Académique Documents
Professionnel Documents
Culture Documents
to accompany
Financial
Accounting:
Recording, Analysis
and Decision Making
Fifth Edition
Prepared by
Shirley Carlon
Brief
Learning Objectives Exercises Exercises Problems
1. Differentiate between the cash basis 1 1,9 7A
and the accrual basis of accounting.
ANSWERS TO QUESTIONS
The revenue recognition criteria which states that revenues should be recognised in
the time period in which it is probable that any future economic benefits associated
with the revenue will flow to the entity and the revenue can be reliably measured;
The accounting period concept which states that the life of a business can be divided
into artificial periods, such as one month, six month, 12 months, and that useful
financial statements give feedback on the profitability of the business;
The expense recognition criteria which states that expenses should be recognised
when the outflow of future economic benefits associated with the expense is
probable and the expense can be measured reliably.
3. The new accounting standard for revenue recognition IFRS 15 ‘Revenue from
Contracts with Customers’, is mandatory for reporting periods commencing 1
January 2017, but earlier adoption is permitted. The main principle in this new
standard is that revenue is to be recognised to depict the transfer of goods or
services to customers in amounts which reflect the payment (ie consideration) which
the business expects to receive.
IFRS 15 sets out a five step process. Essentially revenue can be recognised when
an entity satisfies a performance obligation.
4. Assuming the law firm uses accrual accounting it should recognise the revenue in
April as this is when the contract obligation was performed. The revenue recognition
criterion states that revenue should be recognised in the accounting period in which it
is probable that any future economic benefits associated with the revenue will flow to
the entity and the revenue can be reliably measured. If the engagement has been
completed the amount of revenue would typically be able to be measured reliably.
Applying the new criteria under IRFS15 it is assumed both parties agreed to the
conditions of the contract, the payment terms were specified so the contract has
commercial substance. The timing of the recognition is when the right were
transferred and it is probable the law firm will receive the service revenue. That is in
April.
5. Expenses of $3600 should be deducted from the revenues in April in order to match
the revenue recognised in April.
7. The two categories of adjusting entries are prepayments and accruals. Prepayments
are either revenues received in advance or prepayments of amounts that provide
economic benefit for more than one period, e.g. prepaid rent. Accruals consist of
revenues and expenses earned or incurred but which have not been recorded
through daily recording of transactions.
In this text we teach you to recognise a transaction which affects more than 1
reporting [period as an asset. Therefore in a prepaid expense adjusting entry,
expenses are debited and assets are credited, to reflect the expiry of the asset. In a
revenue received in advance adjusting entry liabilities are debited and revenues are
credited.
9. Liability and revenue. The revenue account is debited and liability account (Revenue
Received in Advance) is credited. This is the nature of the adjusting entry if the
original entry was to record the amount received as revenue.
10. An asset (Prepayments) is debited and an expense is credited by the adjusting entry.
12. A worksheet is a multi-columned form. The columns of the worksheet from left to
right are two columns each for the trial balance, adjustments, adjusted trial balance,
statement of profit or loss and other comprehensive income and statement of
financial position.
The proper sequencing of the required steps in the accounting cycle is as follows:
SOLUTIONS TO EXERCISES
EXERCISE 3.1
Tang Pty Ltd
(a)
Cash Basis Accrual Basis
$ $
Service Revenue 66,000 78,000
- Operating Expenses 40,500 45,000
- Insurance Expense 6,500 -
Profit $19,000 $33,000
(b) Both accrual basis and cash basis provide useful information. However, it can be
argued that the accrual basis of accounting provides more useful information about
performance for decision makers because it recognises the impact of accounting
transactions or events on specific accounting periods. The cash basis of accounting
only recognises cash transactions. The accrual basis of accounting provides a more
comprehensive picture of the business activities in the records. For example, accrued
basis profit takes account of all revenues and expenses for a period whether or not
cash is received or paid (provided recognition criteria are met). It also takes account
of internal events, such as the consumption of supplies or the depreciation of plant
assets.
However, cash basis accounting is also useful. For example, the statement of cash
flows shows how much cash is generated from ordinary operating activities (which will
invariably be greater or less than accrual basis profit).
EXERCISE 3.2
EXERCISE 3.3
EXERCISE 3.4
(a) 9. Materiality.
(b) 7. Expense recognition criteria.
(c) 3. Monetary principle.
(d) 4. Accounting period concept.
(e) 8. Cost principle.
(f) 1. Accounting entity concept.
(g) 5. Full disclosure principle.
(h) 6. Revenue recognition criteria.
EXERCISE 3.5
Zimbabwe Ltd
EXERCISE 3.6
Uniform Ltd
General Journal
Post $ $
Date Account name(narration) Ref. Debit Credit
EXERCISE 3.7
Con James Dental Practice
General Journal
$ $
Date Account name(narration) Debit Credit
2016
a Jan 31 Accounts Receivable 1 500
Service Revenue 1 500
(Service preformed January)
b 31 Electricity Expense 1 040
Electricity Payable 1 040
(Accrued electricity)
c 31 Depreciation Expense 1 600
Accumulated Dep’n – Dental Equipment 1 600
(Depreciation for the month)
31 Interest Expense 500
Interest Payable 500
(Accrued interest)
d 31 Insurance Expense 2 000
Prepaid Insurance 2 000
(January insurance exp $24000/12)
e 31 Supplies Expense 2 500
Supplies ($3200 - $700) 2 500
(Supplies used January)
EXERCISE 3.8
EXERCISE 3.9
Wolfmother Ltd
Statement of profit or loss
for the month ended 31 July 2017
Revenues: $ $
Service revenue ($5 500 + $800) 6 300
Expenses:
Wages expense ($2 300 + $300) 2 600
Supplies expense ($1 200 - $400) 800
Electricity expense 600
Insurance expense 300
Depreciation expense 150
Total expenses 4 450
Profit $1 850
EXERCISE 3.10
Darcy Designs Pty Ltd
Supplies
1/7* Bal. 1400 Expense 1220
Purchases 1320 31/7 Bal. 1500
2720 2720
(b) Total premium = $9 600 Total premium = Monthly premium x 12; $800 x 12 =$9 600
Salaries Payable
Salaries 7500 1/7 Bal 1700
paid
31/7 Bal 1500 Salaries exp. 7300
9000 9000
31/7 Bal 1500
EXERCISE 3.11
Martin Pty Ltd
Supplies
1/3* Bal. 800 Expense 950
Purchases 850 31/3 Bal. 700
1650 1650
(b) Total premium = $4 800 Total premium = Monthly premium x 12; $400 x 12 =
$4,800 (2400:4800 = 50%)
At 31 March the prepaid amount is half the annual
premium so policy was purchased six months earlier on 1
October 2016
Purchase date = 1 Oct 2016
Salaries Payable
Salaries 2500 1/3 Bal 1500
paid
31/3 Bal 800 Salaries exp. 1800
3300 3300
31/3 Bal 800
EXERCISE 3.12
Snowmass Ltd
General Journal
14 Cash 3 000
Service Revenue 3 000
20 Cash 700
Service Revenue Received in Advance 700
EXERCISE 3.13
Monkey Ltd
General Journal
Date Account name (narration) $ $
Debit Credit
2016
1. June 30 Insurance Expense 15 855
Insurance Payable 15 855
Calculations:
$33300 ÷ 3 yrs = $11 100 per annum, 1.5 yrs remain
$9510 ÷ 2 yrs= 4 755 per annum, 1 year remains
$15 855
Prepayment of B4564 at 30/6/16 is $16 650
Prepayment of A2958 at 30/6/16 is 4 755
$ 21 405
Pre adjustment balance $ 37 260
Adjustment required to expense $ 15 855
(b) Subscriptions are usually paid in advance and for revenue to be recognised it needs to
meet the revenue recognition criteria. The revenue is recognised as the work is performed
not when the cash is received.
SOLUTIONS TO PROBLEM
SET A
Students need to look and see what has been recorded in the ledgers to work out if one or two
months adjustments are required. For insurance and depreciation no expense had been
recorded to date.
Supplies 113
30/6 Balance 13 600 30/6 Supplies Expense 6 400
30/6 Closing Balance 7 200
13 600 13 600
1/7 Opening Balance 7 200
(c)
Ewok Ltd
Adjusted Trial Balance
as at 30 June 2015
(e) If the cost of the equipment was allocated over the two years then the annual
depreciation expense would be $43 200 ($86 400/2) instead of $17 280 which means
profit in the first 2 years would be $25 920 ($43 200-$17280) less than if the depreciation
was charged over the useful life and this would mean the profit in year 3 4 and 5 would
be $17 280 more as no depreciation would be charged.
Note over the 5 years total depreciation is the same is $86 400 either rate used.
Cash 100
30/6 Opening Balance 54 800
Supplies 113
30/6 Opening Balance 1 500 30/6 Supplies Expense 500
____ 30/6 Closing Balance 1 000
1 500 1 500
1/7 Opening Balance 1 000
(c)
Maxi Services Ltd
Adjusted Trial Balance
as at 30 June 2017
(e) To report a higher profit the expense adjustments would be avoided therefore adjustment
numbers 1, 2, 3, 5, and 6.
(b)
Auckland Consulting Ltd
Statement of profit or loss
for the three months ended 30 September 2016
$ $
Revenues:
Rent revenue 32 400
Commission revenue 22 200
Total revenues 54 600
Expenses:
Salaries expense 28 200
Rent expense 19 500
Depreciation expense 2 250
Supplies expense 450
Electricity expense 1 530
Interest expense 300
Total expenses 52 230
Profit $ 2 370
$ $
Assets
Current assets
Cash 4 950
Accounts receivable 19 800
Supplies 900
Total current assets 25 650
Non-current assets
Equipment 45 000
Less: Accumulated depreciation – equipment (2 250) 42 750
Total assets 68 400
Liabilities
Accounts payable 4 530
Salaries payable 4 200
Interest payable 300
Rent revenue received in advance 1 800
Bank loan* 15 000
Total liabilities 25 830
Net Assets $42 570
Equity:
Share capital 42 000
Retained earnings 570
Total equity $42 570
(c) The following accounts would be closed: Commission Revenue, Rent Revenue,
Salaries Expense, Rent Expense, Depreciation Expense, Supplies Expense, Electricity
Expense, Interest Expense, Dividends.
(d) 1 August 2016. Interest of 12% per year equals a monthly rate of 1%; monthly interest is
$150 ($15000 x 1%). Since total interest expense is $300, the loan has been
outstanding for two months.
(b)
Frog Ltd
Statement of profit or loss
for the year ended 30 June 2015
$ $
Revenues:
Service revenue 51 900
Rent revenue 17 700
Total revenues 69 600
Expenses:
Salaries expense 27 150
Office Supplies expense 2 400
Rent expense 22 000
Insurance expense 2 250
Depreciation expense 1 800
Total expenses 55 600
Profit $14 000
Frog Ltd
Calculation of retained earnings
for the year ended 30 June 2015
Frog Ltd
Statement of financial position
as at 30 June 2015
$ $
Assets
Current assets
Cash 14 500
Accounts receivable 14 100
Office supplies 1 050
Prepaid insurance 3 750
Total current assets 33 400
Non-current assets
Equipment 18 000
Less: Accumulated depreciation – equipment (5 400)
Total non-current assets 12 600
Total assets 46 000
Liabilities
Accounts payable 8 700
Salaries payable 1 650
Rent revenue received in advance 1 050
Total liabilities 11 400
Net Assets $34 600
Equity
Share capital 15 000
Retained earnings 19 600
Total equity $34 600
(c)
Frog Ltd
General Journal
Date Account name (narration) Post Ref Debit $ Credit $
2015
June 30 Service Revenue 400 51 900
Rent revenue 410 17 700
Profit or loss summary 330 69 600
(To close revenue accounts)
(b)
Nathan Ltd
Statement of profit or loss
for the three months ended 30 September 2016
$ $
Revenues:
Sales revenue 85 200
Commission revenue 51 600
Total revenues 136 800
Expenses:
Salaries expense 65 100
Rent expense 22 500
Depreciation expense 6 000
Supplies expense 4 500
Electricity expense 5 250
Interest expense 900
Total expenses 104 250
Profit $32 550
Nathan Ltd
Calculation of retained earnings
for the three months ended 30 September 2016
Nathan Ltd
Statement of financial position
as at 30 September 2016
$ $
Assets
Current assets
Cash 114 450
Accounts receivable 12 900
Prepaid Rent 15 000
Supplies 4 500
Total current assets 146 850
Non-current assets
Equipment 120 000
Less: Accumulated depreciation – equipment (6 000) 114 000
Total assets 260 850
Liabilities
Accounts payable 19 200
Salaries payable 10 800
Interest payable 900
Commission revenue received in advance 5 400
Bank loan* 90 000
Total liabilities 126 300
Net Assets $134 550
Equity
Share capital 105 000
Retained earnings 29 550
Total equity $134 550
(c) The following accounts would be closed: Sales Revenue, Commission Revenue,
Salaries Expense, Rent Expense, Depreciation Expense, Supplies Expense, Electricity
Expense, Interest Expense, Dividends.
(d) 1 August 2016. Interest of 6% per year on loan $90 000 = $5 400. Monthly interest is
$450 ($5400/12) Since total interest expense is $900, the loan has been outstanding for
two months.
(b)
Characters Ltd
Statement of profit or loss
for the year ended 30 June 2017
$ $
:
Revenue 68 880
Expenses:
Salaries expense 12 600
Insurance expense 950
Interest expense 720
Depreciation expense 7 840
Supplies expense 3 800
Rent expense 4 480
Total expenses 30 390
Profit $38 490
Characters Ltd
Calculation of retained earnings
for the year ended 30 June 2017
Characters Ltd
Statement of financial position
as at 30 June 2017
$ $
Assets
Current assets
Cash 24 520
Accounts receivable 24 080
Supplies 5 600
Prepaid Insurance 2 800
Total current assets 57 000
Non-current assets
Equipment 67 200
Less: Accumulated depreciation (39 200)
Total non-current assets 28 000
Total assets 85 000
Liabilities
Current liabilities
Accounts payable 5 600
Salaries payable 1 400
Interest payable 120
Revenue received in advance 6 270
Total current liabilities 13 390
Non-current liabilities
Bank loan 18 000
Total liabilities 31 390
Net Assets $53 610
Equity
Share capital 22 400
Retained earnings 31 210
Total equity $53 610
(c) The following accounts would be closed: Revenue, Salaries Exp, Insurance Exp, Interest
Exp, Depreciation Exp, Supplies Exp, Rent Exp, and Dividends.
(d) The total interest expense for the six months is $720. So annually the interest is $1440.
Rate is $1 440 ÷ $18 000 = 8%.
(f) The effect on profit was to reduce profit by $10 860 ( $950+3800+7840 - 1680 +120 –
1570 + 1400).
(g) Information concerning the future forecast for the next year. What has been budgeted for
sales and expenses? Any new markets for the business? Who are the major
competitors? and what are the general economic conditions?
(b)
Smart Rentals Ltd
General Journal
Supplies 113
30/6 Balance 11 400 30/6 Supplies Expense 4 200
30/6 Closing Balance 7 200
11 400 11 400
1/7 Opening Balance 7 200
Land 120
30/6 Balance 90 000
Building 122
30/6 Balance 420 000
Furniture 130
30/6 Balance 100 800
(e)
Smart Rentals Ltd
Statement of profit or loss
for the three months ended 30 June 2017
$ $
Revenues:
Rent revenue 64 200
Expenses:
Advertising expense 3 000
Depreciation expense 9 900
Electricity expense 6 000
Insurance expense 2 700
Interest expense 3 150
Salaries expense 19 800
Supplies expense 4 200
Total expenses 48 750
Profit $ 15 450
$ $
Assets
Current Assets
Cash 15 000
Prepaid Insurance 8 100
Supplies 7 200
Total current assets 30 300
Non-current assets
Land 90 000
Building 420 000
Less: Accumulated depreciation (5 400) 414 600
Furniture 100 800
Less: Accumulated depreciation (4 500) 96 300
Total non-current assets 600 900
Total assets 631 200
Liabilities
Current Liabilities
Accounts payable 28 200
Rent revenue received in advance 12 600
Salaries payable 1 800
Interest payable 3 150
Total current liabilities 45 750
Non-current Liabilities
Mortgage Payable 210 000
Total liabilities 255 750
Net Assets $375 450
Equity
Share capital 360 000
Retained earnings 15 450
Total equity $375 450
(f) The following accounts would be closed: Rent Revenue, Advertising expense,
Depreciation Expense, Electricity Expense, Insurance Expense, Interest Expense,
Salaries Expense, Supplies Expense.
Cash 100
1/7 Share Capital 60 000 1/7 Motor Vehicles 15 000
21/7 Accounts Receivable 12 000 5/7 Prepaid Insurance 14 400
18/7 Accounts Payable 11 400
20/7 Salaries Expense 9 600
31/7 Petrol & Oil 1 200
Expense
31/7 Dividends 2 250
31/7 Closing Balance 18 150
72 000 72 000
1/8 Opening Balance 18 150
Truck 170
1/7 Cash/Accounts 48 000
Payable
Dividends 315
31/7 Cash 2 250 31/7 Retained Earnings 2 250
* (e) Adjusting entry, nil balance before adjusting entry, $2400 dr after adjustment, before
closing
6
Depreciation Expense 520
31/7 Accumulated Depreciation* 750 31/7 Profit or loss summary 750
* (e) Adjusting entry, nil balance before adjusting entry, $1200 dr after adjustment, before
closing
(g)
Central Cleaning Ltd
Statement of profit or loss
for the month ended 31 July 2016
$ $
Revenues:
Service revenue 32 520
Expenses:
Salaries expense 10 500
Cleaning supplies expense 2 400
Depreciation expense 750
Petrol & Oil expense 1 200
Insurance expense 1 200
Total expenses 16 050
Profit $16 470
(i)
Central Cleaning Ltd
Post-Closing Trial Balance
as at 31 July 2016
No. Account name Debit $ Credit $
100 Cash 18 150
110 Accounts Receivable 20 520
120 Cleaning Supplies 1 200
130 Prepaid Insurance 13 200
170 Trucks 48 000
171 Accumulated Depreciation – Trucks 750
200 Accounts Payable 25 200
210 Salaries Payable 900
300 Share Capital 60 000
310 Retained Earnings 14 220
$101 070 $101 070
(j) Today’s society is aware of their social responsibility and as such business’s can only
operate successfully if they meet society’s expectations and as such are willing to take
actions which is socially responsible. This means using environmentally friendly
resources even though it may not be the cheapest. Triple bottom line reporting means
measuring success not only the economic return but also the environment and the social
dimensions.
(a) Chart of accounts: students may have different account numbers as long as they are
grouped to sections of the ledger.
100 Cash
110 Accounts receivable
120 Supplies
130 Prepaid rent
150 Store equipment
151 Accumulated Depreciation
200 Accounts Payable
210 Service Revenue Received in Advance
215 Salaries Payable
300 Share Capital
310 Retained earnings
400 Service Revenue
510 Depreciation Expense
515 Supplies Expense
520 Salaries Expense
525 Rent Expense
Cash 100
1/7 Opening Balance 5 000 8/7 Salaries Expense/Payable 3 000
10/7 Accounts Receivable 2 000 24/7 Accounts Payable 2 000
12/7 Service Revenue 800 24/7 Rent Expense/prepaid 800
27/7 Revenue Rec’d in Advance 1 300 25/7 Salaries Expense 3 000
31/7 Closing Balance 300
9 100 9 100
1/8 Opening Balance 300
Supplies 120
1/7 Opening Balance 2 000 31/7 Supplies Expense 2 200
17/7 Accounts Payable 3 400 31/7 Closing Balance 3 200
5 400 5 400
1/8 Opening Balance 3 200
Balance before adjusting entry $2000 + $3400 = $5400
Prepaid rent 130
24/7 Cash 400
Unadjusted Adjusted
No Account names Debit $ Credit $ Debit $ Credit4
100 Cash 300 300
110 Accounts Receivable 5 900 5 900
120 Supplies 5 400 3 200
130 Prepaid Rent 400 400
150 Store Equipment 28 000 28 000
151 Accumulated Depreciation 1 000 1 240
200 Accounts Payable 13 600 13 600
210 Service Revenue Received in Advance 2 100 1 500
215 Salaries Payable 1 000
300 Share Capital 20 000 20 000
310 Retained Earnings 5 600 5 600
400 Service Revenue 3 100 3 700
510 Depreciation Expense 240
515 Supplies Expense 2 200
520 Salaries Expense 5 000 6 000
525 Rent Expense 400 400
$45 400 $45 400 $46 640 $46 640
(h)
Bulwara Ltd
Statement of profit or loss
for the month ended 31 July 2016
Revenues: $ $
Service revenue 3 700
Expenses:
Salaries expense 6 000
Supplies expense 2 200
Rent expense 400
Depreciation expense 240
Total expenses 8 840
Loss ($5 140)
Bulwara Ltd
Calculation of retained earnings
for the month ended 31 July 2016
$
Retained earnings 1 July 5 600
Less: Loss (5140)
Retained earnings 31 July $ 460
Bulwara Ltd
Statement of financial position
as at 31 July 2016
$ $
ASSETS
Current Assets
Cash 300
Accounts receivable 5 900
Supplies 3 200
Prepaid Rent 400
Total current assets 9 800
Non-current assets
Store equipment 28 000
Less: Accumulated depreciation (1 240)
Total non-current assets 26 760
Total assets 36 560
LIABILITIES
Accounts payable 13 600
Salaries payable 1 000
Service revenue received in advance 1 500
Total liabilities 16 100
Cash 100
1/4 Share Capital 37 500 1/4 Motor Vehicles 12 500
23/4 Accounts Receivable 2 750 7/4 Prepaid Insurance 5 820
21/4 Accounts Payable 12 125
21/4 Salaries Expense 3 400
30/4 Petrol & Oil Exp 432
30/4 Dividends 600
30/4 Closing Balance 5 373
40 250 40 250
1/5 Opening Balance 5 373
Dividends 315
30/4 Cash 600 30/4 Retained Earnings 600
* (e) Adjusting entry, nil balance before adjusting entry, $4 125 dr after adjustment, before
closing
* (e) Adjusting entry, nil balance before adjusting entry, $485 dr after adjustment, before closing
(g)
Willard Cleaning Ltd
Statement of profit or loss
for the month ended 30 April 2017
$ $
Revenues:
Service revenue 13 975
Expenses:
Salaries expense 4 600
Cleaning supplies expense 4 125
Depreciation expense 375
Petrol & Oil expense 432
Insurance expense 485
Total expenses 10 017
Profit $3 958
$ $
ASSETS
Current assets
Cash 5 373
Accounts receivable 11 225
Cleaning supplies 750
Prepaid insurance 5 335
Total current assets 22 683
Non-current assets
Motor Vehicles 22 500
Less: Accumulated depreciation (375)
Total non-current assets 22 125
Total assets 44 808
LIABILITIES
Current liabilities
Accounts payable 2 750
Salaries payable 1 200
Total liabilities 3 950
NET ASSETS $40 858
EQUITY
Share capital 37 500
Retained earnings 3 358
TOTAL EQUITY $40 858
(i)
Willard Cleaning Ltd
Post-Closing Trial Balance
as at 30 April 2017
No. Account name Debit $ Credit $
100 Cash 5 373
110 Accounts Receivable 11 225
120 Cleaning Supplies 750
130 Prepaid Insurance 5 335
171 Motor vehicles 22 500
172 Accumulated Depreciation – MV 375
200 Accounts Payable 2 750
210 Salaries Payable 1 200
300 Share Capital 37 500
310 Retained Earnings 3 358
$45 183 $45 183
Totals $53 075 $53 075 $7 335 $7 335 $55 800 $55 800 $13 975 $13 975 $45 783 $45 783
SOLUTIONS TO PROBLEM
SET B
Supplies 113
30/6 Balance 2 000 30/6 Supplies Expense 700
30/6 Closing Balance 1 300
2 000 2 000
1/7 Opening Balance 1 300
(c)
Solo Ltd
Adjusted Trial Balance
as at 30 June 2016
(e) If the cost of the equipment was allocated over the two years then the annual
depreciation expense would be $7 500 ($15000/2) instead of $3 000 which means
profit in the first 2 years would be $4 500 ($7500-$3000 ) less than if the depreciation
was charged over the useful life and this would mean the profit in year 3 4 and 5
would be $4 500 more as no depreciation would be charged.
Note over the 5 years total depreciation is the same is $15 000 either rate used.
Cash 100
30/6 Balance 9 480
Supplies 113
30/6 Balance 2 350 30/6 Supplies Expense 1 860
30/6 Closing Balance 490
2 350 2 350
1/7 Opening Balance 490
(c)
Brothers Ltd
Adjusted Trial Balance
as at 30 June 2016
(d) To report the higher profit the adjustments to accrue expense and not write down
assets would be avoided hence depreciation, writing down supplies and the prepaid
insurance, recognising salaries and electricity expense. The shareholders old and
potential new shareholders and the creditors would be affected as they would make
incorrect assumptions about the profitability and liquidity of the business
(b)
Matrix Ltd
Statement of profit or loss
for the quarter ended 30 September 2016
$ $
Revenues:
Commission revenue 18 980
Rent revenue 910
Total revenues 19,890
Expenses:
Salaries expense 12 220
Rent expense 1 950
Depreciation expense 455
Supplies expense 260
Electricity expense 663
Interest expense 65
Total expenses 15 613
Profit $4 277
Matrix Ltd
Calculation of retained earnings
for the quarter ended 30 September 2016
$
Retained earnings 1 July 0
Add: Profit 4 277
4 277
Less: Dividends (780)
Retained earnings 30 September $3 497
Matrix Ltd
Statement of financial position
as at 30 September 2016
$ $
ASSETS
Current assets
Cash 8 710
Accounts receivable 1 300
Prepaid rent 1 170
Supplies 1 300
Total Current assets 12 480
Non-current assets
Equipment 19 500
Less: Accumulated depreciation – equipment (455) 19 045
Total assets 31 525
LIABILITIES
Liabilities:
Accounts payable 1 963
Salaries payable 520
Interest payable 65
Rent revenue received in advance 780
Bank loan 6 500
Total liabilities 9 828
NET ASSETS $21 697
EQUITY
Share capital 18 200
Retained earnings 3 497
TOTAL EQUITY $21 697
(c) The following accounts would be closed: Commission Revenue, Rent Revenue,
Salaries Expense, Rent Expense, Depreciation Expense, Supplies Expense,
Electricity Expense, Interest Expense, Dividends.
(d) 31 August 2016. Interest of 12% per year equals a monthly rate of 1%; monthly
interest is $65 ($6,500 x 1%). Since total interest expense is $65, the loan has been
outstanding one month.
OR
Since the total interest expense is $65, the company must have taken out the loan
one month ago on 31 August 2016. (Alternatively, 1 September 2016)
Expenses:
Salaries expense 9 050
Office supplies expense 800
Rent expense 7 500
Insurance expense 750
Depreciation expense 600
Total expenses 18 700
Profit $4 500
LIABILITIES
Accounts payable 2 900
Salaries payable 550
Rent received in advance 350
Total liabilities 3 800
NET ASSETS $12 300
EQUITY
Share capital 5 000
Retained earnings 7 300
TOTAL EQUITY $12 300
(c)
Aurora Pty Ltd
General Journal
Date Account name (narration) Ref Debit $ Credit $
#
June 30 Service Revenue 17 300
Rent Revenue 5 900
Profit or loss summary 23 200
(Closing entry)
30 Profit or loss summary 18 700
Salaries Expense 9 050
Office Supplies Expense 800
Rent Expense 7 500
Insurance Expense 750
Depreciation Expense 600
(Closing entry )
30 Profit or loss summary 4 500
Retained Earnings 4 500
(Closing Entry)
(b)
McPherson Ltd
Statement of profit or loss
for the 3 months ended 31 March 2015
$ $
Revenues:
Sales revenue 18 600
Rent revenue 12 000
30 600
Expenses:
Salaries expense 11 340
Rent expense 6 000
Depreciation expense 1 750
Supplies expense 900
Electricity expense 750
Interest expense 250
Total expenses 20 990
Profit $ 9 610
McPherson Ltd
Calculation of Retained Earnings
for the 3 months ended 31 March 2015
McPherson Ltd
Statement of financial position
as at 31 March 2015
$ $
ASSETS
Current Assets
Cash 15 750
Accounts receivable 6 800
Supplies 600
Total Current Assets 23 150
Non-Current Assets
Equipment 32 000
Less: Accumulated Depreciation (1 750)
Total Non-Current Assets 30 250
Total Assets 53 400
LIABILITIES
Current Liabilities
Accounts Payable 1 840
Interest Payable 250
Salaries Payable 1 800
Rent Revenue Received in Advance 500
Total Current Liabilities 4 390
Non-Current Liabilities
Bank Loan 15 000
Total Non-Current Liabilities 15 000
Total Liabilities 19 390
NET ASSETS $34 010
EQUITY
Share Capital 25 000
Retained Earnings 9 010
TOTAL EQUITY $34 010
(b)
Lou’s Advertising Agency Pty Ltd
Statement of profit or loss
for the year ended 31 December 2017
$ $
Revenues:
Advertising revenue 172 200
Expenses:
Salaries expense 31 640
Depreciation expense 19 600
Rent expense 11 200
Art supplies expense 9 520
Insurance expense 2 380
Interest expense 1 400
Total expenses 75 740
Profit $96 460
Non-Current Assets
Printing Equipment $168 000
Less: Accumulated Depreciation (98 000)
Total Non-Current Assets 70 000
Total Assets 182 000
LIABILITIES
Current Liabilities
Accounts Payable 14 000
Interest Payable 420
Salaries Payable 3 640
Advertising Revenue Received in Advance 15 680
Total Current Liabilities 33 740
Non-Current Liabilities
Bank Loan 14 000
Total Non-Current Liabilities 14 000
Total Liabilities 47 740
NET ASSETS $134 260
EQUITY
Share Capital $56 000
Retained Earnings 78 260
TOTAL EQUITY $134 260
(f) The effect of profit from the adjustments is a net decrease of $ 27 440.
Cash 100
31/5 Balance 4 500
Supplies 113
31/5 Balance 2 660 31/5 Supplies Expense 980
31/5 Closing Balance 1 680
2 660 2 660
1/6 Opening Balance 1 680
Land 120
31/5 Balance 21 000
Building 122
31/5 Balance 98 000
Furniture 130
31/5 Balance 23 520
(d)
The Palpatine Hotel Ltd
Adjusted Trial Balance
as at 31 May 2016
(e)
The Palpatine Hotel Ltd
Statement of profit or loss
for the month ended 31 May 2016
$ $
Revenues:
Rent revenue $14 980
Expenses:
Salaries expense 4 620
Electricity expense 1 400
Supplies expense 980
Advertising expense 700
Interest expense 500
Insurance expense 210
Depreciation expense 770
Total expenses 9 180
Profit $5 800
$
Retained earnings, 1 May 2016 0
Add: Profit 5 800
Retained earnings, 31 May 2016 $5 800
$ $
ASSETS
Current assets
Cash 4 500
Prepaid insurance 2 310
Supplies 1 680
Total current assets 8 490
Non-current assets
Land 21 000
Buildings 98 000
Less: Accumulated depreciation – building (420) 97 580
Furniture 23 520
Less: Accumulated depreciation – furniture (350) 23 170
Total non-current 141 750
Total assets 150 240
LIABILITIES
Current Liabilities
Accounts payable 6 580
Rent revenue received in advance 2 940
Salaries payable 420
Interest payable 500
Total current liabilities 10 440
Non-current liabilities
Mortgage payable 50 000 50 000
Total liabilities 60 440
NET ASSETS $89 800
EQUITY
Share capital 84 000
Retained earnings 5 800
TOTAL EQUITY $89,800
Cash 100
1/7 Share Capital 27 000 1/7 Motor Vehicles 9 000
21/7 Accounts Receivable 4 200 5/7 Prepaid Insurance 3 600
18/7 Accounts Payable 4 500
20/7 Salaries Expense 3 600
31/7 Petrol & Oil Expense 600
31/7 Dividends 1 800
31/7 Closing Balance 8 100
31 200 31 200
1/8 Opening Balance 8 100
Dividends 315
31/7 Cash 1 800 31/7 Retained Earnings 1 800
* (e) Adjusting entry, nil balance before adjusting entry, $450 dr after adjustment, before
closing
* (e) Adjusting entry, nil balance before adjusting entry, $300 dr after adjustment, before
closing
Salaries Expense 540
20/7 Cash 3 600 31/7 P & L Summary 4 800
31/7 Salaries Payable* 1 200
4 800 4 800
* (e) adjusting entry $3 600 dr balance before adjusting entry, $4 800 dr after adjusting entry
before closing
(d)
General Journal Contract Cleaning Pty Ltd
Date Account name (narration) Post Debit Credit
Ref.
1. July 31 Accounts Receivable 110 3 300
Service Revenue 400 3 300
(Accrued revenue)
(g)
Contract Cleaning Pty Ltd
Statement of profit or loss
for the month ended 31 July 2015
$ $
Revenues:
Service revenue 16 800
Expenses:
Salaries expense 4 800
Cleaning supplies expense 900
Depreciation expense 600
Petrol & Oil expense 600
Insurance expense 300
Total expenses 7 200
Profit $9 600
$ $
ASSETS
Current assets
Cash 8 100
Accounts receivable 12 600
Cleaning supplies 1 800
Prepaid insurance 3 300
Total current assets 25 800
Non-current assets:
Motor Vehicles 18 000
Less: Accumulated depreciation (600)
Total non-current assets 17 400
Total assets 43 200
LIABILITIES
Current liabilities:
Accounts payable 7 200
Salaries payable 1 200
Total current liabilities 8 400
NET ASSETS $34 800
EQUITY:
Share capital 27 000
Retained earnings 7 800
TOTAL EQUITY $34 800
(h)
Contract Cleaning Pty Ltd
General Journal closing entries
(i)
Contract Cleaning Pty Ltd
Post-Closing Trial Balance
as at 31 July 2015
(a) Chart of accounts: students may have different account numbers as long as they are
grouped to sections of the ledger.
100 Cash
110 Accounts receivable
120 Supplies
150 Store equipment
151 Accumulated Depreciation
200 Accounts Payable
210 Service Revenue Received in Advance
215 Salaries Payable
300 Share Capital
310 Retained earnings
400 Service Revenue
510 Depreciation Expense
515 Supplies Expense
520 Salaries Expense
525 Rent Expense
Supplies 120
1/11 Opening Balance 1 200 30/11 Supplies Expense 1 080
17/11 Accounts Payable 1 800 30/11 Closing Balance 1 920
3 000 3 000
1/12 Opening Balance 1 920
(c)
© John Wiley and Sons Australia Ltd, 2016 3.110
Solutions manual to accompany Financial accounting: recording, analysis and decision making 5e
Unadjusted Adjusted
Account name s Debit Credit Debit Credit
(f)
Naboo Equipment Ltd
General Journal
(g)
Naboo Equipment Ltd
Statement of profit or loss
for the month ended 30 November 2015
Revenues:
Service revenue $3 120
Expenses:
Salaries expense $2 520
Supplies expense 1 080
Rent expense 360
Depreciation expense 144
Total expenses 4 104
Loss ($ 984)
LIABILITIES
Accounts payable 4 920
Salaries payable 600
Service revenue received in advance 780
Total liabilities 6 300
NET ASSETS $14 376
EQUITY
Share capital 12 000
Retained earnings 2 376
TOTAL EQUITY $14 376
Totals $24 780 $24 780 $2 184 $2 184 $25 524 $25 524 $4 104 $4 104 $22 404 $22 404
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Cash 100
1/9 Share Capital 150 000 1/9 Motor Vehicles 45 000
23/9 Accounts Receivable 18 000 7/9 Prepaid Insurance 27 000
21/9 Accounts Payable 55 500
21/9 Salaries Expense 15 300
30/9 Petrol & Oil Exp 1 980
30/9 Dividends 900
30/9 Closing Balance 22 320
168 000 168 000
1/10 Opening Balance 22 320
Dividends 315
30/9 Cash 900 30/9 Retained Earnings 900
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* (e) Adjusting entry, nil balance before adjusting entry, $15000 dr after adjustment, before
closing
* (e) Adjusting entry, nil balance before adjusting entry, $750 dr after adjustment, before closing
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(g)
On Call Services Ltd
Statement of profit or loss
for the month ended 30 September 2015
$ $
Revenues:
Service revenue 60 600
Expenses:
Salaries expense 20 700
Cleaning supplies expense 15 000
Depreciation expense 1 500
Petrol & Oil expense 19 800
Insurance expense 2 250
Total expenses 41 430
Profit $19 170
$ $
ASSETS
Current assets:
Cash 22 320
Accounts receivable 42 600
Cleaning supplies 3 600
Prepaid insurance 24 750
Total current assets 93 270
Non-current assets:
Motor Vehicles 90 000
Less: Accumulated depreciation (1 500)
Total non-current assets 88 500
Total assets 181 770
LIABILITIES
Current liabilities:
Accounts payable 8 100
Salaries payable 5 400
Total liabilities 13 500
NET ASSETS $168 270
EQUITY
Share capital 150 000
Retained earnings 18 270
TOTAL EQUITY $168 270
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(i)
On Call Services Ltd
Post-Closing Trial Balance
as at 30 September 2015
No. Account name Debit $ Credit $
100 Cash 22 320
110 Accounts Receivable 42 600
120 Cleaning Supplies 3 600
130 Prepaid Insurance 24 750
171 Motor vehicles 90 000
172 Accumulated Depreciation – MV 1 500
200 Accounts Payable 8 100
210 Salaries Payable 5 400
300 Share Capital 150 000
310 Retained Earnings 18 270
$183 270 $183 270
Totals $213 300 $213 300 $29 550 $29 550 $225 600 $225 600 $60 600 $60 600 $61 390 $61 390
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(a) Items that may have resulted in adjusting entries for accruals are:
(b) The employee benefits provision was $3,383,000. The split between current and non-
current is unclear .Other provisions of $167,000 are included and of total provisions
$3,550,000 ($3,383,000 +$167,000) -- $3,109,000 is classified as current and $441,000
as non-current.
There is also a note stating that $2,715,000 of the current employee benefit provisions
relates to annual leave and long service leave which is not expected to be paid out
within the next twelve months ( that is it is technically current but Dominos do not expect
all employees to claim their leave entitlements within the next year.).
(c) The statement of cash flows reports income taxes paid in 2013 of $11,796,000. The
consolidated statement of profit or loss and other comprehensive income reports income
tax expense of $12,108,000.
Extract from Note 3.8 Revenue recognition of the 2013 Domino’s financial report:
3.8.4 Royalties
Royalty revenue is recognised on an accrual basis in accordance with the substance of
the relevant agreement (provided that it is probable that the economic benefits will flow
to the Consolidated entity and the amount of revenue can be measured reliably).
Royalties determined on a time basis are recognised on a straight-line basis over the
period of the agreement. Royalty arrangements that are based on sales and other
measures are recognised by reference to the underlying arrangement.
Interest revenue is recognised when it is probable that the economic benefits will flow to
the Consolidated entity and the amount of revenue can be measured reliably. Interest
revenue is accrued on a time basis, by reference to the principal outstanding and at the
effective interest rate applicable, which is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial asset to that asset’s net carrying
amount on initial recognition.”
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(b) The recognition of revenue for the sale of goods is consistent with the principles of
recognition discussed in the chapter.
(a) the entity has transferred to the buyer the significant risks and rewards of
ownership of the goods;
(b) the entity retains neither continuing managerial involvement to the degree usually
associated with ownership nor effective control over the goods sold;
(d) it is probable that the economic benefits of the revenue will flow to the entity; and
(e) the costs incurred or to be incurred in respect of the transaction can measured
reliably.’
Students should notice that the wording in the Dominos accounts are similar to the
accounting standard applicable at the date the accounts were prepared. .
Note the new accounting standard for revenue recognition was released in May 2014
and is IFRS 15 ‘Revenue from Contracts with Customers’ which is effective from
reporting periods 1 January 2017 but may be adopted earlier. In the new standard a five
step model framework is used. Essentially revenue is recognised when an entity satisfies
a performance obligation.
(c) The distinction between revenue and other income flows from the source. In Chapter 1
the textbook explains the definition from the conceptual Framework. Income
encompasses both revenue and other gains. Revenue arises in the course of the
ordinary activities of an entity and is referred to by a variety of different names including
sales, fees, interest, dividends, royalties and rent. You examined the definition and
recognition criteria for these items in your answer to part (a) .
Gains represent other items that meet the definition of income and may, or may not,
arise in the course of the ordinary activities of an entity. Gains represent increases in
economic benefits and as such are no different in nature from revenue. Hence, they are
not regarded as constituting a separate element in this Framework. Gains include, for
example, those arising on the disposal of non-current assets. See Note 8 of the
Domino’s financial statements.
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Micro Ltd
General Journal
(a) (Amounts in millions)
5. Rent Expense 12
Prepaid Rent 12
(Prepaid rent now expensed)
6. Interest Expense 20
Interest Payable 20
(To accrue interest expense)
(b) The accounts are considered in the order of the journal entries:
Expenses:
Cost of sales 7050
Selling, general and administrative 1204 (1)
Research and development 351 (2)
Interest expense 380 (3)
8985
(3) Original figure $360 million + $20 million not recorded = $380 million.
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Chapter 3: Accrual accounting concepts
(d) Useful information to disclose would be the basis of accounting for the items. For
example: when is revenue recognised? The statement of profit or loss has categories of
expenses which are classified according to areas within the business. It may be useful to
further split the expense between administrative and selling. The accounts are usually
prepared using last year as a comparative.
This solution is based on the 2014 Annual Report of Fairfax Media Limited
“G REVENUE RECOGNITION
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the
Group and the amount of the revenue can be reliably measured. Revenue from advertising,
circulation, subscription, online services, radio broadcasting and printing is recognised when
control of the right to be compensated has been obtained and the stage of completion of the
contract can be reliably measured. For newspapers, magazines and other publications the right
to be compensated is on the publication date. Revenue from the provision of online advertising
on websites is recognised in the period the advertisements are placed or the impression occurs.
Amounts disclosed as revenue are net of commissions, rebates, discounts, returns, trade
allowances, duties and taxes paid.
Dividend revenue is recognised when the Group’s right to receive the payment is established,
which is generally when the dividend has been declared.
Interest revenue is recognised as it accrues, based on the effective yield of the financial asset. “
(b)Which items referred to in the revenue recognition policy require accrual adjustments and
which items require adjustments for prepaid revenue?
Items which need accrual would be the interest and the dividend revenue.
Items which would need adjustment for prepaid revenue could be if advertising is paid ahead of
the publication or the online impression. It is assumed here revenue is before Fairfax completes
the contract. For example it may be a twelve month subscription to a publication. So Fairfax
would recognise the revenue when they meet their obligation under the contract ie when the
monthly publication is produced and send to the customer.
(c) Is the way that Fairfax Media recognises revenue consistent with the revenue recognition
criteria discussed in the chapter?
The revenue recognition is consistent with the conceptual framework in that the revenue amount
must be reliably measured and it is probable that the economic benefits will flow to the group. It
is also consistent with old IAS 18 Revenue, where Fairfax states it will only recognise when
control of the right to be compensated has been obtained and the stage of completion of the
contract can be reliably measured.
Although the new recognition criteria uses different wording, I do not expect any change to the
method of revenue recognition at Fairfax.
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CRITICAL THINKING
(a)
Holiday Travel Australasia
Statement of profit or loss
for the year ended 31 March 2017
$ $
Revenues:
Service revenue ($150000 - $16000) 134 000
Expenses:
Advertising expense
(8700 +15000 – 5200+3200) 18 800
Wages expense ($56400 + $300) 56 700
Electricity expense ($4600 + $320) 4 920
Depreciation expense 1 200
Repair expense ($4000 + $2000) 6 000
Insurance expense ($21000 x 9/12) 15 750
Interest expense ($20000 x 10%x 3/12) 500
Total expenses 115 670
Profit $19 330
(b) Accrual accounting was not followed with respect to several items of revenue and
expense. Revenue recognition criteria had not been followed as revenue of $16,000 had
been recognised for services not yet performed.
Similarly, expense recognition principles were not followed. Expenses were not recorded
even though a decrease in economic benefits had occurred (consumption of supplies,
expiry of insurance) and they could be measured reliably.
Likewise not recording the advertising, electricity and repair expenses (and
corresponding liabilities), was inconsistent with the expense and recognition criteria; it is
probable that an outflow will occur because the parties who have invoiced Holiday Travel
Australasia have a valid and enforceable claim, and the amount can be recognised
reliably as the invoice has been received. Similarly, the expense recognition criteria were
not followed with respect to wages expense and interest expense. While these amounts
were not invoiced they could be measured reliably by calculating the unpaid wages and
interest.
Sam Portafello
(a) – (d)
Executive Summary
This report examines two alternative forms of accounting: cash-based and accrual accounting.
Adoption of accrual accounting is recommended because it provides more information about the
financial position of the business, in particular, assets and liabilities, and results in a more
inclusive measure of profit that reflects increases and decreases in all assets and liabilities, and
not only movements in cash.
Detailed Report
Accrual accounting records the events in the periods in which the events occur, rather than in
the periods in which the entity receives or pays cash. This report presents an argument in
favour of the use of accrual accounting for business reporting.
Cash-based accounting records transactions when cash is paid or received. Thus some items
that may be relevant to assessing how the business has performed during the period may be
omitted because the resulting cash is received or paid in a different period. For example, wages
and other expenses, such as telephone and electricity expenses, are omitted to the extent that
they are unpaid at the end of the period. Further, revenues for which the customer has not yet
paid are omitted by cash-based accounting.
Some items are included as revenues and expenses under cash-based accounting that would
be separately identified as assets and liabilities under accrual accounting. For example, a
receipt for rent revenue in advance is accounted for as revenue under cash-based accounting.
Under accrual accounting only that portion of the rental receipt that pertains to the current
reporting period is recognised as revenue; and the amount of the rental payment received for a
rental period that has not expired at the reporting date, is recognised as a liability (rent received
in advance). Examples of omitted assets include prepaid insurance and prepaid rent. Under
cash-based accounting, all insurance premiums and rental paid are treated as expenses even
though the periods covered by the premiums and rentals may not have expired.
The differences between accrual accounting and cash-based accounting are more pronounced
when non-current assets are involved. Non-current assets involve large payments and benefits
which extend over more reporting periods than other forms of prepayments (such as insurance
premiums). Accordingly, the acquisition of non-current assets causes greater distortion of profit
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Chapter 3: Accrual accounting concepts
in a single period, thus making the use of accrual accounting more appropriate for the
measurement of profitability.
Information presented on an accrual basis is useful because it reveals relationships that are
likely to be important in predicting future results. Conversely, under cash basis accounting,
revenue is recorded only when cash is received, and an expense is recognised only when cash
is paid. This results in the omission of assets and liabilities. As a result, the cash basis of
accounting often leads to misleading financial statements. Accordingly, accrual accounting is
recommended for your business to provide more comprehensive information about its financial
position and financial performance to assist decision makers.
(a) The stakeholders in this situation include anyone who relies on the press release.
(b) Ed’s application of the timeliness constraint is inappropriate. The constraint refers to
situations where delaying the reporting of information until all aspects of a transaction or
event are known may cause loss of relevance. Thus it may be necessary to report
information before all aspects of a transaction are known. In the case of Wellcovered
Insurance, Ed Honcho is suggesting that the information be reported before ANY
aspects of the relevant transactions are known.
(c) Ed’s actions are inconsistent with reliability, which is one of the principal qualitative
characteristics identified in the Framework for the Preparation and Presentation of
Financial Statements. One aspect of reliability is that the information is free of material
error. Ed and Ben are unable to determine the reliability of the information due to the
effects of the computer virus. Accordingly the estimated numbers may be very
misleading,
(d) It would be unethical to report the financial results without full disclosure that they are
estimates, and that actual figures are unavailable due to the computer virus. Users
relying on the information should be aware of its inherent uncertainty and the associated
risks.
(e) A significant overestimation of profit is likely to increase the share price. However, this
would be a temporary gain because the share price would fall when the actual information
is disclosed. Shareholders who sold while the price was high would make a gain at the
expense of those who purchased them. More long-term damage to the company (in the
form of share price and reputation) may occur when shareholders and investors observe
that the company disclosed information that was subsequently found to be materially in
error; they may have less confidence in information provided by the company in future.
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Note to instructor the response will depend on which sustainability report the student accesses.
You can vary the question depending on what you wish to student to concentrate their research
on.
Woolworths: http://www.woolworthslimited.com.au/
Students were asked to outline Woolworths the priority of the environmental sustainability
issues. This is contained on pp 10 and 11 of the report.
1. Climate change:
Use of fuel and associated greenhouse gas and other emissions in our distribution
network (trucks) and our company cars/business travel.
3. Sourcing of our private label products and ingredients as well as other products and services.
4. Packaging – including consumer packaging in our private label products and distribution
packaging.
The students were then required to access the latest annual sustainability report and
summarise the achievements in contribution to the community and environmental
stewardship.
It would be expected that the students would then list the goal and how it was measured and
how the achievement in that area was measured.
Page 52 outlines the approach which refers to the strategic document given in the questions.
“Woolworths has set targets and made commitments to be a responsible and sustainable
business; this can only be achieved with the support of our people at all levels of our business.
As any business should, Woolworths gives priority to issues that are material to the business
and which align with our strategic pillars.
The Destination Zero safety strategy and the Sustainability Strategy 2007–2015 provide the
direction and focus for practices, policies and investment.”
Woolworths target was the equivalent of 1% of pre-tax profit going towards supporting
communities in which it operates.
In 2013 Woolworth’s invested the equivalent $63.6 Million to support community partners
programs such as the Salvation Army Legacy, plus various other charities in Australia. In New
Zealand the Countdown supermarkets contributed by running the Countdown kids hospital
appeal , Countdown food Rescue programs and giving in other local programs.
The $63,3 M was comprised of $33.2 m in cash donation; $19.6 raised by staff and customers;
$1.6m in kind; and $9.2m in staff and management’s time.
Based on that the 2013 performance was “Woolworths’ total carbon emissions in Australia and
New Zealand were 4.33 Mt, a 5.8% increase from the previous year. Emissions from our
buildings totalled 3.6 Mt, which was a 7.8% increase in emissions.
The report continued with more positive achievements: “Despite this, our carbon emissions are
still 570,000 tonnes lower than they would have been without our investment in energy efficient
and low carbon technology.
We implemented 22 new projects in 2013, which reduced electricity usage by 16,022 MWh and
reduced carbon emissions by 14,580 tonnes during the year.
Photovoltaic systems at Petrol sites in Hume and Belconnen in the Australian Capital Territory
generated 86,641 kWh, reducing carbon emissions by 92 tonnes – the equivalent of taking 21
cars off the road.
Most of Woolworths’ company car fleet comply with the high environmental standards set for
fuel efficiency and emissions. Annual car emissions have been reduced by 6,438 tonnes
compared to 2007, which is equivalent to taking almost 1,500 vehicles off the road.”
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