Opening Adjustable Value Method Effective Decline in Closing Value for This Period Value 800 Asset Cost Life Adjustable Diminishing Value Prime Cost Prime Cost Printer 1,200 1,200 3 years 400 3,000 2,400 2,600 1,040 300 10 years 520 2,100 520 Desks Appliances 5 years All depreciable assets are 100% for business use and Ace uses a low-value pool for all eligible assets. The closing value of the low-value pool at 30 June 2019 was $8,000. Ace purchased a camera on 20 Jan 2020 for $840. Advise Ace of the Income Tax consequences arising out of the above information for the 2019 2020 Income year assuming Ace is not a small business entity.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
An extract of the Asset Register of Ace Pty Ltd (“Ace”) for the 2018 - 2019 Income year is
shown as follows:
Asset Cost Opening
Adjustable
Value
Method Effective
Life
Decline in
Value for
This Period
Closing
Adjustable
Value
Printer 1,200 1,200 Diminishing
Value
3 years 400 800
Desks 3,000 2,400 Prime Cost 10 years 300 2,100
Appliances 2,600 1,040 Prime Cost 5 years 520 520
All
assets. The closing value of the low-value pool at 30 June 2019 was $8,000. Ace purchased a camera on 20 Jan 2020 for $840.
Advise Ace of the Income Tax consequences arising out of the above information for the 2019 - 2020 Income year assuming Ace is not a small business entity.
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