Financial statements most important methods of communication clear

Financial statements: �most important methods of communication �clear and understandable financial reporting �obtain relevant information to make economic decisions � the Accounting Standards Board (IASB) �is committed to the development of high quality �contain extensive presentation and disclosure requirements

Financial statements of a sole proprietor A sole proprietorship = �the simplest form of business ownership �there is no legislation prescribing how �cash and/or vehicle is necessary to start �equity simply consists of capital invest plus profit less money and/or goods withdrawn 4

Financial statements of a sole proprietor Owner invests cash in a business: R 100 000 Debit Bank account (in Cash Receipts Journal) Credit Capital account (in General Ledger) Cash Receipts Journal of XXX Traders for January 2009 Dr Doc Day 001 1 Sundry accounts Fol Bank C Cross Dr Amount Fol Details 100 000 Capital Jan 1 Bank Dr Jan 1 Cr Bank Capital Cr CRJ 100 000 Cr 100 000 5

Financial Statements: Statement of changes in equity … (Capital account = changes from opening balance to final balance) Dr Capital Feb 28 Drawings Balance Cr 8 000 Mar 1 Balance c/d 41 000 Mar 2 Bank Feb 28 Profit or loss b/d 25 000 15 000 9 000 Statement of changes equity for the year ended 28 Feb 20. 2 49 in 000 49 000 Balance as at 1 March 20. 1 Plus Additional investment Plus Profit for the year Less Drawings Balance as at 28 Feb 20. 2 Mar 1 Balance b/d R 25 000 41 000 15 000 9 000 (8 000) R 41 000 6

Financial Statements: Exercise The following information relates to Jeff’s Maintenance Services: POST-ADJUSTMENT TRAIL BALANCE AS AT 31 DECEMBER 20. 1 Dr Bank Debtors Inventory: cleaning materials Equipment at cost Vehicles at cost Accumulated depreciation on equipment Accumulated depreciation on vehicles Insurance Creditors Fees earned Capital: J Jefferson – 1 January 20. 1 Drawings Wages Administrative expenses Advertisements Fuel and maintenance Depreciation (equipment R 1 300, vehicles R 3 400) Rent expense R R Cr 580 5 515 640 13 000 17 000 2 600 6 800 720 165 65 895 20 200 12 000 18 650 12 410 335 1 110 4 700 9 000 95 660 7

Financial Statements: Exercise The following information relates to Jeff’s Maintenance Services: POST-ADJUSTMENT TRAIL BALANCE AS AT 31 DECEMBER 20. 1 Dr Bank Debtors Inventory: cleaning materials Equipment at cost Vehicles at cost Accumulated depreciation on equipment Accumulated depreciation on vehicles Insurance Creditors Fees earned Capital: J Jefferson – 1 January 20. 1 Drawings Wages Administrative expenses Advertisements Fuel and maintenance Depreciation (equipment R 1 300, vehicles R 3 400) Rent expense R R Cr 580 5 515 640 13 000 17 000 2 600 6 800 720 165 65 895 20 200 12 000 18 650 12 410 335 1 110 4 700 9 000 95 660 8

Financial Statements: Statement of Financial Position … Statement of financial position as at 31 December 20. 1 ASSETS Non-current assets R Property, plant and equipment Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets EQUITY AND LIABILITIES Total equity Capital Current liabilities Trade and other payables Total equity and liabilities 580 9

Financial Statements: Exercise The following information relates to Jeff’s Maintenance Services: POST-ADJUSTMENT TRAIL BALANCE AS AT 31 DECEMBER 20. 1 Dr Bank Debtors Inventory: cleaning materials Equipment at cost Vehicles at cost Accumulated depreciation on equipment Accumulated depreciation on vehicles Insurance Creditors Fees earned Capital: J Jefferson – 1 January 20. 1 Drawings Wages Administrative expenses Advertisements Fuel and maintenance Depreciation (equipment R 1 300, vehicles R 3 400) Rent expense R R Cr 580 5 515 640 13 000 17 000 2 600 6 800 720 165 65 895 20 200 12 000 18 650 12 410 335 1 110 4 700 9 000 95 660 10

Financial Statements: Statement of Financial Position … Statement of financial position as at 31 December 20. 1 ASSETS Non-current assets R Property, plant and equipment Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets EQUITY AND LIABILITIES Total equity Capital Current liabilities Trade and other payables Total equity and liabilities 5 515 580 11

Financial Statements: Exercise The following information relates to Jeff’s Maintenance Services: POST-ADJUSTMENT TRAIL BALANCE AS AT 31 DECEMBER 20. 1 Dr Bank Debtors Inventory: cleaning materials Equipment at cost Vehicles at cost Accumulated depreciation on equipment Accumulated depreciation on vehicles Insurance Creditors Fees earned Capital: J Jefferson – 1 January 20. 1 Drawings Wages Administrative expenses Advertisements Fuel and maintenance Depreciation (equipment R 1 300, vehicles R 3 400) Rent expense R R Cr 580 5 515 640 13 000 17 000 2 600 6 800 720 165 65 895 20 200 12 000 18 650 12 410 335 1 110 4 700 9 000 95 660 12

Financial Statements: Statement of Financial Position … Statement of financial position as at 31 December 20. 1 ASSETS Non-current assets R Property, plant and equipment Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets EQUITY AND LIABILITIES Total equity Capital Current liabilities Trade and other payables Total equity and liabilities 6 735 640 5 515 580 13

Financial Statements: Exercise The following information relates to Jeff’s Maintenance Services: POST-ADJUSTMENT TRAIL BALANCE AS AT 31 DECEMBER 20. 1 Dr Bank Debtors Inventory: cleaning materials Equipment at cost Vehicles at cost Accumulated depreciation on equipment Accumulated depreciation on vehicles Insurance Creditors Fees earned Capital: J Jefferson – 1 January 20. 1 Drawings Wages Administrative expenses Advertisements Fuel and maintenance Depreciation (equipment R 1 300, vehicles R 3 400) Rent expense R R Cr 580 5 515 640 13 000 17 000 2 600 6 800 720 165 65 895 20 200 12 000 18 650 12 410 335 1 110 4 700 9 000 95 660 14

Financial Statements: Notes for the year ended 31 December 20. 1 Dr Balance Dr Equipment 13 000 b/d Cr Accumulated depreciation on Equipment Jan 1 Balance Dec 31 Depreciation Cr b/d NOTE: Property, Plant and Equipment Vehicles Carrying amount: Beginning of year Cost Acc depreciation Depreciation for the year Carrying value: End of year Cost Acc depreciation Equipment Total 13 000 15

Financial Statements: Exercise The following information relates to Jeff’s Maintenance Services: POST-ADJUSTMENT TRAIL BALANCE AS AT 31 DECEMBER 20. 1 Dr Bank Debtors Inventory: cleaning materials Equipment at cost Vehicles at cost Accumulated depreciation on equipment Accumulated depreciation on vehicles Insurance Creditors Fees earned Capital: J Jefferson – 1 January 20. 1 Drawings Wages Administrative expenses Advertisements Fuel and maintenance Depreciation (equipment R 1 300, vehicles R 3 400) Rent expense R R Cr 580 5 515 640 13 000 17 000 2 600 6 800 720 165 65 895 20 200 12 000 18 650 12 410 335 1 110 4 700 9 000 95 660 16

Financial Statements: Notes for the year ended 31 December 20. 1 Dr Balance Dr Vehicles 17 000 b/d Cr Accumulated depreciation on Vehicles Jan 1 Balance Dec 31 Depreciation Cr b/d NOTE: Property, Plant and Equipment Vehicles Carrying amount: Beginning of year Cost Acc depreciation Depreciation for the year Carrying value: End of year Cost Acc depreciation Equipment Total 17 000 17

Financial Statements: Exercise The following information relates to Jeff’s Maintenance Services: POST-ADJUSTMENT TRAIL BALANCE AS AT 31 DECEMBER 20. 1 Dr Bank Debtors Inventory: cleaning materials Equipment at cost Vehicles at cost Accumulated depreciation on equipment Accumulated depreciation on vehicles Insurance Creditors Fees earned Capital: J Jefferson – 1 January 20. 1 Drawings Wages Administrative expenses Advertisements Fuel and maintenance Depreciation (equipment R 1 300, vehicles R 3 400) Rent expense R R Cr 580 5 515 640 13 000 17 000 2 600 6 800 720 165 65 895 20 200 12 000 18 650 12 410 335 1 110 4 700 9 000 95 660 18

Financial Statements: Notes for the year ended 31 December 20. 1 Dr Balance Dr Dec 31 Balance Equipment 13 000 b/d Cr Accumulated depreciation on Equipment c/d 2 600 Jan 1 Balance Dec 31 Depreciation NOTE: Property, Plant and Equipment Vehicles Carrying amount: Beginning of year Cost Acc depreciation Depreciation for the year Carrying value: End of year Cost Acc depreciation Equipment 17 000 13 000 17 000 13000 2 600 Total Cr b/d 2 600 19

Financial Statements: Exercise The following information relates to Jeff’s Maintenance Services: POST-ADJUSTMENT TRAIL BALANCE AS AT 31 DECEMBER 20. 1 Dr Bank Debtors Inventory: cleaning materials Equipment at cost Vehicles at cost Accumulated depreciation on equipment Accumulated depreciation on vehicles Insurance Creditors Fees earned Capital: J Jefferson – 1 January 20. 1 Drawings Wages Administrative expenses Advertisements Fuel and maintenance Depreciation (equipment R 1 300, vehicles R 3 400) Rent expense R R Cr 580 5 515 640 13 000 17 000 2 600 6 800 720 165 65 895 20 200 12 000 18 650 12 410 335 1 110 4 700 9 000 95 660 20

Financial Statements: Notes for the year ended 31 December 20. 1 Dr Balance Dr Dec 31 Balance Vehicles 17 000 b/d Cr Accumulated depreciation on Vehicles c/d 6 800 Jan 1 Balance Dec 31 Depreciation Cr b/d NOTE: Property, Plant and Equipment Vehicles Carrying amount: Beginning of year Cost Acc depreciation Depreciation for the year Carrying value: End of year Cost Acc depreciation Equipment 17 000 13 000 10 200 17 000 (6 800) 10 400 13 000 (2 600) Total 6 800 20 600 30 000 (9 400) 21

Financial Statements: Statement of Financial Position … Statement of financial position as at 31 December 20. 1 ASSETS Non-current assets R 20 600 Property, plant and equipment 20 600 Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets EQUITY AND LIABILITIES Total equity Capital Current liabilities Trade and other payables Total equity and liabilities 6 735 640 5 515 580 22

Financial Statements: Exercise The following information relates to Jeff’s Maintenance Services: POST-ADJUSTMENT TRAIL BALANCE AS AT 31 DECEMBER 20. 1 Dr Bank Debtors Inventory: cleaning materials Equipment at cost Vehicles at cost Accumulated depreciation on equipment Accumulated depreciation on vehicles Insurance Creditors Fees earned Capital: J Jefferson – 1 January 20. 1 Drawings Wages Administrative expenses Advertisements Fuel and maintenance Depreciation (equipment R 1 300, vehicles R 3 400) Rent expense R R Cr 580 5 515 640 13 000 17 000 2 600 6 800 720 165 65 895 20 200 12 000 18 650 12 410 335 1 110 4 700 9 000 95 660 23

Financial Statements: Statement of profit or loss and other comprehensive income … JEFF’S MAINTENANCE SERVICES Statement of profit or loss and other comprehensive income for the year ended 31 December 20. 1 R Revenue: Distribution, administrative and other expenses Insurance Wages Administrative expenses Advertisements Fuel and maintenance Rent expense Depreciation Profit for the year Other comprehensive income for the year Total comprehensive income for the year 720 ----24

Financial Statements: Exercise The following information relates to Jeff’s Maintenance Services: POST-ADJUSTMENT TRAIL BALANCE AS AT 31 DECEMBER 20. 1 Dr Bank Debtors Inventory: cleaning materials Equipment at cost Vehicles at cost Accumulated depreciation on equipment Accumulated depreciation on vehicles Insurance Creditors Fees earned Capital: J Jefferson – 1 January 20. 1 Drawings Wages Administrative expenses Advertisements Fuel and maintenance Depreciation (equipment R 1 300, vehicles R 3 400) Rent expense R R Cr 580 5 515 640 13 000 17 000 2 600 6 800 720 165 65 895 20 200 12 000 18 650 12 410 335 1 110 4 700 9 000 95 660 25

Financial Statements: Statement of Financial Position … Statement of financial position as at 31 December 20. 1 ASSETS Non-current assets R 20 600 Property, plant and equipment 20 600 Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets EQUITY AND LIABILITIES Total equity Capital Current liabilities Trade and other payables Total equity and liabilities 6 735 640 5 515 580 165 26

Financial Statements: Exercise The following information relates to Jeff’s Maintenance Services: POST-ADJUSTMENT TRAIL BALANCE AS AT 31 DECEMBER 20. 1 Dr Bank Debtors Inventory: cleaning materials Equipment at cost Vehicles at cost Accumulated depreciation on equipment Accumulated depreciation on vehicles Insurance Creditors Fees earned Capital: J Jefferson – 1 January 20. 1 Drawings Wages Administrative expenses Advertisements Fuel and maintenance Depreciation (equipment R 1 300, vehicles R 3 400) Rent expense R R Cr 580 5 515 640 13 000 17 000 2 600 6 800 720 165 65 895 20 200 12 000 18 650 12 410 335 1 110 4 700 9 000 95 660 27

Financial Statements: Statement of profit or loss and other comprehensive income … JEFF’S MAINTENANCE SERVICES Statement of profit or loss and other comprehensive income for the year ended 31 December 20. 1 Revenue: Distribution, administrative and other expenses Insurance Wages Administrative expenses Advertisements Fuel and maintenance Rent expense Depreciation Profit for the year Other comprehensive income for the year Total comprehensive income for the year R 65 895 720 ----28

Financial Statements: Exercise The following information relates to Jeff’s Maintenance Services: POST-ADJUSTMENT TRAIL BALANCE AS AT 31 DECEMBER 20. 1 Dr Bank Debtors Inventory: cleaning materials Equipment at cost Vehicles at cost Accumulated depreciation on equipment Accumulated depreciation on vehicles Insurance Creditors Fees earned Capital: J Jefferson – 1 January 20. 1 Drawings Wages Administrative expenses Advertisements Fuel and maintenance Depreciation (equipment R 1 300, vehicles R 3 400) Rent expense R R Cr 580 5 515 640 13 000 17 000 2 600 6 800 720 165 65 895 20 200 12 000 18 650 12 410 335 1 110 4 700 9 000 95 660 29

Financial Statements: Statement of changes in equity … Statement of changes in equity for the year ended 31 December 20. 1 Balance as at 1 January 20. 1 Total comprehensive income for the year Drawings Capital R 20 200 Balance at 31 December 20. 1 30

Financial Statements: Exercise The following information relates to Jeff’s Maintenance Services: POST-ADJUSTMENT TRAIL BALANCE AS AT 31 DECEMBER 20. 1 Dr Bank Debtors Inventory: cleaning materials Equipment at cost Vehicles at cost Accumulated depreciation on equipment Accumulated depreciation on vehicles Insurance Creditors Fees earned Capital: J Jefferson – 1 January 20. 1 Drawings Wages Administrative expenses Advertisements Fuel and maintenance Depreciation (equipment R 1 300, vehicles R 3 400) Rent expense R R Cr 580 5 515 640 13 000 17 000 2 600 6 800 720 165 65 895 20 200 12 000 18 650 12 410 335 1 110 4 700 9 000 95 660 31

Financial Statements: Statement of changes in equity … Statement of changes in equity for the year ended 31 December 20. 1 Balance as at 1 January 20. 1 Total comprehensive income for the year Drawings Capital R 20 200 (12 000) Balance at 31 December 20. 1 32

Financial Statements: Exercise The following information relates to Jeff’s Maintenance Services: POST-ADJUSTMENT TRAIL BALANCE AS AT 31 DECEMBER 20. 1 Dr Bank Debtors Inventory: cleaning materials Equipment at cost Vehicles at cost Accumulated depreciation on equipment Accumulated depreciation on vehicles Insurance Creditors Fees earned Capital: J Jefferson – 1 January 20. 1 Drawings Wages Administrative expenses Advertisements Fuel and maintenance Rent expense Depreciation (equipment R 1 300, vehicles R 3 400) R R Cr 580 5 515 640 13 000 17 000 2 600 6 800 720 165 65 895 20 200 12 000 18 650 12 410 335 1 110 9 000 4 700 95 660 33

Financial Statements: Statement of profit or loss and other comprehensive income … JEFF’S MAINTENANCE SERVICES Statement of profit or loss and other comprehensive income for the year ended 31 December 20. 1 Revenue: Distribution, administrative and other expenses Insurance Wages Administrative expenses Advertisements Fuel and maintenance Rent expense Depreciation Profit for the year Other comprehensive income for the year Total comprehensive income for the year R 65 895 (46 925) 720 18 650 12 410 335 1 110 9 000 ----34

Financial Statements: Exercise The following information relates to Jeff’s Maintenance Services: POST-ADJUSTMENT TRAIL BALANCE AS AT 31 DECEMBER 20. 1 Dr Bank Debtors Inventory: cleaning materials Equipment at cost Vehicles at cost Accumulated depreciation on equipment Accumulated depreciation on vehicles Insurance Creditors Fees earned Capital: J Jefferson – 1 January 20. 1 Drawings Wages Administrative expenses Advertisements Fuel and maintenance Rent expense Depreciation (equipment R 1 300, vehicles R 3 400) R R Cr 580 5 515 640 13 000 17 000 2 600 6 800 720 165 65 895 20 200 12 000 18 650 12 410 335 1 110 9 000 4 700 95 660 35

Financial Statements: Statement of profit or loss and other comprehensive income … JEFF’S MAINTENANCE SERVICES Statement of profit or loss and other comprehensive income for the year ended 31 December 20. 1 Revenue: Distribution, administrative and other expenses Insurance Wages Administrative expenses Advertisements Fuel and maintenance Rent expense Depreciation R(1 300 + 3 400) Profit for the year Other comprehensive income for the year Total comprehensive income for the year R 65 895 (46 925) 720 18 650 12 410 335 1 110 9 000 4 700 ----36

Financial Statements: Notes for the year ended 31 December 20. 1 Dr Balance Dr Dec 31 Balance Vehicles 17 000 b/d Cr Accumulated depreciation on Vehicles c/d 6 800 Jan 1 Balance Dec 31 Depreciation Cr b/d 3 400 6 800 NOTE: Property, Plant and Equipment Vehicles Equipment Total Carrying amount: Beginning of year Cost Acc depreciation Depreciation for the year 13 600 17 000 (3 400) 11 700 13 000 (1 300) 25 300 30 000 (4 700) Carrying value: End of year Cost Acc depreciation 10 200 17 000 (6 800) 10 400 13 000 (2 600) 20 600 30 000 (9 400) 6 800 37

Financial Statements: Statement of profit or loss and other comprehensive income … JEFF’S MAINTENANCE SERVICES Statement of profit or loss and other comprehensive income for the year ended 31 December 20. 1 Revenue: Distribution, administrative and other expenses Insurance Wages Administrative expenses Advertisements Fuel and maintenance Rent expense Depreciation Profit for the year Other comprehensive income for the year Total comprehensive income for the year R 65 895 (46 925) 720 18 650 12 410 335 1 110 9 000 4 700 18 970 ----18 970 38

Financial Statements: Statement of changes in equity … Statement of changes in equity for the year ended 31 December 20. 1 Balance as at 1 January 20. 1 Total comprehensive income for the year Drawings Balance at 31 December 20. 1 Capital R 20 200 18 970 (12 000) 27 170 39

Financial Statements: Statement of Financial Position … Statement of financial position as at 31 December 20. 1 ASSETS Non-current assets R Property, plant and equipment 20 600 Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets EQUITY AND LIABILITIES Total equity Capital Current liabilities Trade and other payables Total equity and liabilities 6 735 640 5 515 580 27 335 27 170 165 27 335 40

Financial Statements: Notes for the year ended 31 December 20. 1 NOTE: Property, Plant and Equipment Vehicles Equipment Total Carrying amount: Beginning of year Cost Acc depreciation Depreciation for the year 13 600 17 000 (3 400) 11 700 13 000 (1 300) 25 300 30 000 (4 700) Carrying value: End of year Cost Acc depreciation 10 200 17 000 (6 800) 10 400 13 000 (2 600) 20 600 30 000 (9 400) 41