ACC203A Report on Financial Accounting Assessment Answer

• Introduction

This report aims at explaining the accounting treatment of some special transactions undertaken at Jones Limited for the month of June 2021. The accounting transactions are undertaken using Xero accounting software. This report will discuss one by one for the treatment of such transactions.

• General Transactions

For the inventory which costed $20,700 is required a reduction in value of 25%, which is $5,175. $25,100 worth of inventory has been lost due to damage because of floods. The accounting treatment is given as loss of inventory affecting the increase in expenses and reduction in inventory value. Accordingly, the balance sheet gets impacted.

The borrowings amounting to $10,450 are classified as current out of the total non-current borrowings, which impacted the line items amount of the liabilities side of the balance sheet without impacting the total. 

For the omitted entry of sales return, respective COGS will be reversed impacting the reduction in profits by the amount of mark-up. 

Out of the total computed required allowance for doubtful debts, the existing balance is reduced to affect the current allowance of $3,152.

The total amount of $ 32,000 which was erroneously recorded as intangible assets are reversed and recorded as brand development expense. 

• Impairment Loss

The impairment loss of $ 18,000 is provided for to impact the value of intangible assets. Such loss can be reversed if the conditions goes favourable. This is as advised by the AASB-136. But for the goodwill, reversal is not permitted. 

• Research and development expense

The research and development expense amounting to $228000 for testing the prototype shall be capitalised as per AASB-138. This expense is to check the viability of undergoing project. More to it, this project is also supposed to generate future economical benefits. 

• Lease Payment

As per AASB-16, the asset comprising of the period more than 12 months and the lessee is exclusively in the use of such asset, the lease thus, is a finance lease. For the lease payment of $ 400,000, the lease liability gets generated as of current nature. The depreciation amounting to $ 381,028 is also provided for the lease asset as the accumulated depreciation on the right of use asset. The interest amounting to $ 37404 is recorded as finance cost for the period. 

• Conclusion

The aim of this report was explaining the accounting treatment of some special transactions undertaken at Jones Limited for the month of June 2021. The report thus gets concluded by accomplishment of its objective.

Appendix

1. Balance Sheet

2. Profit and loss

3. General Journal

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