gurungnazin.files.wordpress.com€¦ · Web viewIn accounting, while learning inventories, we learn stages of inventories: Raw materials, basic materials and goods to be processed

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


Accumulated Depreciation- Land and

Buildings


69

69

30 Sept

2018


Accumulated Depreciation- Lease

improvements


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 To: Anuj Shukla


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


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 To: Samikshya Bhandari


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


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


Step 8MYOB set upMYOB trainingMYOB quiz


Step 10Depreciation

Overall

Feedback from: Anuj Shukla





Step 10Depreciation

Overall

Feedback from: Samikshya Bhandari





Step 10Depreciation

Overall

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