Financial Accounting Practice Example

Answer:

Answer to question 1:

In the Books of Chili
Journal Entries
Date	Particulars	Debit	Credit
01-01-2017	Bank A/c………………………………Dr	€ 3,00,000.00
	To Share Application A/c		€ 3,00,000.00
	(Being share application money received for 10000 shares)
01-01-2017	Share Application A/c………………….Dr	€ 3,00,000.00
	To Share Capital A/c		€ 3,00,000.00
	(Being Share application money transferred to share capital)
20-01-2017	Building A/c……………………………Dr	€ 50,000.00
	Computer Equipment A/c………………Dr	€ 20,000.00
	To Cash A/c		€ 35,000.00
	To Bank A/c		€ 35,000.00
	(Being tangible assets purchased and paid 50% by cash and 50% by bank loan)
10-03-2017	Merchandise Inventory A/c………………Dr	€ 30,000.00
	To Cash A/c		€ 15,000.00
	To Accounts Payable A/c		€ 15,000.00
	(Being merchandise goods purchased and paid in cash with remaining balance being purchased on account)
30-03-2017	Employees’ Salaries A/c………………Dr	€ 30,000.00
	To Bank A/c		€ 30,000.00
	(Being employees’ salaries paid)
01-07-2017	Prepaid Rent A/c……………………..Dr	€ 12,000.00
	To Cash A/c		€ 12,000.00
	(Being six months’ rent paid at 2000 per month)
31-08-2017	Accounts Receivable A/c………………Dr	€ 3,00,000.00
	Cash A/c……………………………Dr	€ 2,00,000.00
	To Merchandise Inventory A/c		€ 5,00,000.00
	(Being accounts receivable and partial amount received in cash)
31-08-2017	Cost of Goods Sold A/c……………..Dr	€ 30,000.00
	To Inventory A/c		€ 30,000.00
	(Being costs of goods sold charged from finished goods)
30-10-2017	Cash A/c………………………….Dr	€ 1,00,000.00
	To Accounts Receivable		€ 1,00,000.00
	(Being accounts receivable received in cash)
30-10-2017	Accounts Payable A/c………………Dr	€ 1,00,000.00
	To Cash A/c		€ 1,00,000.00
	(Being accounts payable paid in cash)
30-12-2017	Amortization Expense A/c……………Dr	€ 11,667.00
	To Accumulated Amortization A/c		€ 11,667.00
	(Being amortization expenses recorded for building and equipment)
30-12-2017	Traveling Expenses A/c…………………Dr	€ 50,000.00
	To Cash A/c		€ 50,000.00
	(Being Traveling Expenses Paid)
30-12-2017	Dividends Payable A/c…………..Dr	€ 1,50,000.00
	To Cash A/c		€ 1,50,000.00
	(Being dividend paid)

Answer to question 2:

T-Accounts

Cash A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	To Cash A/c		€ 5,000.00		By Balance c/d		€ 5,000.00
			€ 5,000.00				€ 5,000.00
	To Balance b/d		€ 5,000.00
Debtors A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	To Debtors A/c		€ 50,000.00		By Balance c/d		€ 50,000.00

			€ 50,000.00				€ 50,000.00
	To Balance b/d		€ 50,000.00
Furniture A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	To Furniture A/c		€ 80,000.00		By Balance c/d		€ 80,000.00
			€ 80,000.00				€ 80,000.00
	To Balance b/d		€ 80,000.00
Computer A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	To Computers A/c		€ 4,000.00		By Balance c/d		€ 4,000.00
			€ 4,000.00				€ 4,000.00
	To Balance b/d		€ 4,000.00
Purchase A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	To Purchase A/c		€ 1,50,000.00		By Balance c/d		€ 1,50,000.00
			€ 1,50,000.00				€ 1,50,000.00
	To Balance b/d		€ 1,50,000.00
Sales A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	By Balance c/d		€ 3,00,000.00		By Sales A/c		€ 3,00,000.00
			€ 3,00,000.00				€ 3,00,000.00
					By Balance b/d		€ 3,00,000.00
Other Revenue A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	By Balance c/d		€ 10,000.00		By Other Revenue A/c		€ 10,000.00
			€ 10,000.00				€ 10,000.00
					By Balance b/d		€ 10,000.00
Creditors A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	By Balance c/d		€ 30,000.00		By Creditors A/c		€ 30,000.00
			€ 30,000.00				€ 30,000.00
					By Balance b/d		€ 30,000.00
Salaries A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	To Salaries A/c		€ 60,000.00		By Balance c/d		€ 60,000.00
			€ 60,000.00				€ 60,000.00
	To Balance b/d		€ 60,000.00
Energy A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	To Energy A/c		€ 6,000.00		By Balance c/d		€ 6,000.00
			€ 6,000.00				€ 6,000.00
	To Balance b/d		€ 6,000.00
Rent A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	To Rent A/c		€ 16,500.00		By Balance c/d		€ 16,500.00
			€ 16,500.00				€ 16,500.00
	To Balance b/d		€ 16,500.00
Marketing A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	To Marketing A/c		€ 30,000.00		By Balance c/d		€ 30,000.00
			€ 30,000.00				€ 30,000.00
	To Balance b/d		€ 30,000.00
Short Term Loan A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	To Short term Loan A/c		€ 10,000.00		By Balance c/d		€ 10,000.00
			€ 10,000.00				€ 10,000.00
	To Balance b/d		€ 10,000.00
Capital A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	By Balance c/d		€ 1,50,000.00		By Capital A/c		€ 1,50,000.00
			€ 1,50,000.00				€ 1,50,000.00
					By Balance b/d		€ 1,50,000.00
Retained Earnings A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	By Balance c/d		€ 1,500.00		By Retained Earnings A/c		€ 1,500.00

			€ 1,500.00				€ 1,500.00
					By Balance b/d		€ 1,500.00
Apple A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	To Apple A/c		€ 18,500.00		By Balance c/d		€ 18,500.00
			€ 18,500.00				€ 18,500.00
	To Balance b/d		€ 18,500.00
Tools A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	To Tools A/c		€ 5,000.00		By Balance c/d		€ 5,000.00
			€ 5,000.00				€ 5,000.00
	To Balance b/d		€ 5,000.00
Provision A/c
Dr							Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
	To Provision A/c		€ 56,500.00		By Balance c/d		€ 56,500.00
			€ 56,500.00				€ 56,500.00
	To Balance b/d		€ 56,500.00

Trial balance

Trial Balance
In the Books of GEPLAY for the year ended……….
Particulars	Amount (Dr)	Amount (Cr)
Cash	€ 5,000.00
Debtors	€ 50,000.00
Furniture	€ 80,000.00
Computers	€ 4,000.00
Purchase	€ 1,50,000.00
Sales		€ 3,00,000.00
Other Revenue		€ 10,000.00
Creditors		€ 30,000.00
Salaries	€ 60,000.00
Energy	€ 6,000.00
Rent	€ 16,500.00
Marketing	€ 30,000.00
Shor term loan	€ 10,000.00
Capital		€ 1,50,000.00
Retained Earnings		€ 1,500.00
Bills Receivables	€ 18,500.00
Tools	€ 5,000.00
Provision	€ 56,500.00
Total	€ 4,91,500.00	€ 4,91,500.00

Answer to question 3.1:

During the span of nine months ended the company has managed to derive funds from the financing activities which comprised of the $4.1 billion. Out of which $966.4 million was gained from the issuance of senior convertible notes. Additionally, the company reported $1.8 billion from the issue of senior notes with $400.2 million from the public offering of the common stock and net underwriter fees[1].

The net cash that was generated from the financing activities comprised of $2.4 billion that included a sum of $1.7 billion of net proceeds from the public offering of 7,915,004 shares of the common stock. The company makes the use of sola financing funds for certain kinds of governmental rebates, tax credits and other financial incentives which is presently available in regard to the solar and energy storage product business in an attempt to lower the cost of installation. Additionally, the company provides the storage financing options in order to support overall financing needs of the customers.

Answer to question 3.2:

The company has reported a profit of 449,140 from its operations during the period of nine month of operations. It is noteworthy to denote that the objective of the credit and collection policy is to offer Tesla with an organized and repeatable practice of credit adjudication and management of portfolio in order to support the profitability of the business and brand experience. The innovative support of the company helps in attaining profitability and experience of brand since it helps in striking the balance between the risk and reward with robust governance and compliance. However, it is noteworthy to denote that the profitability of the leasing program reported by the business is dependent on the ability of the organization in accurately projecting the residual values by securing adequate amount of financing and business partners so that the business could fund this program for growth.

Answer to question 3.3:

For Tesla the most important year to date cost that is reported is the accumulated depreciation or the accumulated Amortization. The company reported the accumulated depreciation and the accumulated amortization for the year ended stood $36.0 million for both the financial year of September 2017 and December 2016 respectively[2]. The cost included the solar energy system which was leased and to be leased during the September and December. The lease was related to the capital leased assets with the accumulated depreciation and amortization of around $1.5 million and $0.2 million respectively.

Additional the accumulated amount reported for the year to date also comprised of the accumulated depreciation on the property plant and equipment under the capital lease of the dates stood $88.3 million and $40.2 million respectively. Furthermore, it was also noticed that the company has reported an accumulated deficit of 4.298.960 and 2,997,911 for the year ended 2017 and 2016 respectively. The accumulated cost has been derived from the development of technology, trade name with cost on favourable contracts and leases. Therefore, an assertion in this regard can be bought forward by stating that the accumulated cost from year to date comprised of the cost of depreciation and amortization for the tesla motors.

Answer to question 3.4:

Considering the management of the cash flows it can be said that the company reported a cash flow from the operating activities for the year ended 2017 of 570,545 with an increase in the figures of the cash flow reported in the previous financial year of 2016. Additionally, Tesla reported the cash flow from the investing activities of 3,457,091. The figure reported a mark of improvement from the amount reported in the previous year of 2016 where the company reported the cash flow from the investing activities of 821,679.

The net increase in the cash flow from the investing activities can be primarily attributed to the purchase of property and equipment along with the purchase of the solar energy system. There was an increase in the restricted cash of the business. Additionally, the cash flows from the financing activities reported by the business stood 4,129,022 for the year 2017 with major amount of cash inflow from the issuance of common stock through public offering. Considering the payment of bill, it can be stated that Tesla has generated sufficient amount of cash from its business activities and has also reported a better profit which would be helpful for the firm in meeting its short term obligations and business bills.

Answer to question 4:

Profit and Loss Account:

In the Books of……….
Income Statement for the year ended 2017
Dr					Cr
Particulars	Amount	Amount	Particulars	Amount	Amount
Expenses			Income
Depreciation		€ 336.67	Gross Sales		€ 3,500.00
Rent		€ 20.00	Less: COGS		€ 1,500.00
Energy and water		€ 24.00	Net Sales		€ 2,000.00
Marketing		€ 150.00
Interest		€ 56.00
		€ 586.67
To Net Profit c/d		€ 1,413.33
		€ 2,000.00			€ 2,000.00

Balance Sheet:

In the books of………
Balance Sheet for the year ended 2017
Liabilities	Amount	Amount	Assets	Amount	Amount
Current Liabilities			Current Assets
Short Term Loan		€ 500.00	Cash		€ 500.00
Accounts Payable		€ 450.00	Accounts Receivables		€ 1,000.00
			Inventory		€ 100.00
Fixed and Long term			Fixed Assets
Long Term Loan		€ 250.00	Buildings	€ 1,200.00
Capital		€ 500.00	Less: Accumulated Depreciation	€ 120.00	€ 1,080.00
Add: Net Profit		€ 1,413.33	Equipment	€ 650.00
			Less: Accumulated Depreciation	€ 216.67	€ 433.33
		€ 3,113.33			€ 3,113.33

Reference List:

Deegan, Craig. Financial accounting theory. McGraw-Hill Education Australia, 2013.

Williams, Jan. Financial accounting. McGraw-Hill Higher Education, 2014.

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