ACCT11081 INTRODUCTORY FINANCIAL ACCOUNTING

ASSIGNMENT 1

STEP 7, 8, 9, 10 & 11

STUDENT NAME: MARIYA TAMANG

STUDENT NUMBER: 12049685

UNIVERSITY: CQU, SYDNEY

Step 7

Step 7 involves you exploring the inventory practices of your firm.

According to hogget (2015), the term inventories means goods or propery purchased by firms and held them for sale in upcoming operating cycle of a business. Normally in business, people call inventory ‘stock’. Inventories are assets for business firms. So they are debited. Inventories can be raw materials, work in process or unfinished goods, finished goods that are still in the firm being ready for sale that haven’t taken out or gone out for sale. Work in progress or unfinished goods are those inventories which are in process to be final or finished goods. Normally these inventories can’t be used for sale. Finished goods are those inventories which are all set or ready to go out for sale. They are equal to some certain price. My company is ANSELL. It is an American company that is considered as world leader in providing superior health and safety protection solutions. It produces and designs a huge rage of protection solutions that helps to meet changing needs and demands of industrial market.

2014

Inventories in 2014 are 311.5 million dollars. Inventories are current assets of firms. In 2014, ANSELL’s total current assets are 931.6 million dollars. Inventories have occupied 33.43% of total current assets. This is quite big thing, I think. As mentioned in ANSELL’s notes to financial statements, inventories of 2014 include raw materials, work in progress and finished goods. Out of total inventories of 311.5 million dollars, raw materials are worth 39.3 million dollars, work in progress is of 24.0 million dollars and finished goods are equivalent to 248.2 million dollars. Here, we can clearly see that ANSELL has produce maximum finished goods for sale. As shown in in the notes to the statement of cash flows, the value of increase/decrease in inventories is positive i.e. 13.9 million dollars. That means it has reduced its inventories from stock by selling its maximum products. This refer that it has increase its sales.

2015

Inventories in 2015 are 339.6 million dollars. Total current asset in 2015 is 897.5. It has occupied more % of total current assets. This year ANSELL seems to be producing more goods since it has increased its inventories. This year also, all three types of inventories are included. Out of total 339.6 inventories, raw materials are of 46.1 million dollars, work in progress inventories are of 20.7 million dollars where finished goods are of 272.8 million dollars. All the inventories have slightly increased than in 2014. As shown in the notes to the statement of cash flow, value of increase/decrease in inventories is negative i.e. (46.9) which means inventories

have increased. This year ANSELL seems to be fail in selling maximum goods comparatively in previous year (i.e.2014)

2016

Inventories in 2016 are 322.8 million dollars. Total current assets are 846.6 and inventories are 38.12% of total current assets. This year again value of inventories has increased that in the previous two years. Out of total inventories raw materials are of 40.1 million dollars, work in progress is of 19.0 million dollars and finished goods are of 263.7 million dollars. This year ANSELL seems to be producing more goods than in 2015. In the notes to statement of change in cash flow, value of inventories is positive i.e. 0.7 that means there is decrease in inventories. That means ANSELL must have sold finished goods out.

While going through all three year’s annual reports, ANSELL doesn’t seems to have any changes in inventory practice. There is just slight difference in values. And in all three year’s annual report there is a term ‘inventories recognized as an expense’ in notes to the financial statements. I didn’t get what does that means.

Honestly, I didn’t find any clue to identify whether my company does perpetual inventory system or periodic inventory system. Neither I found any clue that made me clear whether it use weighted average, LIFO,FIFO or specific identification method of inventory. But I found word ‘weighted average’ in all three annual reports of ANSELL so, I, myself assumed that may be ANSELL use weighted average method of inventory. If it is right then ANSELL does periodic inventory system. However, it’s just my assumption so I might be wrong also. But if I am right then I would like to request to Martin/Maria to clarify about this to me in my feedback. Well I am not experienced with inventory that well. It’s just I have read about LIFO and FIFO before in my home country. But these perpetual or periodic system, weighted average method and specific identification method is new to me. If, it would me I would have use FIFO method so that all the stocks were sold according to the date.

STEP 8

Step 8 involves exposing you to a commonly used accounting software. In this step, you will learn how to use MYOB AccountRight.

I had seriously no idea about this thing. MYOB????? What does it means? Though I have been studying Accounting since last 4 years, I never heard about this thing. I am sure it is seriously gonna be hard and complicated. But it seems interesting as well. Let’s see what is upcoming…..

Well, I downloaded MYOB in my computer and installed it as well. I found so much difficulties to install it. Downloading was not an issue. It was easy but installation made me mad. I don’t know what was wrong with my laptop; it was not accepting MYOB’s installation. I tried it so hard but I failed so many times. But finally I did it.

After installing MYOB, I started its online training. Though it was quite long but very useful. I have inserted screen shot of my trainings as well as quizzes.

Online Quizzes

Well done to MYSELF, successfully completed my MYOB online training and quizzes as well. I was so afraid to attempt quizzes at the beginning but it was quiet easier than I thought. Training was so long and honestly, I felt so bore in some point. But overall it was so interesting. I never thought accounting could be like this as well. It has all the solutions regarding business. It is so

systematic that this MYOB is so great. Well I still have to learn many more. I had no idea about MYOB. This is brand new to me, like seriously. Though this is my 1st time using MYOB, I did quiet well in quizzes. Actually, I enjoyed doing this step. Excited to learn many more…..

STEP 9

Step 9 involves you creating a set of business transactions for your company, recording these in MYOB, and producing a set of financial statements from MYOB.

Ahhhh!!! This step is challenging I think. MYOB is so new to me and here, in this step I have to use it. I have to make transactions for my company and have to record all the transactions in the MYOB. And after that I have to prepare a set of financial statements from MYOB. At the moment I don’t have any idea what I am going to do. Making transactions is not a big deal but what would I do after making those transactions, I have no idea. Let’s see what I can do ;-).

Hypothetical transactions

Dates Transactions4/08/2017 Sale of 2000 pieces surgical gloves to Anil’s Pharmacy Ltd for $2 each, inclusive

GST, worth $4000. Not paid yet.4/08/2017 Purchased 100 press shop machines for $100 each From Ram’s Machines Group

Ltd, worth $10000.8/08/2017 Sale of 500 Aprons to Sydney Medical College for practical $10 each, Worth

5000. Not paid yet.9/08/2017 Received full payment from Anil’s Pharmacy Ltd for sale of surgical gloves. Total

$4000.16/08/2017 Received full payment from Sydney Medical college for sale of Aprons. Total

$5000.17/08/2017 Sale of 500 pieces chemical sleeves to Sydney hospital $20 each. Inclusive GST,

worth $10000. Not paid yet31/08/2017 Received full payment from Sydney hospital for chemical sleeves worth $10000.

31/08/2017 Paid Dinesh Technpologies for the bill of $4500.

31/08/2017 Payment for the worker’s jackets made by directly transferring from ANSELL Bank account to MYER, worth $50000

31/08/2017 Ansell rented a small clinic in Canberra. Rent was directly transfer from their bank account for two month. $2500 per month. Total $5000.

All Journal Report

Income statement

Balance sheet

Cash Flow Statement

From the above financial statements of my company, it can be seen that my company went through loss in the month of august. But I don’t think it is an accurate statement for my company ANSELL. Because while making hypothetical transactions, I was not sure about all the regular and usual incomes and expenses of my company. I just made them on the basis of its regular products and services and also from its annual reports.

STEP 10

Step 10 involves you describing your firm’s Depreciation policies and creating Depreciation journal entries based on your firm’s financial statements.

This step is little confusing for me. Though I have basic ideas about depreciation, here, on this section, question is asking something different. My understanding won’t be enough to complete this step. I am sure. I will have to do a lot of hard work I guess.

According to Hogget (2015), Allocation of the cost of a tangible asset over it’s useful life is called depreciation. It is an accounting method. Firms and business use depreciation method for both tax and accounting purpose. Depreciation is charged on the basis of asset’s useful life or residual value. Depreciation is very important aspect for business organizations. Depreciation helps us to know the real/ actual price of any assets by passing time or passing life of any assets. According to Hogget (2015), there are four methods of allocating depreciation. They are as below:

1. Straight-line method 2. Diminishing- balance method3. Sum-of-years-digits method4. Units-of-production method

My company, ANSELL, use straight line depretiation method. It means an equal amount of depreciation in the assets useful life to each full accounting period. Depreciation amount is always same in each depreciation. ANSELL depreciates property, plant and equipment and tangible assets on a straight line basis over their useful economic lives.

Straight-line method

This method is most popular method of allocating depreciation. And I guess this is the easiest one as well. In this method, an equal amount of depreciation is allocated to each accounting period in the asset’s useful life. I have read about this method before also. So it is quite familiar and easy to me. Depreciation in this method is calculated by using below formulae:

Depreciation amount = (cost of assets – its residual value)/ number of periods in the asset’s useful life.

In ANSELL, different assets has different expected life. I have shown them in the table below.

Assets Useful lifeFreehold building 20-40 yearsLeasehold building Lesser than 50 years

Plant and equipment 3-20 years

2014 2015 2016Depreciation 25.2 million dollar 28.3 million dollar 29.0 million dollarAmortization 10.0 million dollar 7.1 million dollar 9.0 million dollarProfit/loss before tax 65.3 million dollar 223.8 million dollar 214.5 million dollar

All these three years, ANSELL has been using the same depreciation method that is straight line method. It hasn’t changed anything. There were so many terms in the annual report which I really didn’t understand. They just bounced over my head actually.

Journals of my company, ANSELL’s depreciation transactions.

Date Journal entries Debit (Dr) Credit (Cr)June 30 Depreciation Expense – Property, plant and

equipment

Accumulated Depreciation – Property, plant and equipment

(Depreciation expense for the year)

XXXX

XXXX

June 30 Depreciation Expense – Freehold Building

Accumulated Depreciation – Freehold Building

(Depreciation expense for the year)

XXXX

XXXX

June 30 Depreciation Expense – Leasehold building

Accumulated Depreciation – Leasehold building

(Depreciation expense For the year)

XXXX

XXXX

June 30 Amortization Expense

Accumulated amortization

(Amortization expense for the year)

XXXX

XXXX

Finally completed this step. Depreciation is not hard as much as I used to think. While analyzing my company’s annual reports, I didn’t anything that clarify that journal entries has any effect on my company’s annual report. But yes it is true that journal entries help a lot to prepare annual reports. And yes, I think depreciation expense is significant for my company. Not only for ANSELL but for every company or business firms depreciation expense is useful. It is useful because firm can calculate its actual expense upon any assets after purchasing. It can assume its selling price over periods.