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Natasha Bennett FAURECIA ACCT11081

Student Name: Natasha Bennett

Student Number: 12108464

Unit code and name: ACCT11081 Introductory Financial Accounting

Assessment: Steps 7 - 11

Date of Submission: 4th February 2020

Word Count: 7,723

Campus: Brisbane

Lecturer: Lois Kempnich

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STEP #7 : INVENTORIESInventories :

“Inventories encompass goods purchased and held for resale including,for example, merchandise purchased by a retailer and held for resale,or land and other property held for resale. Inventories also encompassfinished goods produced, or work in progress being produced, by theentity and include materials and supplies awaiting use in the productionprocess. Costs incurred to fulfil a contract with a customer that do notgive rise to inventories (or assets within the scope of another Standard)are accounted for in accordance with AASB 15 Revenue from Contractswith Customers.”

- Australian Accounting Standards Board 102

According to AASB 102, inventories are assets that are held for sale in the ordinary activities of business, or in the process of production for sale or in the form of materials or supplies to be consumed in the production process or in the rendering of services. This states that inventories can be in several forms and these include raw materials, work-in-progress and finished goods. In my own words, inventories are classified as a business’s assets that it uses to sell on to consumers or the business utilises the inventories to produce another product for sale. Inventories are generally very valuable to businesses, although, not all businesses have inventories. Many service firms generally will not have a stock of inventories or a very small amount of money may be invested in inventory. AASB 102 also requires Australian businesses to value their inventories at the lower cost and net realisable value. The net realisable value refers to the estimated selling price less the estimated costs and the estimated costs necessary for sale. The AASB clearly states how inventories are to be treated and this has occurred to prevent businesses from incorrectly (and falsely) valuing inventory.

Inventory Systems :

There are two distinctly different inventory systems that are utilised to keep records of inventory: the perpetual system and the periodic system. Businesses of different industries and size utilise the method that is best suited to them. Although, the perpetual system for inventory tracking is generally preferred to keep accurate up-to-date records.

The perpetual system incorporates maintaining current and continuous records of inventory transactions in the daily undertakings of the business. The system keeps a ‘running balance’ that records the quantity and unit cost for each ale and purchase. Though the perpetual system is updated with each inventory transaction, a manual stock take is still required to ensure records are ‘matching’ the physical inventory in the warehouse and store front. Many larger businesses utilise the periodic system for inventory tracking, as it allows access to (almost) accurate inventory balances at any point in time.

The periodic inventory system is basic and simple in comparison to the perpetual system. The periodic system does not update regularly, with the beginning balance of inventory not changing until the end of the period. The inventory account is updated periodically (monthly generally) to calculate cost of sales, with the competition of a stock take to determine the ending balance for inventory. The periodic method is generally used for

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small businesses or those that do not have a lot of inventory. The periodic method is not entirely accurate, as some estimates are used for wastage and theft.

Inventory Cost Assignment :

There are four different methods utilised to assign cost to each piece of inventory: FIFO, LIFO, weighted average method and specific identification. The FIFO (First-in, first-out) method utilises the assumption that the cost of the first units acquired is the cost of the first units sold. LIFO (Last-in, last-out) is the assumption that the cost of the last unit acquired is the cost of the last unit sold. In Australia, the AASB decided to eliminate the use of the LIFO method as a result of each assumption allocating a different inventory cost between inventory asset and cost of goods sold. The weighted average method calculated the average cost per unit and utilises this to cost the ending inventory. Specific identification assigns specific costs to each item through its original invoice. The specific identification method is considered inappropriate in Australia with inventory items of large numbers but is considered appropriate for items that are segregated for specific projects. Whilst these four different methods allocate costs differently in the short run, in the long run all costs and profits will be equal and end up identical.

My Company :

Table 1 : Comparison of Inventories 2015 - 2018

(Figures are in € millions) 2018 Restated 2017 2017 2016 2015

Net Inventor

y Balance

s

Raw materials and suppliesEngineering, tooling and prototypes

Work in progress for productionSemi-finished and finished products

TOTAL

546.90482.50

4.90472.50

1,431.70

515.80526.80

2.20342.70

1,387.50

515.80558.50

2.20342.70

1,419.20

437.50512.70

3.40310.40

1,264.00

425.30392.70

5.50281.70

1,105.20

Total Assets for the year 13,394.70

11,861.40

11,492.50

10,544.40 9,765.90

Percentage of net inventory balances of total assets for the

year %9.36 8.55 8.1 8.34 8.83

Sales 17,524.70

16,962.10

20,181.70

18,710.50

18,770.40

Inventories are determined by: FIFO FIFO FIFO FIFO

Stated at: Production costs by FIFO, excluding overhead not linked to production.

Provisions are booked for

inventories for which the probable realisable value is

lower than cost and for slow moving

items.

Provisions are booked for

inventories for which the probablerealisable value is lower than cost.

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The company has generally retained the same inventory policies throughout 2016-2018. As seen in the photos below, Faurecia’s inventory policies have remained at stated cost as determined by the FIFO method (First-In, First-Out) for the years 2015-2018 that we are examining. The FIFO method assumes that inventories that were purchased and produced first will be sold first, and the remaining items of inventory at the end of the period will be those recently purchased (AASB Standards).

Faurecia’s net inventory balance has been steadily increasing from 2015 to 2018, although the percentage of net inventory balances of total assets for the years between 2015 and 2017 slowly decreased, with an approximate 1% increase between 2017 and 2018. Whilst Faurecia’s inventory balance has been increasing over the years, I am unsure why this has occurred. I have discovered that this increase in inventory is not directly related to sales as sales have not been increasing steadily each year like inventories. As seen in the table above, Faurecia has four different types of inventory with raw materials and supplies, and engineering, tooling and prototypes utilising the most money. I am unclear on what Faurecia’s inventories would be as I do not have any experience dealing with cars but know that tooling would be the equipment and tools utilised to complete work and prototypes would be examples of future projects and ideas from the business’s research and development team.

The 2017 financial figures were restated, as a result of Faurecia applying the IFRS 15 standard on revenue recognition in January 2018. The Faurecia group decided to have full retrospective application, therefore restating the 2017 financial years annual figures for the 2018 report. The 2017 restated figures presented within the 2018 annual report have the application of IFRS 15 norm for easy of comparing the years figures. The objective of IFRS 15 is to establish the principles that entities should report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer (Standards). The application of the standard became mandatory for annual reporting periods starting from 1 January 2018 onwards, which is the date that Faurecia adapted its policies.

In 2016, the annual report stated specifications to enforce further inventory controls to reduce discrepancies. The company included inventories in its risk management and program control that stated they were now enforcing inventory rotating to reduce discrepancies and ensure inventory reliability by installing rotating inventories and identifying then reducing inventory discrepancies according to the QRCI (Quick Response Continuous Improvement) method. This method is utilised to approach all issues within 24 hours, working from an in-depth analysis to pinpoint the root causes of the problems and determine appropriate solutions.

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Faurecia did not explain its inventories and related policies enough for me to analyse if there are any issues with their policies. Although, 2016 explained that they were enforcing new controls. Within the financial reports, Faurecia did not report any wastage, theft or loss for its inventories within the analysis years. With Faurecia’s inventories appearing well structures, I could only suggest that the company lower its inventory balance and invest in a just-in-time inventory system to reduce holding the inventory in warehouses.

My Thoughts :

I have had some experience with inventories, previously I worked at McDonalds and was able to witness their inventory policies. McDonalds completes a physical stock take of their inventories on the last day of every month and attempts to have accurate and exact figures at 12pm. The manager then compares what they have recorder to the computer figure of what they should have and alerts other managers of huge discrepancies. The managers are also responsible for completing a stock take every night, which consists of a few items (generally 5) that the store always has huge discrepancies with. In my previous store, there was always huge amounts of bacon, tomato and lettuce missing from the records. Therefore, crew were trained and regularly reminded of the amount of product each burger was meant to have according to their ‘make cards’ and managers monitored stock levels to ensure procedures were being followed and high amounts of stock were not ‘missing’ regularly. I am still unsure if McDonalds utilises the perpetual or periodic system. I believe they could be utilising the perpetual system as each transaction could update records on what stock is being used, but at the same time, wastage records were not being completed properly. If I wanted to know more about their inventory policies, I would’ve had to become a manager and complete extensive training to become qualified to know the procedures. Another thing I noticed was that FIFO was utilised. The crew that unloaded new stock regularly cleaned stock shelves and rotated stock to reduce waste and minimise wastage. This stock rotation was especially important with dairy and fresh produce as use by dates were essential to prevent food poising and ‘off’ food.

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STEP #8 : MYOB

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Training process - Starting out with AccountRight :

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Training Process - Using AccountRight :

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MYOB Quiz :

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STEP #9 : TRANSACTIONS AND REPORTSBusiness Transactions :

1. PURCHASES - 01.01.2020 - Purchase of 50,000 Castrol Foam Air Filter Oil - 300g from Supercheap Auto Chermside for $21.00 each, invoice #59687 and paid on delivery with cheque #001.

750 Gympie Road, Chermside Queensland 4032(07) 3359 4930

2. BANKING - 01.01.2020 - Payment with cheque #002 of $10,500.00 for monthly rent to Carden Office Leasing.

L23/127 Creek Street, Brisbane City Queensland 4000(07) 3014 5406

3. PURCHASES - 07.01.2020 - Purchase from Repco Kedron for 10,500 7m Narva Cable Speaker twin Grey/Black at $8.59 each, invoice #13579 with cheque #003.

192 Gympie Road, Kedron Queensland 4031(07) 3266 1777

4. PURCHASES - 13.01.2020 - Invoice #33441 for 950 Audio & Charging Harness for iPod iPhone fit Ford BA BF Falcon & SX SY Territory at $20.11 each from Online Auto Parts, pay $1,000.00 deposit with cheque #004.

41 Yarraman Place, Virginia Queensland 4014(07) 3265 6228

5. SALES - 13.01.2020 - Julian Verri purchased/ordered on credit 35 Castrol Foam Air Filter Oil - 300g for $51.00 each, customer purchase number #103, with a $100.00 deposit.

38 George Street, South Mackay Queensland 47404942 565630-day credit policy

6. PURCHASES - 13.01.2020 - Pay remaining balance of invoice #33441 on the 13.01.2019 from Online Auto Parts with cheque #005.

7. SALES - 16.01.2020 - Paige Sinn purchased on credit 10 7m Narva Cable Speaker twin Grey/Black at $21.99 each, with $55.00 charged for freight and a $30.00 deposit paid today, customer purchase order number #37.

145 Anne Street, Brisbane Queensland 40003295 678930-day credit policy

8. SALES - 17.01.2020 - Declan Daly purchased with 20 Audio & Charging Harness for iPod iPhone fit Ford BA BF Falcon & SX SY Territory at $44.99 each. Invoice done at 9am on credit and paid at 3pm.

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3295 1432529 Anne Street, Brisbane Queensland 4000

9. PURCHASES - 23.01.2020 - Purchase from Bunnings Warehouse for 250 Makita LXT 18V Cordless Brushless Hammer Drill Kit with cheque #006 for $250.00 each, invoice #98753401 and items are received at the time of purchase.

18-28 Cook Court, North Lakes Queensland 4509(07) 3293 6900

10. BANKING - 31.01.2020 - Interest earned on bank account $1,259.33.

308-322 Queen Street, Brisbane City Queensland 400013 22 65

11. BANKING - 31.01.2020 - Bank charges of $45.77.

308-322 Queen Street, Brisbane City Queensland 400013 22 65

**All amounts are GST inclusive and expressed in AUD $ for the purposes of MYOB use.

My First Thoughts on Reports :

I chose to complete my business transactions in a new company file for Faurecia, as I wanted to view my financial reports with only my business transactions.

All Journals Report - contains all the business’s transactions for the selected period from all journals.

Profit and Loss Statement (Income Statement) - groups together the business’s total income, cost of sales, expenses and other income. This allows the business to view the net profit/loss figure for the period.

Balance Sheet - assets, liabilities and equity are all viewed on this statement, allowing a view of the worth of the business to its owners.

Statement of Cash Flow - shows net income and also net cash flows from the three different activities (operating, investing and financial).

All the financial statements show different aspects of the business. The income statement balance (net profit or loss figure) has to match the balance sheet’s current year earnings and total equity figures to ‘check’ that both financial statements are correct, and an error has not occurred.

All Journals Report :

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The all journals report is a report of all the business’s individual journals for the transactions over a period of time. This report provides foundational information that is generally utilised by auditors to analyse how the financial transactions impact the business and provides central information for all of a business’s financial reports.

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The all journals report can be utilised to show all the transactions a business has completed throughout the given time period. When comparing my business's transactions (above) to the all journals report, the transactions ‘match,’ as this report shows all the

business’s transactions.

Income Statement :

The income statement is also known as the profit and loss statement. This statement shows a company’s revenues and expenses during a period of time. The statement indicates how the revenues are transformed into net income or net profit. The income statement is an important part of a company’s performance, as it reports income through a time period. The income statement focuses on revenue, expenses, gains and losses, it does not include cash receipts and payments (money received and paid). This report essentially incorporates the accrual accounting method and gives an account of how net revenue realised by the company is transformed into net earnings (profit/loss).

The income statement is utilised to show revenue, expenses and a net profit or loss. Faurecia’s income statement highlights its total cost of sales, expenses, operating profit, total other income, total other expenses and its net income or loss. The income statement is essential to view the company’s revenues and expenses being transformed into net income or net profit over a period of time. Net profit margin is a ratio that can be utilised for the income statement to measure the amount of every dollar of sales that is turned into profit. Net profit margin is calculated by dividing sales by net profit. -$6,753.16 / $2,640.64 = -2.56% is Faurecia’s gross profit margin, meaning that for every dollar of sales nothing is being turned into net profit, they actually have $2.56 of loss for every dollar of sales.

Balance Sheet:

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The balance sheet is a financial statement that highlights the assets, liabilities and equity of a business at a particular point in time, which details the business’s income and expenditure. This financial statement represents the basic accounting equation of ‘assets = equity + liabilities.’ The balance sheet can also be known as a statement of financial position or statement of financial condition as it is a summary of the financial balances at a particular point of time, generally on the last day of every month. The balance sheet reveals the financial status of a business, as it shows what the entity owns in assets, how much it owes in liabilities, as well as the amount invested in the business, equity.

The balance sheet is useful to know if the business has sufficient funds to pay its short-term obligations. This is can be found by using the current ratio, by dividing current assets by current liabilities. The current ratio for Faurecia is -$118,511.34 / -$111,758.18 = -1.06%, Faurecia currently does not have enough current assets to cover is current liabilities. Faurecia’s balance sheet shows that it is not in a good (or positive) financial position, with more current liabilities than current assets.

Liability :

For something to be classified a liability it must exhibit three essential aspects, it must be a present obligation to an external party, that results from previous events and it also must be expected to result in a future outflow of resources embodying economic benefits.

“A present obligation of the entity arising from past events,the settlement of which is expected to result in an outflowfrom the entity of resources embodying economic benefits.”

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- Australian Accounting Standards Board 137.10, F.49(b)

The Australian Accounting Standards Board (AASB) is the Australian Government agency that develops, issues and maintains financial reporting standards that are applicable to entities in the private and public sectors of the Australian economy. The definition of a liability from the AASB is clearly set out above, with three essential aspects. Liabilities also require specific criteria for recognition: It is probable that future economic benefit will flow from the entity, with the occurrence of a specific event, date or demand; and the cost or value of the outflow can be reliably easier or estimated. Liabilities need to be accurately accounted for and estimated to avoid the understatement of liabilities and the overstatement of equity. Liabilities are classified into two aspects on balance sheet depending on their nature, timing and amount; current liabilities are within an operating cycle or one year and non-current liabilities are of more than one year.

Statement of Cash Flows :

The statement of cash flows provides data regarding all cash flows that the company receives for its operations and external investment sources during a time period. This statement shows how the changes in the balance sheet accounts impact cash and cash equivalents, and includes the sectioning of operating, investing and financial activities. The statement of cash flow summarises the amount of cash and cash equivalents entering and leaving a business. This statement measures how well the company generates cash to pay its debt obligations and fund its operating expenses.

The statement of cash flow for Faurecia currently only shows cash flow from operating income, which is because I am not confident to do transactions in the other areas and I am

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actually unsure how I would enter these into MYOB. The statement of cash flow for Faurecia is a negative balance, as the business has mainly spent money on purchasing equipment and inventory then selling products to customers. This statement is showing that the business is spending more money than it is receiving.

Conclusion :

These three financial statements are all interrelated, the income statement, the balance sheet and the statement of cash flows. The financial statements tell us the ‘story’ of how the business has earnt and spent its money over a certain period in time. The balance sheet shows us the business’s financial position at a certain point in time, the income statement shows us what the business has been doing with its money, and the statement of cash flows shows how the changes in balance sheet accounts and income affect cash and cash equivalents and separates the analysis into operating, investing, and financing activities.

The income statement calculates the profitability of the business, which determines the net income for a given financial period. The net income is linked to both the balance sheet and the statement of cash flows. The balance sheet adds net income to the retained earnings, and the statement of cash flows has this figure as net income before any adjustments are made.

The changes in a business’s balance sheet at the start of the period and that balance sheet at the end of the period are reflected in the statement of cash flows. This statement illustrates where and how the business has received and spent money during the period.

A business’s financial reports ‘tell a story,’ without ever speaking with the owners. As a result of the financial statements revealing a lot of information about the business, it is crucial for business owners to take the time preparing financial statements correctly. The income statement tells the story of whether a business is making or losing money, with revenues and expenses. The balance sheet ‘pauses’ the business, to show current assets, current liabilities and equity, which shows a business’s liquidity at any point in time. Finally, the statement of cash flows shows how much cash is available to operate the business and shows data regarding the cash flows from the company’s three activities.

Financial statements are fantastic to show a business’s information, but they are useless unless they are analysed effectively. Ratios can be utilised to amylase financial information and understand the business’s financial position. There are many four main types of ratios, profitability ratios, efficiency ratios, liquidity ratios, financial structure ratios and market ratios. These ratios show the relationship between two amounts and allow analysis of business information.

The three income statement are all connected in some way and can be utilised as ‘checks’ if one financial statement does not seem correct. I have had trouble analysing my financial statements, as I feel that it doesn’t look the same as my company’s original financial statements. I am not confident with analysing my company’s financial statements. The financial statements that I have created vary from the actual business transactions, this scares me and makes me worry that I have not completed my MYOB transactions correctly. This step has taught me a lot about MYOB AR, even though I am still confused. In my job I work with MYOB Essentials and MYOB AE which are completely different platforms, and this has caused some of my confusion in this step. Generally, in my work I am looking at a business’s transactions as an accountant, but with this step I had to look at

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the transactions as if I were the owner of a business. This different view was tricky for me to master, usually I do not have to enter transactions (not in MYOB AR anyway) and I simply classify transactions, print reports and complete payroll transactions. In this unit I found printing the required reports and finding the ‘all journals report’ quite easily. If this unit had incorporated payroll, I would have been easily able to complete those transactions, although a new learning experience was great. I have previously done some work in grades 11 and 12 with MYOB AR (I believe), although I have clearly forgotten most of that information. Overall, I believe this was a good activity and it widened my knowledge, but I did find some steps tricky and confusing.

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STEP #10 : DEPRECIATION Depreciation :

Depreciation is the reduction in the value of an asset overtime, that accounts for its ware and tare and the decrease in its monetary value. Depreciation is a non-cash expense that reduces the value of an asset over its useful life, which is the time period over which depreciated assets are expected to be used by the business. Depreciation occurs to assets because of wear and tear, technical and commercial obsolescence, and legal limits and restrictions. Depreciation is also the process of converting an asset to an expense. There are three ways that a business may depreciation its assets, which are the straight-line method, the diminishing balance method and the units-of-production method. These different methods have different depreciation expenses, but over the life of the asset the depreciation will have the same amount. Depreciation methods are estimates that are very rarely precise, causing businesses to review their asset’s residual value and estimated useful life annually. Although accumulated depreciation is considered an asset, it is actually a contra-asset account. This contra-asset account is the opposite of an asset account and is a credit, contra-asset accounts off-set asset accounts to decrease their value. I am confident with depreciation, as the journal entries are the same for all three methods and the final balance will always end up the same. I believe that if I had to depreciate assets, I would confidently be able to if I were given all the needed information. I quite enjoy depreciation as it is simple and an easy concept to understand. I understand that depreciation needs to occur because an items value decreases and a business needs to account for this in it’d records. Decreasing the value of an asset is required to accurately represent the assets value if it were to be sold for monetary value by the business today.

Property, plant and equipment :

Property, plant and equipment is a common non-current asset that is depreciated regularly. Non-current assets are those assets that will generate economic benefits for more than one year, which are generally property, plant and equipment, intangible assets and investments. Property, plant and equipment is considered a tangible (physical) fixed asset that is recorded at historical cost, which is the original monetary value, and needs to be depreciated over its useful life. According to AASB 116 para 16, property, plant and equipment’s historical cost includes costs for transportation, set-up, training and removal costs.

Straight-line method :

The straight-line method of depreciation is also known as the prime cost method. This method divides an assets depreciable amount by its useful life and equally depreciates the asset for if useful life. The general journal entry for this depreciation method is represented in table 2, which is the same for all the depreciation methods.

Diminishing balance method :

The diminishing balance method is also called the reducing balance method, which allocates a decreasing depreciation amount over the useful life an asset. This method for depreciation assumes that an asset is more useful in the earlier years of its life and therefore more benefits are consumer earlier. This method has a formula to calculate its diminishing rate, although, this is usually provided. The general journal entry for this

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method can be seen above in table 2, as seen this is the same journal entry for all depreciation entries.

Units-of-production method :

The units-of-production method allocates its depreciation amount based on per unit of output. This method finds the depreciation per number of units by dividing the depreciable amount by the numbers of units. This method accounts for depreciation through $2 per hour, $5 per km, $3 per unit, etc.

My firm :

Table 1 : Depreciation

2018 Restated 2017 2017 2016 2015

Depreciations and amortisations of assetso/w depreciations and amortisations of R & D assets

o/w other amortisations

(From 2.3. Consolidated cash flow statement)

719.00257.60461.40

74.3094.30

(20.00)

719.00--

669.10--

611.80--

Total Depreciation for the year 1438 148.6 719 669.1 611.8

Depreciation of property, plant and equipment (441.20) (432.70) (432.70) (392.00) (373.20)

Depreciation of specific tooling (12.80) (9.50) (13.30) (13.80) (6.10)

Depreciation and impairment of other property, plant and equipment (427.60) (402.60) (418.80) (376.80) (366.80)

Depreciation and amortisation of other intangible assets (441.00) (383.50) (289.30) (264.30) (235.30)

Depreciation on inventories and work-in-progress (165.40) - (152.00) (153.10)

Stated at acquisition cost, or production costs - less accum. deprec.

Straight-line method

2016 had a risk management strategy to have provisions set aside

Faurecia is a consistent company, as from 2015 through till 2018 they have not changed many of their policies unless laws have required them to. This is the same for the

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business’s depreciation policies, the business utilises the straight-line method for depreciation and has so for the past four years. Faurecia manages it depreciation policies by stating its assets at acquisition or production costs, less accumulated depreciation. As can be seen in table 1, the company’s depreciation for property, plant and equipment has been continually increasing over the years. Depreciation expenses have slowly been increasing in all areas form 2015 through to 2018. As can be seen, prior to 2018 Faurecia did not separate its depreciation. Although, as new procedures and laws were introduced, Faurecia has recently separated it depreciation and amortisation of assets.

I found investigating my business’s depreciation policy’s and notes boring, yet interesting. Depreciation policies have remained very similar for my firm throughout the four years. Faurecia has utilised the straight-line method of depreciation, whilst stating assets at cost. In 2016, Faurecia implemented a risk management strategy to set provisions aside for depreciation. The strategy was to set aside provisions under applicable accounting standards for the depreciation of assets. As noticed throughout the financial reports, Faurecia’s accounting policies have only changed when they have been legally required. For example, in 2018 Faurecia applied the new standard IFRS 15 on revenue recognition. Faurecia applied this new accounting standard on December 31, 2017, which was the required date for the accounting standard to be applied. With the change in accounting standards, Faurecia restated its 2017 figures to allow for comparability with the 2018 financial figures.

Depreciation entries :

General Journal

31.12.2019 Depreciation Expense XXX

Accumulated Depreciation - Buildings XXX

(Depreciation expense for the year 2019)


Accumulated Depreciation - Plant, tooling and technical equipment XXX



Accumulated Depreciation - Development costs XXX


Impact depreciation journal entries have on financial statements :

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Depreciation entries impact the balance sheet as they decrease the worth of assets. Depreciation entries gradually decrease the value of fixed assets, so that the assets value is accurately represented on the balance sheet. Depreciation impacts the income statement as it is an operating expense that reduces the company’s gross profit.

Depreciation expenses also have the benefit of decreasing a company’s tax payable, as it is a deduction and lowers the company’s taxable income.

Depreciation entries manipulated :

Depreciation entries, like all accounting entries can be manipulated to show a different representation. Manipulating accounting data can be simple, as figures can be altered, items reclassified and simply ‘forging’ items, sales, discounts, etc. If accounting standards and regulations were not enforced, then majority of reporting entities would reclassify and revalue their business’s items to present a ‘better,’ more profitable set of accounting reports.

Depreciation entries can be overstated or understated to make a firm appear more profitable and fundamentally stronger. Altering depreciation entries can occur in a number of ways by charging less depreciation, increasing the life span of an asset, changing the calculation method, keeping no longer used assets on the balance sheet and revaluing assets.

If companies were legally allowed to assign any amount of depreciation to its assets, then depreciation would occur at a very low rate within the financial records and the firm would have high value assets. Although, this is not accurate as the assets are losing their value (depreciating) with time and use.

If firms were able to increase the estimated life span of an asset without restrictions, then the depreciation charges would be reduced and the asset would depreciate over a longer number of years, which is not accurate.

Whilst choosing a depreciation method that depreciates differently to another method may alter the business’s depreciation records today, (in the future) at the end of the depreciation period when the asset is disposed, the final depreciated amount is the same no matter what method of depreciation is used. Opting for an amount of lower depreciation in the earlier years of the assets useful life may make the financial statements more enticing, causing firms to pick and choose their depreciation policies depending on the current position of the business.

Without removing assets from the balance sheet, a business falsely represents that the item is in complete working condition and continues to depreciate it. This procedure means that a loss is not recorded in the current period.

Revaluing assets is not illegal, it is actually within the law to revalue them regularly. Although, accounting standards state that a business has to revalue a whole class of assets and cannot selectively revalues its assets because this would indicate the manipulation of records.

STEP #11 : FEEDBACK

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PEER FEEDBACK SHEET 1Feedback from : Natasha BennettFeedback to : Stuart Hentschke

MY COMMENTS

STEP #7 : INVENTORIES

Great introduction to inventories, the definition was well done and explained a lot of features. This step is set out

well, with clear headings to know what is being talked about. Great use of references and a wide variety of

definitions. Referring your experiences to the types of inventories made the work relatable and showed your

personal understanding even though the definitions were well done and understandable. Your questions with net

realisable value are valid and show that you are considering the work you are doing and not just ‘rote learning,’ which is good. Great explanation of which

inventory system you think your company is using and the reason why. Could you also mention the disadvantages of the FIFO method, as the selling cost may be different for

the same product sold days apart? It’s great that your company provided a 5-year summary, as you didn’t have

to do this for comparative purposes. Can you briefly explain why GKN did not make what they wanted in 2016 regarding cash flow? Your ideas for improving inventory

management are sufficient and well explained, well done! Your experiences with inventories are limited, as

mentioned, but included which is good for marks. Did you find anything interesting or questionable about your

company’s inventory systems? Does your company follow the International Financial Reporting Standards (IFRS), as you mentioned they follow AASB and that they hadn’t had any changes in their policies, whereas the IFRS altered their inventory policies at the beginning of 2018. (Just

wondering as I thought they would follow IFRS.) Overall, this step is in depth and has provided a lot of information,

definitions, personal experiences and analysis. I would understand if you didn’t include my suggestions above.

Great step with lots of information!!!

STEP #8 : MYOB

The inclusion of the web link that you followed is great. You have included many photos, showing all set-up steps and preparation of partial payment, processing sales, etc.

You quiz results were also included. I hope you’ve included the right photos for the marks (as I am unsure which ones are needed), as you have shown proof that

you have followed the videos.

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STEP #9 : TRANSACTIONS AND REPORTS

Great introduction/description at the start of this step! Great detailed list of transactions, with awesome worded stories. In your transactions you have shown exactly what process you have done and why, great work! Could you

possibly add a banking transaction (interest or fees), I am unsure if this is specifically required but my lecturer made

sure I included this. There is a ‘building insurance company on the 03.01.2020 for $16,363.64’ on the all

journals report that does not seem to be in your transactions list, it seems as though you received the bill for this account and didn’t pay it until a few days later? - I believe this should be checked and altered. All your other transactions seem to be correct and match between your transactions and the all journals report. Well done! You have included all the relevant financial reports. It was

great that you included the MYOB highlights as well and talked about these. Great explanation of ratios and

financial statement and how these also link. Could you possibly explain what each of the financial statement is,

includes and shows?

STEP #10 : DEPRECIATION

Great introduction to depreciation, talking about property, plant and equipment and your thoughts. I feel as though this section has some grammar mistakes, so having a

second read through may be beneficial. Good depreciation entries, correct format and labels. Overall, I

feel as though this step is well done with no areas to improve. Although, have you had any experiences with

depreciation?

OVERALL STEPS 7-10

Awesome references! Your document was long, I honestly dreaded reading it at some points ha-ha. You have clearly put a lot of time and effort into this, great work!!! I feel like

your work was fantastic already, I attempted to make some helpful suggestions for improvements, but it was difficult. I think you work is of a very high standard and

there is not much to improve on, well done!!!

PEER FEEDBACK SHEET 2Feedback from : Natasha Bennett

Feedback to : Chrystal Genard

MY COMMENTS

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The first paragraph that included your personal experiences was great, as you were connecting with the work immediately. I think you did well in stating how your

company states things at cost and the different way it does this. It was well done how you incorporated your

thoughts about your company decision and what occurred with its figures. It was great that you mentioned a ‘take

over’ and your thoughts. I like the included screenshots. You have done well with this step, including a lot of information about your company. I think it could be

beneficial if you added definitions of inventory, periodic and perpetual systems, raw materials, etc, I think this

would just show your further understanding of the concepts. Are there any parts that you found interesting or

questionable? Has your company changed any policies throughout the year, where are they located, do they

follow AASB or IFRS? What method of inventories does your company use (FIFO, LIFE, etc)? Are there any

issues with your firms inventory management or are there any ways in which they could improve this? You slightly

mentioned your experience with inventories, have you had any other experience?

STEP #8 : MYOB Good job, all work is shown to be done. Great score on the quiz, shows you grasped the concepts. You have done well in taking photos of your work throughout.


You have an adequate number of transactions. There is no banking transaction, I suggest this is added, I am

unsure if this is needed although my lecturer made our class include this. I like your thoughts on the MYOB

process and the all journals report. You have found all the correct financials which is good. The error is fixable as I can assist you or possibly videos and MYOB, although I

like how you have used this incorrect transaction to identify what it has impacted and what figures could be different if the transaction was correct. I have found it

unclear if you have talked about how the financial statements are linked, I did notice that you slightly

mentioned this with regards to the incorrect transaction though. Well done with this step. Did you have any personal thoughts about it or previous experiences,

maybe this could be added (a short paragraph could be good). What tolls can be utilised to intemperate financial

statements - this is on the assignment sheet and could be useful to add. Also, what story do you think the financial

statements are telling?


This step is still to be completed, when completed I can provide feedback if you wish.

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OVERALL STEPS 7-10

You have done a fantastic and thorough job. Obviously step 10 is still to be completed, which I will happily have a look at later. Step 7 was fantastic, although I think there is

some room for additional information. The information about your company was awesome and in depth. Step 8

shows that you have completed all the training, I am unsure if they are the correct photos (as you can see, I have not inserted my photos yet) but hopefully they are correct. Perhaps you could add the link to the training

videos to show what you followed, I have seen others do this and thought it was a good idea. Step 9 transactions

are well thought out, although there is no banking transaction which I think should be added (interest/fees).

You have made a mistake, although talked about it impact and what would be different. I suggest you figure out how

to fix it and then talk about that - this would add further knowledge and understanding of the step. I believe that

there are a few minor grammar/spelling mistakes, having this checked would improve your work. Great work so

far!!!

PEER FEEDBACK SHEET 3Feedback from : Natasha Bennett

Feedback to : Laura Salmon

MY COMMENTS


You started this step with your own thoughts, talking about the chapter and defining the different inventory methods, which is good as you have shown your own

understanding. I like how you have headings throughout your work, it makes it easy to read and to know what

you're talking about. I think rereading through your work would be beneficial for some minor grammar and spelling

mistakes. The table presented in good and makes comparison and viewing easy. I liked how you explained your thoughts and questions throughout. Your personal experiences with inventory systems was good too. You have a lot of information in this step and seem to have

answered all the question in the assignment task guidelines, great job!! Although, I am unsure if you talked about the size of your company’s inventories in relation to

total assets and the proportion.

STEP #8 : MYOB

It is great that you explained your thoughts in this step. You have provided screenshots of your MYOB training and set-up (I am unsure if they are the right ones as I

myself do not know) and quiz which was required. This step is completed to the requirements of the assignment

sheet.

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I don’t see you ten transactions listed anywhere - if you have a look at mine you can see that you need to write

out the transactions as if it were before you put them into MYOB (I hope you know what I mean). You have included

a lot of your personal thoughts which is great. I was unable to see your all journals report though, if you are

having trouble finding this, I suggest looking on MYOB or YouTube or I could point you in the right direction if you’d like. May I ask why you included the cash disbursements journal; I don’t think you talked about it, but you did refer to the excel sheet (Did you think this was the all journals report? That’s what I’m gathering from your document.).

Have you talked about the story that the financial statements are telling you and your interpretation of the

statements? What tools can we use to analyse the financial statements? Good format for this step, although,

I think there are a few things that could be added and revised.


It was great that you included tables, photos and definitions/statements directly from the financial

statements in this step. *** So, you haven’t completed the three journal entries and would like assistance. I would start with having a look at my work and looking at the

week’s lecture slides that are associated with depreciation. When depreciation entries are completed

that are (almost, I think) always the same. There are several different methods to depreciate but if you have a look at the journal entries, they are all the same. Our task here is to create three journal entries (essentially copying and pasting from the lecture slides), where we can identify figures or use ‘XXX’ and identify things to be depreciated,

like buildings, land and equipment, tooling, etc. Your financial statements that mention depreciation should

explain what they are depreciation (buildings, tooling, etc) and you use these in your created depreciation entries. I hope this makes sense or I will try to explain it in another

way. Essentially, we just need to know how to write a depreciation entry and know what our company is

depreciating after looking at the financial statements. *** I am unsure if you mentioned if your firm has changed

depreciation methods or what type of method it uses. You also need to write how depreciation journal entries impact

your financial statements and how they can be manipulated. So far you have done good work on this

step, with further things to complete.

OVERALL STEPS 7-10

Step 7 was done fantastically, with all aspects addressed. Step 8 is done according to the assignment sheet. Step 9

has good foundations, with a few things that could be added and altered. Step 10, what has been completed has been done well, but there is still some work to be

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done and I hope you can understand what I was trying to say. Good job on this assignment so far, let me know if

you have any troubles, good luck!!

PEER FEEDBACK SHEET 4 : IN PROGRESSFeedback to : Shiqi Xue

Feedback from : Natasha Bennett

MY COMMENTS


Great opening paragraph, you described inventories and explained that your company is a service business that

won’t have many inventories. I think you could explain that WIP is work-in-progress and that it has value even though

the product is not yet completed. Could you explain the four methods for inventory costing to show further

understanding? Could you ‘guess’ and explain which inventory system your company might use, periodic or

perpetual? What were your personal thoughts about your company’s inventory system and information provided/or

not? Have you had any experience with inventories?

STEP #8 : MYOB

You have shown a lot of photos for this section. From the assignment task sheet only three (3) photos are required. As you can see your marks for the quiz, the questions of the quiz are not necessary. With the set-up and training

videos you only need screenshots of the last transactions for each, possibly you could adhere to this.


You have an adequate number of transactions. The story is missing for the transaction on the 03.07.2018. Your

analysis of the profit and loss statement is good. All the required financial reports and analysis are included.


Your KCQ’s for depreciation have been done very well. All concepts from the assignment sheet are all answered

clearly too. Why do you think that 5% for depreciation is a big expense? You have the journal entries as well.

OVERALL STEPS 7-10 Overall, the assignment is done very well with minimal corrections noted. Good job.

PEER FEEDBACK SHEET 1Feedback from : Stuart Hentschke

Feedback to : Natasha Bennett

MY COMMENTS

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-A great summary of your company’s inventory polices and how the net inventory balance is

increasing. You might like to add a possible reason for why they are increasing. Are sales increasing at

the same rate? -If you wanted to expand this step you might like to include an example of each of Faurecia products

that you think may be a raw material, an engineering tooling and prototype, a work in progress and a

finished good. -You have commented that the inventory policies

have generally remained the same as directed in the assignment.

-You might also like to comment on any issues you think your firm may be having with their inventory

management and why this might be the case. -I enjoyed reading your experience with inventories and it made sense that McDonalds would use the

FIFO method so that food would not go off.

STEP #8 : MYOB

- Starting out with account right screenshots were done very well. Great thinking to make them smaller

and include lots.-Using account right photos to be added.

-You have included the MYOB training skills test screenshot of your results as requested.

-Well done.


-It’s great to see that you have given your thoughts on each of the financial statements explaining what

they are.-Well written transaction list that matches the all

journals report. -You might like to add the basic accounting

equation into your comments regarding the balance sheet.

-You have used the current ratio to analyse the balance sheet and commented on the negative figures indicating that Faurecia is not in a good

position.-If you are looking to expand this step, I would

suggest analysing each of the financial statements with a ratio and commenting on the result.

-Great to read your thoughts regarding this step. I think most people would have had some trouble with

their MYOB entries along the way.

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-I would add at the beginning, depreciation is the process of converting an asset to an expense.

-Adjust spelling of ware to wear.-A great explanation of the three different methods

of depreciation.-You might like to include a response to, is

depreciation a significant expense for your firm? This could be completed by comparing your company’s depreciation expense to their total expenses each

year as a % and commenting on the trend.-I found your comments on the depreciation entries to be very good and you gave a great response to

the possible ways in which depreciation entries might be manipulated.

OVERALL STEPS 7-10I think that you have done a great job. Thank you for providing me with feedback and useful suggestions

for improvement. Well done!

PEER FEEDBACK SHEET 2Feedback from : Chrystal GerardFeedback to : Natasha Bennett

MY COMMENTS


-Include some discussion on how the restating has affected the figures for inventories (was this a

small/big change?) How has this impacted the rest of your financials?

-Include some discussion on factors your company may face with management of inventories (you

could link this into the restating here).-Do you think your company could improve upon their inventory management? How? Why did you

choose these areas? -Your discussion on personal experience is detailed

and easy to understand. Great linking into the concepts we have been discussing.

STEP #8 : MYOB -Set up and training videos not yet present.

-Maybe make your quiz results larger as it is hard to read currently.


-Great level of detail for your transactions. -Slight spelling error under heading Income

Statement (knows instead of known).-You need to include snips or screen shots of your

reports in this section.

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-Great discussion on each of the reports. I can relate to your confusion with AccountRight - it’s also not

my favourite program to use!


-Note the figures down for your depreciation over the years (see para. 2 of Step 10) as part of your

KCQ’s. -Is depreciation a significant expense for Faurecia? -Your discussion here is good, only requires a

proofread.

OVERALL STEPS 7-10Overall, a very good assessment. You have

thoroughly examined your financials for Faurecia and examined their inventory and

depreciation policies in depth. Great job

PEER FEEDBACK SHEET 3Feedback from : Laura SalmonFeedback to : Natasha Bennett

MY COMMENTS


I appreciated the way that you showed the comparison of inventories in the table, especially with the changes to the Inventory method. The in-depth details you found regarding your Inventories are good to read along with your experience with

inventories

STEP #8 : MYOB No details besides from the results from the Quiz


It was good that you explained why you chose to create a new company file for your company’s business

transactions. As well as outlining the definitions for each report we were asked to pull in your own words and

understanding. It was great that you conveyed that you were not

confident with analysing the financial statements because this was not your background, nor did you have the in-

depth experience.


Like with the Inventories, it was great that you made the table regarding the depreciation for each of the

years we were instructed to. Your journal entries have given me some clarification

as to what I need to do for my assignment, thanks

OVERALL STEPS 7-10

You have done a great job explaining each step for this part of the assessment. I noticed a few

grammatical errors throughout so maybe just have a slow read through of each step. Great job and good

luck

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PEER FEEDBACK SHEET 4Feedback from : Shiqi Xue

Feedback to : Natasha Bennett

MY COMMENTS


Explanation regarding all the necessary disclosures made by the case company over inventories are included in the

assignment. Method of inventory valuation are clearly determined and explained. All the key requirements of

steps are considered. However, a little explanation regarding the theoretical concepts is given but efforts

made by mate can be clearly determined from the work.

STEP #8 : MYOB

No Screenshots as an evidence of the training process are added. Only MYOB quiz result screen shot is

attached. As much as possible screenshots of the training process should have been attached. In bold words, more

efforts were required to complete this step.


Self-prepared journal entries are included in the step. No screenshots of the new company preparation and reports

extracted from the MYOB are attached. Analysis of the results of the transactions is clearly presented. Overall, a good analysis as well as practical set of transactions are presented. However, inclusion of the reports extracted

from the MYOB would have helped in better interpretation and understanding of the financial performance and

position.


Comprehensive discussion over the concepts of the depreciation including popular method of depreciation.

Lack of discussion over the depreciation treatment by the case company. No KCQ are made and answered.

Important requirement of the steps is missing. Required journal entries are included. A better discussion was

possible if the annual reports of the company are analysed in more depth to answer the KCQ of the step.

OVERALL STEPS 7-10

In nutshell, a better attempt was possible if the key requirements of all the steps were considered. However,

the efforts made to answer the step 7 cannot be neglected.

My Comments : To begin with, many people were leaving this assignment until the last minute which meant no one was ready for feedback when I was. When I did receive feedback, I had found that my blog was having issues uploading my document (as it was

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so large) and this delayed some feedback even further. Once my document was accessible, three people opted to exchange feedback, and another simply gave me feedback without notification. I was surprised and overwhelmed when I received the feedback unexpectedly. I would have been preferred to be told that I was going to receive the feedback so that I could have given feedback at approximately the same time. Instead, it was received unexpectedly, and I felt an obligation to then in return give feedback. The feedback given by the four people was generally mixed, with some of it being helpful, some being simply wasteful and some being complimentary. My work is approximately 23 pages long and I felt bad for those that provided me feedback, although, I found that most assignments are of approximately the same length which was fantastic. I did find some of the feedback given to me to be harsh, as I was told to directly do something whereas I would have like them to be worded into a suggestion. The feedback given was great, as I can tell that they have referred to the assignment task sheet and I can add additional information to better me assignment. Overall, I am happy with the feedback I have received, as a few useful comments allowed my work to be improved.

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