Question 1...........................................................................................

2
Question 2...........................................................................................6
Question 3.........................................................................................19
Reference list....................................................................................26
Notes to Financial Statement............................................................32
..........................................................................................................33

1
 Question 1

Research Study

1) Companies outline

Shipping industry is one of the most influential industries in the world today as it
contributes heavily in international trade which increases economic development of
countries around the world. The 3 companies chosen for this report are involved in this
industry. They are MISC Berhad of Malaysia, GRINDROD Ltd of South Africa and
Richfield International Limited of Australia.
MISC is a subsidiary of PETRONAS and is currently the leading international
shipping line in Malaysia which provides marine repair, offshore floating facilities and
many other shipping related activities.
GRINDROD is a shipping company that was founded from an old pilgrim ship
which was sold from an auction and has established itself as one of the largest users of
the South African ports today.
Richfield International Limited was established at 1984 and it was set up to
provide services to large vessels; however it has developed to provide more services for
its customers.
(128 words)

2) Accounting report outline

The accounting report chosen to be analyzed for this report is the income
statement. Income statement is one of the financial reports used to provide information
regarding the profit or loss made by a company from its operations during the reporting
period (Peirson, G., & Ramsay, A., 2006). This accounting report is used to measure a
company’s performance and allows business owners’ to make decisions about their
investment in the business. It is calculated through the difference of income and
expenses to determine profit or loss of the concerned company. If the income exceeds
the expenses incurred, profit is the result. If the expenses surpass income earned during
the reporting period, then a loss is made. (110 words)

2
3) Companies comparison

Referring to the income statement acquired from MISC Berhad, GRINDROD Ltd
and Richfield International Limited, there exist some similarities and differences between
each financial report of the three companies. In this report, only 3 similarities and
differences will be listed out.

First similarity which can be pointed out is that all 3 income statements seem to
follow the basic format of an income statement stated in the framework for the
preparation and presentation of financial statements, which requires income earned
during the reporting period to be consigned with the expenses incurred in the same
period. All 3 income statements conform to this basic format as each income statement
has revenue matched against expenses to calculate profit or loss earned during the
period.

Another similarity that can be found within all three income statements is the
presence of income tax imposed on the company. According to IAS 12, income tax is
enforced when a transaction affects the equity directly. In this case, the profit earned
directly affects the equity, hence must be taxed. Referring to the 3 income statements,
profit for the year for the 3 companies are found after deducting ‘taxation’ expense,
which results lower yield in profit.

The third similarity that exists is presence of ‘basic earning per share’ categories
within each income statements. This complies with IAS 1, which state that income
statement should include ‘share of the profit or loss of associates and joint ventures
accounted for using the equity method’. This indicates how much each shareholder
earns from the profit/loss that the company makes during the reporting period.

First variation among the three income statements are the different currencies
used to prepare the income statements. MISC Berhad of Malaysia uses Ringgit
Malaysia (RM), Richfield International Limited utilizes Australian Dollar ($) while
GRINDROD Ltd of South Africa employs South African Rand (R) to represent their
functional currency in the income statements. There exists differences in currencies due
to each company conducting their businesses in different countries and as stated in

3
each accounting policies, each entity uses currency of main economic location. Thus, if
comparisons are made, it will be difficult as each income statement is conducted in
different functional currency. Each currency have different value, thus may lead to
imprecise analysis of company’s performance.

Another difference between the three incomes is the type of revenues earned
within the reporting period. For MISC, the company includes the gains from disposal of
ship as revenue in its financial report. Meanwhile, GRINDROD take account of interest
received and sale of ‘non-trading items’ as part of its revenue. Richfield International
Limited however, only state ‘revenue from operating activities’ as its income. This
variation will be lead to difficulty in comparison as there is apparent difference in
composition of revenue. The inconsistency in the way business generate income may
lead to unfair analysis of the business performance.

The third distinction that can be seen among the three income statements is the
type of expenses stated in the income statements. Both MISC and GRINDROD
generalize their expenses under ‘operating expenses’ and ‘general and administrative
expenses’ respectively. Richfield International Limited however has broken down its
expenses to several groups to highlight how money is spent within the company.
(534 words)

4
4) Ding, Entwistle & Stolowy (2007) wrote that “in a globalized business
world, it is often necessary to compare companies across national
boundaries”. Discuss this statement based on the case study you have
just completed.

The statement above has certain truth in it. Yes, in this modern time, the world is
becoming more globalized with the aid of open international trade policy and the internet.
However, it is sometimes unfair to compare performance of companies across national
boundaries as there are many factors that can affect its performance during a reporting
period. Such factors can be different accounting policies applied to each company as
they are situated at different countries, hence follow different regulations. Referring to
case study earlier, MISC of Malaysia follows MASB, Richfield International Limited of
Australia adheres to AASB while GRINDROD of South Africa complies with the
regulations set by IFRS.

However, comparisons across national borders also bring several benefits to the
companies of the same industry. By comparing performances internationally,
competition is induced indirectly among companies. Competition is seen as a benefit as
each company may want to perform better than its rival by incurring less expenses or
earning more revenue in its income statement produced annually. This form of
competition is seen as beneficial as it inspires companies to perform better in the next
reporting period.

Another advantage for comparing company performances internationally is that it

enables investors and other external financial information users to generalize the
performance of the industry, in this case, shipping industry, during specific period. This
allows for better decision-making for them so as to reduce wastage of resource
allocations.

(234 words)

5
Question 2

(A) Peirson & Ramsay (2006), Chapter 5, Question 15 : Tim Redmond’s

Mowing Service

A - L = OE
34,000 - 15,100 = 18,900 (Initial Capital)

(b) Record the transactions in the general journal.

Tim Redmond’s Mowing Service

General Journal
Date Particulars Debit Credit
20X3 $ $
April 1 Cash at bank 7,000
Accounts receivable 2,000
Mowers and equipment 5,000
Motor vehicle 20,000
Accounts payable 1,100
Loan 14,000
Capital, Tim Redmond 18,900
Tim Redmond’s initial capital at the
beginning of Tim’s Mowing Service

April 2 Telephone 600

Telephone expense 100
Cash at bank 700
Paid for mobile phone and connection fee

April 5 Cash at bank 1,200

Accounts receivable 1,200
Cash received from account receivables

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Date Particular Debit Credit
20X3 $ $
April 6 Vehicle expense 250
Cash at bank 250
Paid for vehicle expense

April 10 Cash at bank 940

Fees Revenue 940
Cash sales

April 12 Accounts Payable 950

Cash at bank 950
Paid accounts payable in cash

April 15 Advertising expenses 500

Cash at bank 500
Paid for advertising expenses

April 17 Drawings 2,000

Cash at bank 2,000
Owner withdrew cash

April 22 Loans 260

Interest expense 140
Cash at bank 400
Paid loan with interest by cash

April 24 Cash at bank 1,080

Fees Revenue 1,080
Cash sales

7
Date Particular Debit Credit
20X3 $ $
April 27 Vehicle expenses 190
Cash at bank 190
Paid cash for vehicle expense

April 28 Accounts receivable 720

Fees Revenue 720
Credit sale to Ryde Management
Co. and P. Sallman & Co.

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(c) Prepare a chart of accounts

Tim Redmond’s Mowing Service

Chart of accounts
Assets (100-199)
Current assets
100 Cash at bank
130 Accounts receivable
Non-current assets
150 Telephone
160 Mowers and equipment
170 Motor vehicle
Liabilities (200-299)
Current liabilities
200 Accounts payable
Non-current liabilities
250 Loans
Owners’ equity (300-399)
300 Capital, Tim Redmond
310 Drawings
Income (400-499)
400 Fees Revenue
Expense (500-599)
500 Vehicle expense
510 Interest expense
520 Advertising expense
530 Telephone expense

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(d) Post the general journal entries to the ledger

Tim Redmond’s Mowing Service

General Ledger
Cash at bank no.100
Date Particulars Amount Date Particulars Amount
20X3 $ 20X3 $
April 1 Capital 7,000 April 2 Telephone 600
April 5 Accounts receivable 1,200 Telephone expense 100
April 10 Fees revenues 940 April 6 Vehicle expense 250
April 24 Fees revenues 1,080 April 12 Accounts payable 950
April 15 Advertising expense 500
April 17 Drawing 2,000
April 22 Loans 260
Interest expense 140
April 27 Vehicle expense 190
April 30 Closing balance 5,230
10,220 10,220

Accounts receivable no.130

Date Particulars Amount Date Particulars Amount
20X3 $ 20X3 $
April 1 Opening balance 2,000 April 5 Cash at bank 1,200
April 28 Fees revenue 720 April 30 Closing balance 1,520

2,720 2,720

Telephone no.150
Date Particulars Amount Date Particulars Amount
20X3 $ 20X3 $
April 2 Cash at bank 600 April 30 Closing balance 600
600 600

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 Mower and equipment no.160
Date Particulars Amount Date Particulars Amount
20X3 $ 20X3 $
April 1 Capital 5,000 April 30 Closing balance 5,000
5,000 5,000

Motor vehicle no. 170

Date Particulars Amount Date Particulars Amount
20X3 $ 20X3 $
April 1 Capital 20,000 April 30 Closing balance 20,000
20,000 20,000

Accounts payable no.200

Date Particulars Amount Date Particulars Amount
20X3 $ 20X3 $
April 12 Cash at bank 950 April 1 Capital 1,100
April 30 Closing balance 150
1,100 1,100

Loans no. 250

Date Particulars Amount Date Particulars Amount
20X3 $ 20X3 $
April 22 Cash at bank 260 April 1 Capital 14,000
April 30 Closing balance 13,740
14,000 14,000

Capital, Tim Redmond no.300

Date Particulars Amount Date Particulars Amount
20X3 $ 20X3 $
April 30 Closing balance 18,900 April 1 Net Assets 18,900
18,900 18,900

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 Drawings no.310
Date Particulars Amount Date Particulars Amount
20X3 $ 20X3 $
April 17 Cash at bank 2,000 April 30 Closing balance 2,000
2,000 2,000

Fees Revenue no.400

Date Particulars Amount Date Particulars Amount
20X3 $ 20X3 $
April 30 Income statement 2740 April 10 Cash at bank 940
April 24 Cash at bank 1,080
April 28 Accounts receivable 720
2,740 2,740

Vehicle expense no.500

Date Particulars Amount Date Particulars Amount
20X3 $ 20X3 $
April 6 Cash at bank 250 April 30 Closing balance 440
April 27 Cash at bank 190
440 440

Interest expense no.510

Date Particulars Amount Date Particulars Amount
20X3 $ 20X3 $
April 22 Cash at bank 140 April 30 Closing balance 140
140 140

Advertising expense no.520

Date Particulars Amount Date Particulars Amount
20X3 $ 20X3 $
April 15 Cash at bank 500 April 30 Closing balance 500
500 500

12
 Telephone expense no. 530
Date Particulars Amount Date Particulars Amount
20X3 $ 20X3 $
April 2 Cash at bank 100 April 30 Closing balance 100
100 100

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(e) Prepare a trial balance as at 30 April 20X3
Tim Redmond
Trial Balance as at 30 April 20X3
Particular Account No. Debit Credit
Cash at bank 100 5,230
Accounts receivable 130 1,520
Telephone 150 600
Mowers and equipment 160 5,000
Motor vehicle 170 20,000
Accounts payable 200 150
Loans 250 13,740
Capital 300 18,900
Drawings 310 2,000
Fees revenue 400 2,740
Vehicle expense 500 440
Interest expense 510 140
Advertising expense 520 500
Telephone expense 530 100
Total 35,530 35,530

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(f) Prepare an income statement, statement of changes in equity and a cash flow
statement for the month ended 30 April 20X3 and a balance sheet as at 30 April 20X3.

Tim Redmond’s Mowing Service

Income Statement for the period ended at 30 April 20X3
Income $ $
Fees revenue 2,740

Less expenses
Vehicle 440
Interest 140
Advertising 500
Telephone 100 (1,180)
Net Profit 1,560

Tim Redmond’s Mowing Service

Statement of Changes in Equity for the period ended 30 April 20X3
$ $
Tim Redmond equity brought forward from 31 March 20X3 18,900
Profit for the period 1,560
20,460
Less drawings (2,000)
Tim Redmond equity 30 April 20X3 18,460

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 Tim Redmond’s Mowing Service
Cash Flow Statement for the period ended 30 April 20X4
Cash flow from operations $ $
Cash inflow from customer 3,220
Cash outflow on expenses (1,040)
Cash outflow on accounts payable (950)
Net cash flow from operations 1,230
Cash flow from investing
Cash outflow on telephone (600)
Cash flow from financings
Cash inflow from capital 7,000
Cash outflow from loans (260)
Cash outflow from drawings (2,000)
Cash outflow on interest (140)
Net cash flow from financing 4,600

Net changes in cash balance 5,230

Cash balance at beginning 0

Cash balance at end 5,230

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 Tim Redmond’s Mowing Service
Balance Sheet as at 30 April 20X3
$ $
Current assets
Cash at bank 5,230
Accounts receivable 1,520

Non-current assets
Telephone 600
Mowers and equipment 5,000
Motor vehicle 20,000
32,350
Current liabilities
Accounts payable 150
Non-current liabilities
Loans 13,740
Owner’s equity
Tim Redmond, Capital 18,460
32,350

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 (B) On 1 April, Tim Redmond contributed mower and equipment and a motor
vehicle. Explain how Tim valued these (word limit = 200 words).

Peirson & Ramsay (2006) has defined an asset as a resource owned by a

business entity used to conduct its business activities. Correspondingly, the Australian
conceptual framework has further defined an asset as a ‘resource controlled by the
entity as a result of past events and from which future economic benefits are expected to
flow to the entity’. From this explanation, we can conclude that assets have three
characteristics; it has future economic benefits, it is the result of a past transaction and is
controlled by the entity.
Tim Redmond valued his mower and equipment and motor vehicle as assets
because both assets complete the three characteristics mentioned. Tim’s business
involves mowing services and the two assets both bring about future economic benefits
in terms of revenue earned. Mowing equipment is necessary to conduct his mowing
services while motor vehicle is needed to convey Tim to his customers. These assets
are purchased beforehand, thus conforming to the second characteristic, which is ‘the
result of past transaction’. These assets are exclusively owned by Tim, thus matching
the third characteristic of an asset. Thus, Tim may value these items as assets of the
business.

(192 words)

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Question 3

(A) Peirson & Ramsay (2006), Chapter 6, Problem 5: Brisbane

Traders journal entries. – complete part (a) only.

(a) Record the above transactions and events in the general journal of
Brisbane Traders. Use the perpetual inventory method of recording
inventory.
(i)
Brisbane Traders
General Journal
Date Particular Debit Credit
20X3 $ $
April 1 Cash at bank 100,000
Inventory 300,000
Capital 400,000
M. Voss started business with
cash and inventory as capital

April 2 Inventory 72,727

GST payable 7,273
Accounts payable 80,000
Purchased inventory on credit
from Queensland Wholesalers
Ltd plus 10% GST

April 5 Accounts payable 5,000

Inventory 4,545
GST payable 455
Returned damaged goods back
to Queensland Wholesalers Ltd,
plus 10% GST

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Date Particular Debit Credit
20X3 $ $
April 15 Accounts payable 75,000
Cash at bank 68,182
GST payable 6,818
Paid full amount owing to
Queensland Wholesalers
Ltd plus 10% GST

April 17 Cash at bank 25,000

Sales revenue 22,727
GST payable 2,273
Cash sales at selling price
plus 10% GST
Cost of goods sold 18,000
Inventory 18,000
Cost price of goods sold
for cash

April 23 Sales return 1,818

GST payable 182
Cash at bank 2,000
Goods sold for cash on 17
April returned and cash
refund paid, plus 10% GST
Inventory 1,500
Cost of goods sold 1,500

20
Date Particular Debit Credit
20X3 $ $
April 28 Accounts receivable 40,000
Sales revenue 36,363
GST payable 3,637
Credit sale to M. Pike
Cost of goods sold 23,000
Inventory 23,000
Cost of price goods sold on credit

April 30 Inventory 1,318

Inventory gain 1,318
Recording inventory gain as the
difference between stocktake
and the balance of the inventory
account

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(ii) Also complete the General Journal Entries using the periodic stock
system. Do not transfer the information in the COGS account.

Brisbane Traders
General Journal
Date Particular Debit Credit
20X3 $ $
April 1 Cash at bank 100,000
Purchases 300,000
Capital 400,000
M. Voss started business with
cash and inventory as capital

April 2 Purchases 72,727

GST payable 7,273
Account payable 80,000
Purchased inventory on credit
from Queensland Wholesalers
Ltd plus 10% GST

April 5 Accounts payable 5,000

Purchases returns and allowances 4,545
GST payable 455
Returned damaged goods back
to Queensland Wholesalers Ltd,
plus 10% GST

22
Date Particular Debit Credit
20X3 $ $
April 15 Accounts payable 75,000
Cash at bank 68,182
GST payable 6,818
Paid full amount owing to
Queensland Wholesalers
Ltd plus 10% GST

April 17 Cash at bank 25,000

Sales revenue 22,727
GST payable 2,273
Cash sales

April 23 Sales return 1,818

GST payable 182
Cash at bank 2,000
Goods sold for 17th April
returned and cash refund
paid

April 28 Accounts receivable 40,000

Sales revenue 36,363
GST payable 3,637
Credit sale to M. Pike

23
(B) Peirson & Ramsay (2006), Chapter 6, Problem 10: Sloan and Co.
Retailers - Part (b) only.

(b) Show the income statement of Sloan & Co. for the month ended of April
20X7 using the perpetual and periodic inventory methods.

(i) Perpetual inventory method

Sloan & Co.
Income Statement for the month ended 30 April 20X7
Income $ $
Sales Revenue 54,000
Less Sales returns and allowances (6,000)
Net sales revenue 48,000
Add: Discount received from suppliers 600
48,600
Less: Cost of goods sold
Less: Cost of good sold 33,000
Less: Cost price of sales return (4,500)
Less Inventory loss 3000 (31,500)

Gross Profit 17,100

Less: Discount allowed from customers (900)
Net profit 16,200

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(i) Periodic inventory method
Sloan & Co.
Income Statement for the month ended 30 April 20X7
Income $ $
Sales Revenue 54,000
Less: Sales returns (6,000)
Net sales revenue 48,000
Add: Discount received from suppliers 600
48,600
Less: Cost of goods sold
Inventory 1 April 20X7 60,000
Add: Purchases 30,000
Less: Purchases returns (1,500)
Less: Closing inventory 30 April 20X7 (57,000) (31,500)
Gross Profit 17,100
Less: Discount received from customers (900)
Net profit 16,200

25
 Reference list

Ding Y., Entwistle, G.M. & Stolowy, H. (2007), Identifying and Coping with Balance
Sheet Differences: A Comparative Analysis of U.S., Chinese, and French Oil and
Gas Firms Using the “Statement of Financial Structure” Issues in Accounting
Education, Vol. 22, No 4: 591-606.

GRINDROD Ltd (2005). GRINDROD Ltd Annual Report, Income Statement. Retrieved
on Monday, August 25th, 2008 from http://www.grindrod.co.za/about_history.aspx

GRINDROD Ltd (2005). GRINDROD Ltd Annual Report, Income Statement. Retrieved
on Monday, August 25th, 2008 from
http://grindrod.investoreports.com/grindrod_ar_2007/downloads/grindrod_ar_200
7.pdf?PHPSESSID=ca7f4850734895c79c5eaf78b21ddaa2

Deolitte Touche Tohmatsu (2008). Summaries of International Financial Reporting

Standards, IAS 1 Presentation of Financial Statements. Retrieved on
Wednesday, August 27th, 2008 from http://www.iasplus.com/standard/ias01.htm

Deolitte Touche Tohmatsu (2008). Summaries of International Financial Reporting

Standards, IAS 12 Income Taxes. Retrieved on Wednesday, August 27th, 2008
from http://www.iasplus.com/standard/ias12.htm

MISC Berhad (2008). MISC Berhad Annual Report, Income Statement. Retrieved on
Monday, August 25th, 2008 from
http://www.misc.com.my/pressroom_factsheet.php

MISC Berhad (2008). MISC Berhad Annual Report, Income Statement. Retrieved on
Monday, August 25th, 2008 from
http://www.misc.com.my/misc/pdf/annual_pdf_xrnjog.pdf

Peirson, G., & Ramsay, A., (2006), Financial Accounting: An Introduction (4th ed.),
Pearson Prentice Hall, Australia.

26
Richfield International Limited (2008). Richfield International Limited Annual Report,
Income Statement. Retrieved on Monday, August 25th, 2008 from
http://www.richfield.com.sg/index2.htm

Richfield International Limited (2008). Richfield International Limited Annual Report,

Income Statement. Retrieved on Monday, August 25th, 2008 from
http://www.richfield.com.sg/index2.htm

27
Appendix

28
Richfield International Limited Income Statement in 2007

29
MISC Berhad Income Statement for 2007

30
GRINDROD Ltd Income Statement for 2007

31
Notes to Financial Statement

32
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