
I gained valuable experience using excel!!! I found little tips here and there!
This is the link to excel files:
This is the link to excel files:
https://onedrive.live.com/edit.aspx?cid=e4788879e22a3fd5&page=view&resid=E4788879E22A3FD5!273&parId=E4788879E22A3FD5!113&app=Excel
ASS#Step3
Step
3
identify your own
company, post on your blog some background information on your company and its
industry, and comment on other people’s blogs.
Sharon Field - Q89038205 | ACCT110811 - Introductory to
Financial
http://www.pacificturbine.com.au/
The first
thing I note is that my allocated company is located in Brisbane Queensland and
I kind of feel a sense of patriotic loyalty. I knew turbines are some kind of
engine but upon investigation discovered they were specifically air craft
engine manufacturers; however, this is not their only source of revenue. The
company is actually a group of four businesses PTB business, Pacific Turbine
USA, IAP Business and Emerald Assets business. The $3.6 million revenue earning
activities for the period ending June 30, 2016 involves:
·
Long-term engine maintenance contracts
·
Increased aircraft lease revenue
·
Improved sales margins
·
Reduced staff and overhead costs
·
Insurance payout from prior year incident
Although the
Emerald Asset business contributed a small profit, it is expected to reduce
significantly due to depreciation. This got me thinking about the estimated
life of an aircraft and due to safety issues involving human life, the types of
expense involved in maintenance. In fact, Warren Buffet once said,
"The
worst sort of business is one that grows rapidly, requires significant capital
to engender the growth, then earns little or no money. Think airlines." (https://www.fool.com/investing/2017/04/08/which-airline-stocks-does-warren-buffett-own.aspx)
Pacific
Turbine USA is a new venture and mentions establishing its “customer base” and
focuses on the North American market, but has a similar model to PTB business.
It will be interesting to study the business model that has been successful in
Australia.
The PTB
Brisbane business is highlighted as its main driver of success. Its Engine
Management Program in Pinkenba near Brisbane Airport, involves consistent
monthly payments for comprehensive engine management service which provides
consistent cash flows to the engine and parts sales and workshop jobs. I know
how important cash is ensuring the continuity of business and it looks like
this model works well for PTB. It seems the business model uses other programs
to back the expected decline in profitability of most its activities, such as
ongoing maintenance management of engines manufactured or after sales service
and parts. This coupled with the expansion of the business to capture US
markets seems to be key strategies to ensure continued profits.
The Chairman
and Managing Director’s review mentions “corporate overheads”, something I’m
not familiar, relating to “relocation of administration and finance costs.” I
have no idea how this cost them $1.285 million and why it is a separate expense
from all the groups??? I find shares confusing. The report says the group
places $0.700 million of shares to pay the cash portion of the dividend? How
does that work? And what is the share placement stated in the cash flows of the
same amount? I understand the allocation of capital spent as a reflection of
how some assets were paid for but I don’t understand dividends. What is a “work
in progress” asset? Partly completed engines? This will be interesting to
discover. I recall some inventory knowledge from high school but have never
seen it in action.
I must admit
the Director’s report seemed to drag on and was quite boring. I may not have
paid as much attention as I should but I skimmed enough to get the gist. A
brief examination of the remuneration amounts were quite impressive and thought
“wouldn’t it be nice to have that kind of salary” and maybe one day, I will!
I noticed the
auditor’s declaration of independence and recognized it to one the vital
internal controls and external too. It gives a sense of credence and
reliability to the information contained in their financial reports. I also
noted the Corporate Governance statement, which relays the ethics involved not
only in the compilation of reports but the business as a whole. These should
assist in answering the questions of how, when, where and why in classifying
transactions and economic substance.
The Consolidated
Statement of Profit and Loss and Other Comprehensive Income
Seems almost
straight forward, total revenue listed first and then expenses are subtracted
(most amounts are in brackets I assume to represent a debit amount?) to show a
profit or loss which is then transferred to owner’s equity, R – E = profit.
Most of the expense items are logical, however the changes in inventories,
which I will need to investigate further, is significantly more than the
previous year. Bad and doubtful debts have changed to a positive figure from
the previous year and I wonder if indeed that is positive? Was an adjustment
necessary because someone paid them back after being written off or did
something else happen?
Statement of Financial
Position
Also seems
straight forward, assets are identified into current and non-current which are
subtracted from current and non-current liabilities give equity as per the
formula, A – L = E.
Consolidated Statement of
Changes in Equity
I can see
further how the bits and pieces fit together. The equity is divided into issued
capital from shares and other equity securities plus the dividend appropriation
reserve and retained earnings to give total equity, which is the same amount
shown in the statement of financial position. But I can also see that equity is
the balance from the previous year plus profit from this year plus contributions
of equity net of transaction cost (not completely sure what this is, hoping for
some feedback on review) less dividends paid.
So piecing it
altogether,
Assets +
Expenses = Liabilities
+ Revenue +
Equity
63632 +
43170 = 25946
+ 43170 +
37686
106802 = 106802
Hence the
formula works!!!!
The Statement of
Cashflows
I can
understand that most of their cash comes from receipts from customers but by
the same token, most of their cash is used to pay suppliers. It is interesting
to see the separate activities such as operating, investing and financing. I
recall from ACCT11059 how we restated the statements into operating and
financial activities. Since cash is a very important aspect of the business, I
can understand that tracking the cashflow is especially important. I can see
that the balance is the same amount shown in the Statement of Financial
Position. It’s like additional information and further explanation of cash
movement.
Notes to the Financial Statements
The
preparation of these statements are in accordance with the Corporations act
2001, Australian Accounting Standards and Interpretations of the Australian
Accounting Standards Board and International Financial Reporting Standards as
issued by the International Accounting Standards Board. It also mentions using
the historical cost method of valuation and fair value. I’m not entirely sure
how these methods are applied but it will be interesting to discover more.
There are various guidelines for estimating and making fair assumptions too.
They have a long list of notes concerning lease assets which make up a large
portion of revenue. They also mention goodwill and other intangible assets have
infinite life are not subject to amortization. I recall Anna Towan question
what is goodwill and thinking I didn’t really have an answer. So I did a little
research. My understanding is that goodwill is value created by the business
through reputation, branding and established customer relations. It can be
recognized as a measurable value when the business is sold above the business’s
book value. I have come across the term in marketing also. There is controversy
over how its[U1] measured. It was
interesting to see the estimated useful life of assets as most of them were
represented in years, however engines were in hours! I suppose this is another
judgement made using their experience from years in business. Derivative and
hedging activities??? A mystery. I wonder if anyone can shed some light. It
seems to be related to investments and cash, but it also mentions that some
“derivatives do not qualify for hedge accounting”, is there secret hedging
going on???? I can see further explanations of what is included revenue and
some assets accounts. This may come in handy for future steps involving
spreadsheets.
Links to Annual Reports
2014, 2015 & 2016
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