notes to the accounts[1]
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A. MANAGEMENT ACCOUNTING
QUESTION 1
Budget is detailed plans that coordinate various activities within a company. It is a financial
or quantities statement, prepared or approval prior to a defined period of time, for the policy
to be pursued during the period in order to achieve a given objective.
5 keys purposes of budgeting system.
i) To ensure the managers plan for future operations.
ii) Allow managers to coordinate the activities of the firm, thus identify and resolve
conflict.
iii) Communicate and deliver the plan to other responsibility centre managers in
increasing the company efficiency.
iv) Budget act as a motivation which encourage efficiency that lead to achieve firms
goal.
v) Controlling of activities in the firm by comparing the budget and actual.
vi) Performance evaluation can be done by measuring the success in meeting the
budgets.
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QUESTION 2
Budget activities on quarterly basis for the year ended 31st December 2011
Wardah Apparel Sdn Bhd
Manufacturing Account For The Year Ended 31 December 2011
a) Sales Budget
Q1 Q2 Q3 Q4
Sales (unit) 27,000 9,000 18,000 36,000
x Selling Price per unit (RM) 35 35 35 35
Total Sales Value 945,000 315,000 630,000 1,260,000
b) Production Budget
Q1 Q2 Q3 Q4
Sales (unit) 27,000 9,000 18,000 36,000
Add: closing stock 500 900 3,600 2,250
27,500 9,900 21,600 38,250
Less: opening stock 0 (500) (900) (3,600)
Unit to be Produced 27,500 9,400 20,700 34,650
c) Direct Material Usage Budget
Q1 Q2 Q3 Q4
Quantity to be Produced 27,500 9,400 20,700 34,650
x Fabric per unit (RM) 1.5 1.5 1.5 1.5
Total Material Usage 41,250 14,100 31,050 51,975
Add: closing stock 895 3,105 5,197 2,100
42,145 17,205 36,247 54,075
Less: opening stock 0 (895) (3,105) (5,197)
Total Material to be Purchase 42,145 16,310 33,142 48,878
x Cost per Unit 2.50 2.50 2.50 2.50
Cost Material to be Purchase 105,362.50 40,775 92,855 122,195
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d) Direct Labour Budget
Skilled Workers Q1 Q2 Q3 Q4
Production Unit 27,500 9,400 20,700 34,650
x hour per unit 0.2 0.2
0.2
0.2
Total Hours 5,500 1,880 4,140 6,930
Rate per hours (RM) 10 10 10 10
Total Cost 55,000 18,800 41,400 69,300
Semi-skilled Workers Q1 Q2 Q3 Q4
Production Unit 27,500 9,400 20,700 34650
x hour per unit 0.35 0.35 0.35 0.35
Total Hours 9,625 3,290 7,245 12,127.50
Rate per hours (RM) 6 6 6 6
Total Cost 57,750 19,740 43,470 72,765
e) Manufacturing Overhead Budget
Traditional method:
RM
Supervision Salaries 5,600
Insurance 9,600
Maintenance machineries 10,400
Utilities 7,500
Depreciation - machineries 35,072
Total 68,172
OAR = Budgeted Overhead
Basis
= 68,172
28,400 machine hour
= RM2.40
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ABC method:
Activity Amount (RM) Total Cost Driver Activity Pool
Rate
Indirect Material 1,250 92,250 0.0136
Factory Electricity 750 92,250 0.0081
Set-up Cost 10,000 92,250 0.1084
Purchasing and Material Handling 1,200 92,250 0.0130
Inspection 800 92,250 0.0087
Design 4,000 92,250 400
Manufacturing Overhead
Activity Q1 Q2 Q3 Q4
Indirect Material 373 127 280 470
Factory Electricity 224 77 168 282
Set-up Cost 2,981 1,091 2,244 3,756
Purchasing and Material
Handling
358 122 269 451
Inspection 238 82 180 300
Design 1,000 600 800 1,600
Total Overhead Cost 5,173.44 2,026.56 3,941.46 6,858.54
No of unit 27,500 9,400 20,700 34,650
Total Overhead/ unit 0.19 0.22 0.19 0.20
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f) Production Cost Budget
Q1 Q2 Q3 Q4
Direct Material 103,125 35,250 77,625 129,937.50
Direct Labour 112,750 38,540 84,870 142,065Prime Cost 214,875 73,790 162,495 272,002.50
Production overhead :
Indirect Material 373 127 280 470
Factory Electricity 224 77 168 282
Set-up Cost 2,981 1,091 2,244 3,756
Purchasing and Material
Handling
358 122 269 451
Inspection 238 82 180 300Design 1,000 600 800 1,600
Supervision Salaries 1,400 1,400 1,400 1,400
Insurance 2,400 2,400 2,400 2,400
Maintenance machineries 2,600 2,600 2,600 2,600
Factory Utilities 1,875 1,875 1,875 1,875
Depreciation - machineries 8,768 8,768 8,768 8,768
Depreciation factory
building
13,500 13,500 13,500 13,500
TOTAL PRODUCTION
COST
251,591.44 106,359.56 196,979.46 309,404.04
Production Cost per unit = RM251591.44 + RM106359.56 + RM196979.46 + RM309404.04RM27500 + RM9400 + RM20700 + RM34650
= RM864334,50RM92250
= RM9.37
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g) Cash Budget
Wardah Apparel Sdn Bhd
Cash Budget for the year ended 31 December 2011
Q1
RM
Q2
RM
Q3
RM
Q4
RM
OPENING CASH BALANCE 16,1800 729,638.50 101,3891.50 138,2706.75
Receipt:
Receipt from debtor:
80% for this quarter 756,000 252,000 504,000 1,008,000
18% for next quarter 43,200 170,100 56,700 113,400
Total Cash Available 961,000 1,151,738.50 1,574,591.50 2,504,106.75
Less: Payment :
Payment to creaditors :
60% for this quarter 53,647.50 24,465 49,713.75 73,316.25
40% for next quarter 22,740 35,765 16,310 33,142.50
Salary :
Skilled Labour
Semi-skilled Labour
55,000
57,750
18,800
19,740
41,400
43,470
69,300
72,765
Manufacturing Overhead :
Indirect Material 373 127 280 470
Factory Electricity 224 77 168 282
Set-up Cost 2,981 1,091 2244 3,756
Purchasing and Material
Handling
358 122 269 451
Inspection 238 82 180 300
Design 1,000 600 800 1,600
Supervision Salaries 1,400 1,400 1,400 1,400
Insurance 2,400 2,400 2,400 2,400
Maintenance machineries 2,600 2,600 2,600 2,600
Factory Utilities 1,875 1,875 1,875 1,875
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Selling Overhead :
Sales salaries 2,000 2,000 2,000 2,000
Sales commission 750 750 750 750
Freight outwards 500 500 500 500
Advertising 250 250 250 250
Travelling expenses 2,750 2,750 2,750 2,750
Administrative Overhead :
Licensing fees 150 150 150 150
Clerical wages 1,250 1,250 1,250 1,250
Manager salary 18,000 18,000 18,000 18,000
Entertainment expenses 2,500 2,500 2,500 2,500
Utilities 625 625 625 625
Total Cash Payment 231,361.50 137,847 191,884.75 292,432.75
CLOSING CASH BALANCE 729638.50 1013891.50 1382706.75 2211674
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Actual activities on quarterly basis for the year ended 31st December 2011
Q1 Q2 Q3 Q4
ACTUAL SALES :
Sales (units)
x Selling price (RM)
TOTAL SALES VALUE (RM)
27,000.00
35.00
945,000.00
9,000.00
35.00
315,000.00
18,000.00
35.00
630,000.00
36,000.00
35.00
1,260,000.00
ACTUAL PRODUCTION :
Sales (units)
+ Closing stock
- Opening stock
TOTAL QUANTITY TO BE
PRODUCED
27,000.00
1,500.00
28,500.00
(1,350.00)
27,150.00
9,000.00
900.00
9,900.00
(1,500.00)
8,400.00
18,000.00
3,600.00
21,600.00
(900.00)
20,700.00
36,000.00
2,250.00
38,250.00
(3,600.00)
34,650.00
ACTUAL DIRECT MATERIAL
USAGE:
Quantity to be produced
x Fabric per unit (m)
TOTAL MATERIAL USAGE
27,150.00
1.50
40,725. 00
8,400.00
1.50
12,600.00
20,700.00
1.50
31,050.00
34,650.00
1.50
51,975.00
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ACTUAL MATERIAL PURCHASE :
Quantity of material to be used
+ Closing stock
- Opening stock
TOTAL MATERIAL TO BE
PURCHASED
x Cost of material per meter
COST OF MATERIAL TO BE
PURCHASED
40,725.00
895.00
41,620.00
(6,200.00)
35,420.00
2.50
88,550.00
12,600.00
3,105.00
15,705.00
(895.00)
14,810.00
2.50
37,025.00
31,050.00
5,197.50
36,247.50
(3,105.00)
33,142.50
2.50
82,856.25
51,975.00
2,100.00
54,075.00
(5,197.50)
48,877.50
2.50
122,193.75
ACTUAL DIRECT LABOUR :
Skilled worker
x Rate/hour (RM/hr)
TOTAL COST
Semi-skilled worker
x Rate/hour (RM/hr)
TOTAL COST
5,430.00
9.50
51,585.00
9,502.50
6.50
61,766.25
1,680.00
9.50
15,960.00
2,940.00
6.50
19,110.00
4,140.00
9.50
39,330.00
7,245.00
6.50
47,092.50
6,930.00
9.50
65,835.00
12,127.50
6.50
78,828.75
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ACTUAL MANUFACTURING
OVERHEAD:
Traditional method :
Supervision salaries
Insurance
Maintenance - machineries
Utilities
Depreciation machineries
OAR = Budgeted overhead
Basis
= RM 61,672.00
30,000 MH
= RM 2.06/MH
RM
5,600.00
9,600.00
5,400.00
6,000.00
35,072.00
61,672.00
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ABC method :
ACTIVITY
Amount
(RM)
Total Cost
Driver Activity Pool Rate
Indirect materials 1,550.00 90900.00 0.0171
Factory electricity 750.00 90900.00 0.0083
Set-up cost 10,000.00 90900.00 0.1100
Purchasing & material
handling 1,200.00 90900.00 0.0132
Inspection 800.00 90900.00 0.0088
Design 4,000.00 10.00 400.00
ACTIVITY Q1 Q2 Q3 Q4
Indirect materials 462.95 143.23 352.97 590.84
Factory electricity 224.01 69.31 170.79 285.89
Set-up cost 2,986.80 924.09 2,277.23 3,811.88
Purchasing & material
handling358.42 110.89 273.27 457.43
Inspection 238.94 73.93 182.18 304.95
Design 1,000.00 600.00 800.00 1,600.00
Total overhead cost 5,271.12 1,921.45 4,056.44 7,050.99
No of units 27,150.00 8,400.00 20,700.00 34,650.00
TOTAL OVERHEAD /
UNIT0.19 0.23 0.20 0.20
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ACTUAL PRODUCTION COST
Q1 Q2 Q3 Q4
Direct Material 101,812.50 31,500.00 77,625.00 129,937.50
Direct Labour 113,351.25 35,070.00 86,422.50 144,663.75
PRIME COST 215,163.75 66,570.00 164,047.50 274,601.25
Production Overhead:
Indirect Material 462.95 143.23 352.97 590.84
Factory electricty 224.01 69.31 170.79 285.89
Set-up cost 2,986.80 924.09 2,277.23 3,811.88
Purchasing and material handling 358.42 110.89 273.27 457.43
Inspection 238.94 73.93 182.18 304.95
Design 1,000.00 600.00 800.00 1,600.00
Supervision salaries 1,400.00 1,400.00 1,400.00 1,400.00
Insurance 2,400.00 2,400.00 2,400.00 2,400.00
Maintenance-machineries 1,350.00 1,350.00 1,350.00 1,350.00
Factory utilities 1,500.00 1,500.00 1,500.00 1,500.00
Depreciation on machineries 8,768.00 8,768.00 8,768.00 8,768.00
Depreciation on factory building 13,500.00 13,500.00 13,500.00 13,500.00
TOTAL PRODUCTION COST 249,352.87 97,409.45 197,021.94 310,570.24
Production cost per unit =RM 854,354.50
90,900.00 units
= RM 9.40/unit
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WARDAH APPAREL SDN BHD
Actual Cash for the year ended 31ST December 2011
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
RM RM RM RM
Opening Cash Balance 161,800.00 720,067.63 989,401.18 1,341,798.49
Add : Receipt :
Receipt from debtors :
80% for this quarter 756,000.00 252,000.00 504,000.00 1,008,000.00
18% for next quarter 43,200.00 170,100.00 56,700.00 113,400.00
Insurance received 60,000.00
Rent received 6,000.00 6,000.00 6,000.00 10,000.00
Total Cash Available 967,000.00 1,148,167.63 1,556,101.18 2,533,198.49
Less : Payment :
Payment to creditors :
60% for this quarter 53,130.00 22,215.00 49,713.75 73,316.25
40% for next quarter 22,740.00 35,420.00 14,810.00 33,142.50
Salary :
Skilled labour 51,585.00 15,960.00 39,330.00 65,835.00
Semi-skilled labour 61,766.25 19,110.00 47,092.50 78,828.75
Manufacturing overhead :
Indirect materials 462.95 143.23 352.97 590.84
Factory electricity (machinery) 224.01 69.31 170.79 285.89
Set-up cost 2,986.80 924.09 2,277.23 3,811.88
Purchasing and material handling 358.42 110.89 273.27 457.43
Inspection 238.94 73.93 182.18 304.95
Design 1,000.00 600.00 800.00 1,600.00
Supervision salaries 1,400.00 1,400.00 1,400.00 1,400.00
Insurance 2,400.00 2,400.00 2,400.00 2,400.00
Maintence - machineries 1,350.00 1,350.00 1,350.00 1,350.00
Utilities 1,500.00 1,500.00 1,500.00 1,500.00
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Selling overhead :
Sales salaries 2,000.00 2,000.00 2,000.00 2,000.00
Sales commission 750.00 750.00 750.00 750.00
Freight outwards 750.00 750.00 750.00 750.00Advertising 1,250.00 1,250.00 1,250.00 1,250.00
Travelling expenses 2,750.00 2,750.00 2,750.00 2,750.00
Administrative overhead :
Licensing fees 150.00 150.00 150.00 150.00
Clerical wages 2,500.00 2,500.00 2,500.00 2,500.00
Manager salary 18,000.00 18,000.00 18,000.00 18,000.00
Donation 1,750.00 1,750.00 1,750.00 1,750.00
Utilities 500.00 500.00 500.00 500.00
Maintenance office 1,950.00 1,950.00 1,950.00 1,950.00
Hire-Purchase of motor vehicle - 1stvan 13,440.00 8,820.00 8,820.00 8,820.00
- 2nd van 16,320.00 6,480.00 112,320.00
Purchase of office equipment 5,000.00Repayment on loan for purchasefactory building 13,000.00
Tax fees 3,000.00
Audit fees 5,000.00
Cost of website development 2,000.00
TOTAL CASH PAYMENT 246,932.37 158,766.45 214,302.69 441,313.49
CLOSING CASH BALANCE 720,067.63 989,401.18 1,341,798.49 2,091,885.00
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B. FINANCIAL ACCOUNTING AND ACCOUNTING INFORMATION SYSTEM
QUESTION 1
a) Time based/hourly rate is an employee is paid on the basis of time worked and a
premium is paid for working overtime and the rate is predetermined for a particular time
unit spent. For example an employee is paid per hour that an employee is actual work.
b) Piece rate with guaranteed day rate is the workers are actually paid on the basis of
output and if piece rate wages fall below the time rate wages, the worker is paid on time
rate basis such as at day rate.
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QUESTION 2
a) Gross wages earned by each worker for:
i) The first week of January
MAJID LEE
Basic Wages = 48hours x RM7/hour
= RM 336
Basic Wages = 48hours x RM3.50/hour
= RM 168
Overtime Hour = 48hours - 48hours
= 0
Overtime Hour = 50hours - 48hours
= 2 hours
Overtime - Basic Overtime (100%)
Payment = NIL
- Premium Overtime (50%)
= NIL
- Basic Overtime = 100% x RM3.50 X 2hrs
= RM7
- Premium Overtime = 50% x RM3.50 X 2hrs
= RM3.50
- Total Overtime Payment = RM10.50
Time Allowed = 2.25 minutes x 1500units
60
= 56.25 hours
Time Allowed = 3.50 minutes x 800units
60
= 46.67 hours
Time Taken = 48 hours Time Taken = 50 hours
Time Saved = 56.25 hours - 48 hours
= 8.25 hours
Time Saved = 46.67 hours - 50 hours
= NIL
Bonus = 40% x 8.25 hours x RM7
= RM23.10
NIL
Gross Wages - Basic Wages RM 336
- Overtime NIL- Bonus RM23.10
-Total RM359.10
Gross Wages - Basic Wages RM 168
- Overtime RM10.50- Bonus NIL
-Total RM178.50
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ii) The second week of January
MAJID LEE
Basic Wages = 48hours x RM7.50/hour
= RM 360
Basic Wages = 48hours x RM3.50/hour
= RM 168
Excess Output Payment = 5% x 2 x RM11
= RM1.10
= 1600 x RM1.10
2600
=RM0.68
Excess Output Payment = 5% x 2 x RM11
= RM1.10
= 1000 x RM1.10
2600
=RM0.42
Gross Wages = RM 360 + RM0.68
= RM360.68
Gross Wages = RM 168+ RM0.42
= RM168.42
b) The new remuneration scheme is better than do the previous scheme as when wages is
given based on group bonus scheme, it will encourage team spirit among members,
good group incentive scheme assist in the reduction of labor turnover, spoilage, waste
and absenteeism. Besides that, good output will quality for bonus that can only be
earned if each member performs his/her task satisfactorily. This built-in inspection
system reduces the amount of supervision required. In addition, higher output because
slower workers will follow the act of faster workers. Thus, the cost per unit would
reduce.
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b) Statement of Comprehensive Income
Wardah Apparel Sdn. Bhd
Statement of Comprehensive Income for the year ended 31st December 2011
Notes RM
Sales W1 3,150,500.00
Less: Cost of sales W2 (848,054.50)
Gross Profit 2,301,945.50
Add : Other Income W3 28,000.00
Less: Distribution cost W4 (131,710.00)
Less: Administrative expenses W4 (172,650.00)
OPERATING INCOME 2,025,585.50
Less : Financial expenses W4 (8,310.00)
PROFIT BEFORE TAX 2 2,017,275.50
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Workings :
W1) Total Sales
RM
Q1 945,000.00Q2 315,000.00
Q3 630,000.00
Q4 1,260,000.00
Total Sales 3,150,000.00
W2) Cost of Sales
RM
Opening stock of Finished goods 14,850.00
Add : Production Cost of Completed Goods 854,354.50
Less : Closing stock of finished goods (21,150.00)
Cost of Sales 848,054.50
W3) Other Income
RM
Rental received from building 28,000.00
Total Other Income 28,000.00
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W4) Expenses
Expenses AdministrationCost (RM)
DistributionCost (RM)
FinanceCost (RM)
Office maintenance 7,800.00
Office utilities 2,000.00
Sales salaries 8,000.00
Sales commissions 3,000.00
Freight outwards 3,000.00
Advertising 5,000.00
Travelling expenses 11,000.00
Licensing fees for use of universitiesnames and logos
600.00
Clerical wages 10,000.00
Manager salary 72,000.00
Donation 7,000.00
Depreciation on office equipment 250.00
Interest on hire purchase - first van 3,150.00
- second van 2,160.00
Interest on loan 3,000.00
Loss on disposal of Motor Vehicles 65,960.00
Audit fees 5,000.00
Tax fees 3,000.00
Bad debts 63,000.00
Website Development 2,000.00
Depreciation on motor vehicles 35,750.00
TOTAL 172,650.00 131,710.00 8,310.00
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c) Statement of Financial Position
Wardah Apparel Sdn. Bhd
Statement of Financial Position for the year ended 31st December 2011
Notes RM
NON CURRENT ASSETS
Property, Plant & Equipment 3 613,906.00
CURRENT ASSETS
Inventories - Raw Materials 5,250.00
- Finished Goods 21,150.00
Accounts Receivable 226,800.00
Bank 2,091,885.00
TOTAL ASSETS 2,958,991.00
EQUITY AND LIABILITIES
Share Capital 486,603.00
Reserve 4 2,185,260.50
NON-CURRENT LIABILITIES
Loan-Public Bank 170,000.00
Loan-Hong Leong Bank 68,250.00
CURRENT LIABILITIES
Accounts Payable 48,877.50
TOTAL EQUITY AND LIABILITIES 2,958,991.00
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c) Statement of Changes in Equity
Wardah Apparel Sdn. Bhd
Statement of Changes in Equity for the year ended 31st December 2011
Share Capital (RM) Retained Earnings (RM) Total (RM)
Bal b/d 486,603.00 167,985.00 654,588.00
Profit for the year 2,017,275.50 2,017,275.50
486,603.00 2,185,260.50 2,671,863.50
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e) Statement of Cash Flow (direct method)
Wardah Apparel Sdn. Bhd
Statement of Cash Flow for the year ended 31st December 2011
RM RM
Cash Flows from Operating Activities
Cash receipts from customers 2,903,400.00
Cash paid to supplier (304,487.50)
Cash paid to employees (475,107.50)
Payment for other expenses (88,700.00)
Net Cash Flows from operating activities 2,035,105.00
Cash Flows from Investing Activities
Purchase of motor vehicle (22,500.00)
Purchase of office equipment (5,000.00)
Proceeds from disposal on motor vehicles 60,000.00
Cash receipt from rental 28,000.00
Net Cash Flows from investing activities 60,500.00
Cash Flows from Financing Activities
Finance Cost (8,310.00)
Repayment of bank loan (10,000.00)
Repayment of hire purchase (147,210.00)
Net Cash Flows from financing activities (165,520.00)
Net increase in cash and cash equivalents 1,930,085.00
Cash and cash equivalents and the beginning of period 161,800.00
Cash and cash equivalents at the end of the period 2,091,885.00
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Workings : Payment for other expenses
Expenses RM RM
Manufacturing 133,972.00
Operating 312,670.00
Total Expenses 446,642.00
Less :
Depreciation on machineries (35,072.00)
Depreciation on factory building (54,000.00)
Supervision Salaries (5,600.00)
Sales Salaries (8,000.00)
Clerical wages (10,000.00)
Manager salary (72,000.00)
Depreciation on office equipment (250.00)
Depreciation on motor vehicle (35,750.00)
Loss on disposal (65,960.00)
Bad debts (63,000.00)
Interest on hire purchase - 1 st van (3,150.00)
- 2nd van (2,160.00)
Interest on loan (3,000.00) (357,942.00)
Cash Payment 88,700.00
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Notes to the Accounts
1. Significant Accounting Policies
1.1 Property, Plant and Equipment
Property, plant and equipment are initially stated at cost less accumulated depreciation.
The cost of property, plant and equipment comprises purchase costs, together with any
incidental cost of acquisition.
Freehold land is not depreciated as it has an infinite life. Depreciation of other property,
plant and equipment are as follows are:
Freehold building 15% on cost
Office Equipment 5% on cost
Plant and Machinery 20% on net book value
Motor Vehicles 10% on cost
Residuals values and useful lives of assets are reviewed an adjust if appropriate, at each
balance sheet date.
1.2 Inventories
Inventories are stated at the lower of cost and net realizable value. Net realizable value is
the estimated selling price in the price in the ordinary course of business, less the costs of
completion and selling expenses.
1.3 Trade receivables
Trade receivables are carried at invoiced amount less allowance for doubtful debts.Allowance for doubtful debts is made for any debts considered to be doubtful of collection
based on a review of outstanding amounts at balance sheet date. Bad debts are written
off in the financial year in which they are identified.
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1.4 Cash and cash equivalent
For purpose of the cash flow statements, cash and cash equivalents comprise cash in
hand and bank balances.
1.5 Revenue recognition.
Revenue from the sale of goods is recognized when significant risks and reward of
ownership of the goods are transferred to the buyer.
Rental income is recognized on the accrual basis in accordance with the substance of the
relevant agreements.
2. Profit before taxation
Profit before tax is arrived after charging: RM
Depreciation on office equipment 250
Interest on hire purchase 5,310
Interest on loan 3,000
Audit Fees 3,000
Tax Fees 5,000
and after crediting:
Rental Income 28,000
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3. Property, Plant and Equipment
Cost (RM) Depreciation Current
Year (RM)
Carrying Amount
(RM)
Land 88,618 0 88,618
Building 198,000 (54,000) 144,000
Machineries 175,360 (35,072) 140,288
Motor Vehicles 272,000 (35,750) 236,250
Office Equipment 5,000 (250) 4,750
Total 738,978 (125,072) 613,906
4. Statement of Changes in Equity
Share Capital (RM) Retained Earnings (RM) Total (RM)
Bal b/d 486,603.00 167,985.00 654,588.00
Profit for the year 2,017,275.50 2,017,275.50
486,603.00 2,185,260.50 2,671,863.50
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C. FINANCIAL MANAGEMENT
QUESTION 1
Ratios Formula Workings Result
LIQUIDITY RATIOS
i) Current ratios Current assetCurrent liabilities
2,345,085.0048,877.50
47.98 x
ii) Quick ratios Current asset-inventories-prepaymentCurrent liabilities
2,323,935.0048,877.50
47.55 x
EFFICIENCY RATIOS
i) Inventoryturnover
Cost of goods soldAverage Closing stock
848,054.50(14,840+21150)/2
848,054.5018,000.00
47.11 x
ii) Averagecollectionperiod(days)
Accounts receivablesCredit sales/360
226,800.00567,000/360
226,800.001,575.00
144days
iii) Fixedassetsturnover
SalesNet fixed assets
3,150,000.00613,906.00
5.13 x
iv) Total assetsturnover
SalesTotal assets
3,150,000.002,958,991.00
1.06 x
LEVERAGE RATIOS
i) Debt ratio Total debtTotal assets
287,127.502,958,991.00
10%
ii)Timesinterestearned
Earning before interest and taxesInterest expenses
2,025,585.508,310.00
243.75 x
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PROFITABILITY RATIOS
i) Gross profitmargin
Gross profitSales
2,301,945.503,150,000.00
73%
ii) Net profitmargin
Net profitSales
2,017,275.503,150,000.00
64%
iii) Return onequity
Earnings After TaxCommon equity
2,017,275.502,671,863.50
76%
iv) Return onasset
Earnings After TaxTotal assets
2,017,275.502,958,991.00
68%
Comment for the performance of the company financial ratios :
Liquidity Ratios
The current ratio for Wardah Apparel is high and it is good because for every RM 1 of current
liabilities, the company has RM 47.98 of current assets to cover its short term obligation.
For the quick ratios, it is high and good because for every RM 1 of current liabilities, thecompany has RM 47.55 of current assets after deducting the least liquid current assets to cover
its short term obligation.
Efficiency Ratios
The firm has high inventory turnover ratio which is 47.11. This means, the company is able to
turnover its inventory as it shows higher sales value.
The average collection period of the firm is 144 days which is not good for the firm because the
company takes a longer time to collect its debts.
Fixed asset turnover ratio and total asset turnover ratio for the company shows high ratio which
is the company is able to utilize its assets efficiently to generate sales.
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Leverage Ratios
The debt ratio of the company is 10%, therefore the company only use 10% of external source
of financing in finance its capital and it is good situation for the company because the company
is not bear a higher debt.
The time interest earned for the company is very good because the company is capable to pay
its interest obligation.
Profitability Ratios
Gross profit margin, net profit margin, return on assets, and return on equity of the company
shows higher ratio which are 73%, 64%, 76% and 68% respectively. All these ratios indicate
that the company are in profitable condition by having high sales and efficient in managing their
assets.
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QUESTION 2
a) Depreciation of warehouse = Cost of project
Useful life
= RM2,000,000
5 years
= 400,000.00
b) Average annual profit 5 years = Total after tax accounting profit for n years
n
= 350,000+67,5000+1,200,000+850,000+550,000
5 years
= 3,625,000
5 years
= 725,000.00
c) Average amount invested in the project = Initial outlay + expected salvage value
2
= 2000000+2000
2
= 2,002,000
2
= 1,001,000.00
d) Accounting Rate of Return (ARR) = Average annual profit for the year
Average amount invested in the project
= 725,000
1,000,100
= 72%
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e) Encik Munaim should consider proceeding with the Wardah Smart Online project if its
accounting rate of return (AROR) is higher or equal to the firms minimum acceptable
AROR. In this case, Encik Munaim should accept the project since the AROR is 72%.
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D. AUDITING
QUESTION 1
The course of action that should be taken by an auditor if he has approached to be nominated
as an auditor is that he must request permission from prospective client to communicate with
the existing auditor before accepting any nomination as an auditor. The purpose of
communication is to obtain information about the client and to know for any professional
reasons for the proposed changes before the new auditor can decide whether to accept the
nomination or not.
QUESTION 2
No. Weaknesses Possible Losses Recommendation
1. Time recording system There
is no verification by the
supervisor when the shift
workers clock in their time
work.
There is a possibility that
the employee lying on the
time or might change the
figure.
There should be a
supervisor who
monitors the clock in
time workers.
2. Overtime working There is no
supervisor or person who
monitors their overtime
working.
There is a possibility that
the employee lying on the
time and payment of wages
will be overstated.
There should be a
supervisor who
monitors the overtime
work of workers.
3. Details of hours works There
is no approval by an authorized
person of the details of hours
work before being send to the
payroll department.
There is a possibility that
inaccuracy of data might
happened.
There should has an
approval by an
authorized person on
the details of hours
work.
4. Receipt of the email There is
no person who monitors the
receipt of the email by the
payroll department and no
cancellation has been made
There is a possibility that
the file of termination of
employees may still exist or
the email was not being
received by the payroll
department.
There should be a
person who monitors
the receipt of email or
segregation of duties.
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QUESTION 3
No. Substantive Analytical Procedures Expectation
1. Compare payroll expenses account
balances with previous year (adjusted for
pay rate increases and increases in
volume).
Expect that the pay rate remain unchanged
from the previous year.
2. Compare payroll tax expenses as a
percentage of salaries wages with previous
year (adjusted for changes in the tax rates).
No misstatement of payroll tax expense and
payroll tax liability.
3. Compare on reasonableness of the
managers salary for the managers position.
The manager will be given respective salary
with his position.
QUESTION 4
Four procedures used in collecting audit evidence in respect of testing the accuracy of the
accuracy of the time recording system at Wardah Apparel Sdn. Bhd.
1. Observation Observe whether the workers are clock in on work time.
2. Documentation Examine the clock in time with the time recorded in the system.
3. Reperformance Recalculate the accuracy of the time recorded.
4. Inquiries from client Ask for a written confirmation from the supervisors.
QUESTION 5
Five ledger accounts that are likely to be affected by the payroll and personnel cycle :
1. Cash in bank.
2. Accrued wages, salaries, bonuses, and commissions.
3. Direct labour.4. Accrued payroll tax expenses.
5. Payroll tax expenses.
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QUESTION 6
Five types of audit procedures that the auditor can use to determine whether the payroll
transactions are recorded at the proper amounts:
1. Analytical procedures.
2. Reperformance.
3. Physical examination.
4. Confirmation from third parties.
5. Documentations.
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QUESTION 7
Wardah Apparel Sdn. Bhd.
Audited Statement of Comprehensive Income For The Year Ended 31st December 2011
Workings RM
Sales
Less : Cost of Goods Sold
GROSS PROFIT
Add : Other Income
Less : Distribution Cost
Less : Administrative expenses
OPERATING INCOME
Less : Financial Expenses
Add : Finance Income
PROFIT BEFORE TAX
Less : Tax expenses
PROFIT AFTER TAX
1
2
3
4
4
4
3,150,500.00
(842,554.50)
2,307,945.50
24,000.00
(131,710.00)
(174,400.00)
2,025,835.00
(8,310.00)
-
2,017,525.50
(586,465.63)
1,431,059.88
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WORKINGS RM
Working 1 :
Q1
Q2
Q3
Q4
Add : Credit Sales
TOTAL SALES
945,000.00
315,000.00
630,000.00
1,260,000.00
3,150,000.00
500.00
3,150,500.00
Working 2 :
Opening stock of finished goods
Add : Production Cost of Completed Goods
Less : Closing stock of finished goods
COST OF GOOD SOLD
14,850.00
848,854.50
(21,150.00)
842,554.50
Working 3 :
Rental income
Less : Prepaid rental
OTHER INCOME
28,000.00
(4,000.00)
24,000.00
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Working 4 :
EXPENSES Administration
cost
Distribution
cost
Finance
Cost
Office maintenance
Office utilities
Sales salaries
Sales commissions
Freight outwards
Advertising
Travelling expenses
Licensing fees for use of universities
names and logos
Clerical wages
Manager salary
Donation
Depreciation on office equipment
Interest on hire purchase 1st van
- 2nd van
Interest on loan
Loss on disposal of motor vehicles
Audit fees
Tax fees
Bad debts
Website development
Depreciation on motor vehicles
Telephone
Water and electricity
Entertainment expenses
7,800.00
2,000.00
600.00
10,000.00
72,000.00
7,000.00
250.00
3,000.00
5,000.00
63,000.00
2,000.00
350.00
700.00
700.00
8,000.00
3,000.00
3,000.00
5,000.00
11,000.00
65,960.00
35,750.00
3,150.00
2,160.00
3,000.00
TOTAL 174,400.00 131,710.00 8,310.00
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Wardah Apparel Sdn. Bhd.
Audited Statement of Financial Position As At 31st December 2011
Notes RM
NON CURRENT ASSETS
Property, Plant and Equipment
CURRENT ASSETS
Inventories Raw Materials
Finished Goods
Account Receivables
Bank
Prepaid Insurance
TOTAL ASSETS
3 613,906.00
5,250.00
21,150.00
227,300.00
2,091,885.00
4,800.00
2,964,291.00
EQUITY
Share capital
Reserve
NON CURRENT LIABILITIES
Loan from Public Bank
Loan from Hong Leong Bank
CURRENT LIABILITIES
Accounts Payable
Prepaid Rental Income
Accrued Telephone Expenses
Accrued Water and Electricity
Tax Payable
TOTAL EQUITY AND LIABILITIES
4
486,603.00
1,599,044.88
170,000.00
68,250.00
48,877.50
4,000.00
350.00
700.00
586,465.63
2,964,291.00
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Wardah Apparel Sdn. Bhd.
Audited Cash Flow Statement For The Year Ended 31st December 2011
RM RM
Cash Flows from Operating Activities
Cash receipts from customers
Cash paid to supplier
Cash paid to employees
Payment for other expenses
Net Cash Flows from operating activities
290,3400.00
(304,487.50)
(475,107.50)
(88,700.00)
2,035,105.00
Cash Flows from Investing Activities
Purchase of motor vehicle
Purchase of office equipment
Proceeds from disposal on motor vehicles
Cash receipt from rental
Net Cash Flows from investing activities
(22,500.00)
(5,000.00)
60,000.00
28,000.00
60,500.00
Cash Flows from Financing Activities
Finance cost
Repayment of bank loan
Repayment of hire purchase
Net Cash Flows from financing activities
(8,310.00)
(100,00.00)
(147,210.00)
(165,520.00)
Net increase in cash and cash equivalents
Cash and cash equivalents and the beginning of period
Cash and cash equivalents at the end of the period
1,930,085.00
161,800.00
2,091,885.00
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Working : RM RM
Payment for Other Expenses
Manufacturing expenses
Operating expenses
TOTAL EXPENSES
Less : Non Cash Item
Depreciation on machineries
Depreciation on factory building
Supervision Salaries
Sales Salaries
Clerical wages
Manager salary
Depreciation on office equipment
Depreciation on motor vehicle
Loss on disposal
Bad debts
Interest on hire purchase 1st van
- 2nd van
Interest on loan
Accrued Telephone Expenses
Accrued Water and Electricity
Entertainment expenses
133,972.00
314,420.00
(35,072.00)
(54,000.00)
(5,600.00)
(8,000.00)
(10,000.00)
(72,000.00)
(250.00)
(37,570.00)
(65,960.00)
(63,000.00)
(3,150.00)
(2,160.00)
(3,000.00)
(350.00)
(700.00)
(700.00)
448,392.00
(359,692.00)
Cash Payment for Other Expenses 88,700.00
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Notes to the Accounts
1. Significant Accounting Policies
1.1 Property, Plant and Equipment
Property, plant and equipment are initially stated at cost less accumulated depreciation.
The cost of property, plant and equipment comprises purchase costs, together with any
incidental cost of acquisition.
Freehold land is not depreciated as it has an infinite life. Depreciation of other property,
plant and equipment are as follows are:
Freehold building 15% on cost
Office Equipment 5% on cost
Plant and Machinery 20% on net book value
Motor Vehicles 10% on cost
Residuals values and useful lives of assets are reviewed an adjust if appropriate, at each
balance sheet date.
1.2 Inventories
Inventories are stated at the lower of cost and net realizable value. Net realizable value is
the estimated selling price in the price in the ordinary course of business, less the costs of
completion and selling expenses.
1.3 Trade receivables
Trade receivables are carried at invoiced amount less allowance for doubtful debts.Allowance for doubtful debts is made for any debts considered to be doubtful of collection
based on a review of outstanding amounts at balance sheet date. Bad debts are written
off in the financial year in which they are identified.
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1.4 Cash and cash equivalent
For purpose of the cash flow statements, cash and cash equivalents comprise cash in
hand and bank balances.
1.5 Revenue recognition.
Revenue from the sale of goods is recognized when significant risks and reward of
ownership of the goods are transferred to the buyer.
Rental income is recognized on the accrual basis in accordance with the substance of the
relevant agreements.
2. Profit before taxation
Profit before tax is arrived after charging: RM
Depreciation on office equipment 250
Interest on hire purchase 5,310
Interest on loan 3,000
Audit Fees 3,000
Tax Fees 5,000
and after crediting:
Rental Income 24,000
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3. Property, Plant and Equipment
Cost (RM) Depreciation Current
Year (RM)
Carrying Amount
(RM)
Land 88,618.00 0 88,618.00
Building 198,000.00 (54,000.00) 144,000.00
Machineries 175,360.00 (35,072.00) 140,288.00
Motor Vehicles 272,000.00 (35,750.00) 236,250.00
Office Equipment 5,000.00 (250.00) 4,750.00
Total 738,978.00 (125,072.00) 613,906.00
4. Statement of Changes in Equity
Share Capital (RM) Retained Earnings (RM) Total (RM)
Bal b/d 486,603.00 167,985.00 654,588.00
Profit for the year 1,431,059.88 1,431,059.88
486,603.00 1,599,044.88 2,085,647.88
5. Capital Commitment
Wardah Apparel Sdn Bhd is considering in the future expansion program that cost RM
2,000,000 that will start from 2012 until 2017.
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Independent Auditors Reportto the members of Wardah Apparel SdnBhd
Report on the Financial Statements
We have audited the financial statements of Wardah Apparel SendirianBerhad, which comprise
the statements of financial position as at 31 December, 2011, and the statements of
comprehensive income, statements of changes in equity and statements of cash flow for the
year then ended, and a summary of significant accounting policies and other explanatory
information.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with Financial Reporting Standards and the Companies Act, 1965 in
Malaysia. This responsibility includes: designing, implementing and maintaining internal controlrelevant to the preparation and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with approved standards on auditing in Malaysia. Those
standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance whether the financial statements are free from materialmisstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on our judgment,
including the assessment of the risks of material misstatement of the financial statements,
whether due to fraud or error. In making those risk assessments, we consider internal control
relevant to the entitys preparation and fair presentation of the financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entitys internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation ofthe financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
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Independent Auditors Report (contd)to the members of Wardah Apparel SdnBhd
Opinion
In our opinion, the financial statements have been properly drawn up in accordance with
Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true
and fair view of the financial position of the Company as at 31 December, 2011 and of their
financial performance and cash flows for the year then ended.
Report on other legal and regulatory requirements
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the
following:
(a) In our opinion, the accounting and other records and the registers required by the Act to be
kept by the Company have been properly kept in accordance with the provisions of the Act.
(b) We are satisfied that the financial statements of the Company that have been consolidated
are in form and content appropriate and proper and we have received satisfactory information
and explanations required by us for those purposes.
Other matters
This report is made solely to the members of the Company, as a body, in accordance with
Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not
assume responsibility to any other person for the content of this report.
Zahriyah& Partners
Chartered Accountants
Zahriyah
Chartered Accountant
Perak, Malaysia
Date: 21 May, 2012
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E. TAXATION
1. The relevant capital allowances that entitled to claim by Wardah Apparel Sdn Bhd.
Wardah Apparel Sdn Bhd
Computation of Capital Allowances for the year ended 31st December 2011
MOTOR VEHICLES (2nd Hand Van Non Commercial Vehicle Restricted to RM50,000)
Y/As QUALIFYING PLANT EXPENDITURE RM
2009
2010
2011
QPE
Initial Allowances (20%)
Annual Allowances (20%)
Residual Expenditure as at 31
st
Dec 2009
Annual Allowances (20%)
Residual Expenditure as at 31st Dec 2010
Annual Allowances (20%)
Residual Expenditure as at 31st Dec 2011
50,000.00
(10,000.00)
(10,000.00)
30,000.00
(10,000.00)
20,000.00
(10,000.00)
10,000.00
MOTOR VEHICLE (Commercial use) 1st Van
Y/As QUALIFYING PLANT EXPENDITURE RM
2011 QPE
Deposit
Add: Monthly Installment (RM 2,625 x 10 months)
Initial Allowances (20%)
Annual Allowances (20%)
Residual Expenditure as at 31st Dec 2011
105,000.00
10,500.00
26,250.00
36,750.00
7,350.00
7,350.00
22,050.00
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MOTOR VEHICLE (Commercial use) 2nd Van
Y/As QUALIFYING PLANT EXPENDITURE RM
2011 QPE
Deposit
Add: Monthly Installment (RM 1,800 x 6 months)
Sale Proceeds
Balancing Charge
120,000.00
12,000.00
28,800.00
40,800.00
(60,000.00)
19,200.00
MACHINE A
Y/As QUALIFYING PLANT EXPENDITURE RM
2008
2009
2010
2011
QPE
Initial Allowances (20%)
Annual Allowances (14%)
Residual Expenditure as at 31st Dec 2008
Annual Allowances (14%)
Residual Expenditure as at 31st Dec 2009
Annual Allowances (14%)
Residual Expenditure as at 31st Dec 2010
Annual Allowances (14%)
Residual Expenditure as at 31st Dec 2011
80,000.00
16,000.00
11,200.00
52,800.00
11,200.00
41,600.00
11,200.00
30,400.00
11,200.00
19,200.00
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MACHINE B
Y/As QUALIFYING PLANT EXPENDITURE RM
2008
2009
2010
2011
QPE
Initial Allowances (20%)
Annual Allowances (14%)
Residual Expenditure as at 31st Dec 2008
Annual Allowances (14%)
Residual Expenditure as at 31st Dec 2009
Annual Allowances (14%)
Residual Expenditure as at 31st Dec 2010
Annual Allowances (14%)
Residual Expenditure as at 31st Dec 2011
200,000.00
40,000.00
28,000.00
132,000.00
28,000.00
104,000.00
28,000.00
76,000.00
28,000.00
48,000.00
MACHINE C
Y/As QUALIFYING PLANT EXPENDITURE RM
2010
2011
QPE
Initial Allowances (20%)
Annual Allowances (14%)
Residual Expenditure as at 31st Dec 2010
Annual Allowances (14%)
Residual Expenditure as at 31st Dec 2011
40,000.00
8,000.00
5,600.00
26,400.00
5,600.00
20,800.00
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OFFICE EQUIPMENT
Y/As QUALIFYING PLANT EXPENDITURE RM
2011 QPE
Initial Allowances (20%)
Annual Allowances (10%)
Residual Expenditure as at 31st Dec 2011
5,000.00
1,000.00
500.00
3,500.00
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INDUSTRIAL BUILDING ALLOWANCES
Y/As QUALIFYING BUILDING EXPENDITURE RM
2008
2009
2010
2011
QBE (Purchase Price)
Cash Payment
Installment
Initial Allowances (10%)
Annual Allowances (3%)
Residual Expenditure as at 31st Dec 2008
Installment
Annual Allowances (3%)
Residual Expenditure as at 31st Dec 2009
Installment
Annual Allowances (3%)
Residual Expenditure as at 31st Dec 2010
Installment
Annual Allowances (3%)
Residual Expenditure as at 31st Dec 2011
360,000.00
160,000.00
10,000.00
170,000.00
(17,000.00)
(5,100.00)
147,900.00
10,000.00
157,900.00
(5,100.00)
147,900.00
10,000.00
157,900.00
(4,737.00)
153,163.00
10,000.00
163,163.00
(4,895.00)
158,268.00
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The relevant capital allowances that entitled to claim by Wardah Apparel Sdn Bhd:
CAPITAL ALLOWANCES
RM RM
Motor Vehicles
Machineries
Office Equipment
24,700.00
44,800.00
1,500.00 71,000.00
INDUSTRIAL BUILDING ALLOWANCES
Building 4,895.00
TOTAL 75,895.00
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QUESTION 2
The amount of actual tax payable by Wardah Apparel Sdn. Bhd.
Wardah Apparel Sdn Bhd
Computation of Tax Liability for the year ended 31st
December 2011
RM RM
Profit before tax 2,017,525.50
Less : Non Business Income
Rental income 24,000.00
Add : Non Allowable Expenses
Insurance premium paid to Malaysian InsuranceCompany
(d/d) 1,000.00
Clerical wegas paid to disabled employees (d/d) 7,200.00Entrance fees paid to Persatuan Perniaga IslamMalaysia
100.00
Purchase a secondhand car 200,000.00
Cash donation to Persatuan Kanak-kanak AutismeMalaysia and Persatuan Perniaga Islam Malaysia
5,500.00
Zakat 1,500.00
Office maintenance NIL
Office utilities NIL
Sales salaries NIL
Sales commissions NIL
Freight outwards NIL
Advertising NIL
Travelling expenses NIL
Licensing fees for use of universities names and logos 600.00
Clerical wages NIL
Manager salary NIL
Depreciation on office equipment 250.00Depreciation on motor vehicles 35,750.00
Depreciation on building35,072.00
Depreciation on machineries 54,000.00
Interest on hire purchase 1st van NIL
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Interest on hire purchase 2nd van NIL
Interest on loan NIL
Loss on disposal of Motor Vehicles 65,960.00
Audit fees NIL
Tax fees NIL
Bad debts NIL
Website Development NIL
Telephone NIL
Water and Electricity NIL
2,416,257.50 32,200.00
(32,200.00)
Adjusted Income 2,384,057.50
Add: Balancing Charge 19,200.00
Less : Capital Allowances (71,000.00)
Industrial Building Allowances (4,895.00)
Statutory Income 2,327,362.50
Add: Other Source Of Income
Rental Income 24,000.00
Aggregate Income 2,351,362.50
Less : Approved donations (5,500.00)
Chargeable Income 2,345,862.50
Less: Tax Rate 0.25
Tax Payable 586,465.63
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QUESTION 3
The chargeable income for Encik Munaim and he has elects for separate assessment.
Encik Munaim
Computation of Chargeable Income for the year ended 31st December 2011
En.Munaim En. Munaim'swife
RM RM RM
Section 4 (b) : EmploymentIncome Section 13 (1)(a)
Salary 72,000.00
Travelling allowances - exempt NIL
School fees of child 1,000.00
Reimbursement of driver salary 8,400.00
81,400.00
Section 13 (1)(b)
Domestic servant 4,800.00
Corporate membership 600.00
5,400.00
Section 13 (1)( c )
Living accomodation (800 x 12) 9,600.00
Statutory Employment Income 96,400.00
Aggregate Income 96,400.00
Less: Relief
Personal relief (9,000.00)
Child relief - First child (22) (5,000.00)
- Second child (20) NIL
- Third child (10) (1,000.00)
Basic supporting equipment -restricted RM 5,000
(5,000.00)
Chargeable Income 76,400.00
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QUESTION 4
The responsibility of Wardah Apparel Sdn Bhd with regards to the submission of relevant forms
to the Inland Revenue Board Malaysia:
Wardah Apparel Sdn Bhd is responsible to furnish an estimate of income tax payable for a Year
Assessment in a CP 204 not later than 30 days before the beginning of the basis period which
means not later than 1st December 2010.
Upon receiving the Form CP 204, the authorities will issue a notice of payment (CP 205) and a
12 monthly payment slips (CP 207), with the relevant information of the companies.
The monthly installment will due on the 10 th of every month commencing from the second month
of the basis period. Failure to pay the tax installment on the 10 th day following the month will
subject to 10% penalty on the amount unpaid. Therefore, the installment begins 10 th February
2011 and ends on 10th January 2012.
If there is difference between tax estimate and actual income tax payable exceeds the 30%
margin of error, 10% penalty will be imposed. Hence, to avoid such penalty, revision of
estimates is essential, by submitted the CP 204A, in the sixth month, or the ninth month or in
the both months of the basis period for this YA 2011.
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QUESTION 5
a) Since the Wardah Apparel Sdn Bhd considered constructing a building to be used as a
factory, thus, it is qualified to be treated as qualifying industrial building.
b) Capital expenditure that incurred in constructing the building is also qualified as qualifying
building expenditure. Forexample, the cost of clearing the old site, architects fees, the cost
of construction, cost of installing fittings and other cost that related in construct the factory
building.
c) If the company considered purchasing building to be used as factory, therefore the purchase
price of the building shall be qualified building expenditure (QBE).
d) When the only part of the building is used as an industrial building, the whole building
extension is to treated as industrial building if the capital expenditure on the construction of
the part of the building which is not in use (non-qualifying part) is less than 10% of the cost
of constructing the whole building.
If the cost of construction of the non-qualifying part exceeds 10% of the cost of constructing
the whole building, then the industrial building allowance is given on that proportion of the
building that is in use (qualifying part) as an individual building (Para 66,sch 3).
e) Where capital expenditure is incurred on preparing, cutting, tunneling or leveling land in
order to prepare a site for the installation of the machinery or plant to be used for purposes
of a business and if such expenditure exceeds 75% of the aggregate cost of that plant or
machinery and the cost of installation, then the aggregate expenditure is treated as
qualifying building expenditure. On the other hand, if the cost of preparing, cutting,
tunneling or leveling land is less or equal to 75%, then only the cost of plant and machinery
will be the qualified plant expenditure. The cost of preparing, cutting, tunneling or leveling
land would not be given any tax relief.
f) When the building was put into use in 2009, the building allowance was start to be claimed
at year end 2009 as well. Since the building was subsequently disposed to another
company in 2010, therefore, no building allowance can be claimed for the year of 2010.
Hence, the disposal value of a building is an amount equal to its market value at the date of
disposal.
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REFERENCE
Alvin, A.A., Randal, J.E., & Mark, S.B. (2011) . Auditing and assurance services in malaysia an
integrated approach . (11th ed.) . (Selangor) : Pearson Prentice Hall.
Choong, K.F. (2011) . Malaysian taxation principles and practice . (17th ed.) . ( K.L ) : Infoworld.
Frank, W., & Alan, S. (11th ed.) . (Harlow) : Pearson Education Limited.
Jane, L., & Tan, L.L. (2011) . Company and group financial reporting. (7th ed.) . (Selangor) :
Pearson Prentice Hall.
Rodziah, A.S., Rohani, A.W., Shelia, C., & Mohd, N.H. (2010) . Financial management for
beginners. (3rd ed.) . (Selangor) : McGraw-Hill.
Roshayani, A., Laily, U., Siti Maznah, M.A., & Kamaruzzaman, M. (2009) . Financial accounting
an introduction. (3rd ed.) . (Selangor) : McGraw-Hill.
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