RMIT Classification: Trusted

TUTORIAL QUESTION – TOPIC 1

QUESTION 1

Seaside Ltd is a proprietary (private) company that operates holiday resort in Southern Australia.

It has 10 shareholders, all of whom are involved in the management of the company.

Seaside has 33 employees.

According to the internal accounting records, Seaside has the following main figures:

 Total assets: $28 million

 Total liabilities: $10 million, most of which are represented by a bank loan
 Current year total revenues: $24 million.

Seaside purchases inventories and services from a pool of about 60 suppliers. It also has about 10
trade creditors.

a) Define “reporting entity”?

Ans: A reporting entity is an entity that is required or chooses to prepare financial statement
(General purpose financial statement)

b) Identify users and Do the users need financial information? Why?

Ans: 1. Shareholders
Information they are interested in profitability financial performance.
2. The Bank information interested in Liquidity Cash Flo
3. Suppliers: Cash flows
4. Employees Financial performance of the company for job security reasons
5. Trade Creditors: Cash Flows

c) Identify the users with the power to demand SPECIAL PURPOSE FINANCIAL STATEMENTS
Ans: Financial reports that are intended for presentation to a limited group of users. The
power to request the reports tailored to meet the requirements of special demands.
1. Shareholders because they are managing.
2. The Bank can ask for it because the give of 10 million loan.
First two in accordance with the question
3. The Government,
provide information about the results of operations, financial position, and cash flows of
an organization.
Pool of 10 creditors and 60 of suppliers so they don’t potentially have the power to ask for
SPFS since they are replaceable If there was 1 or 2 of either creditors or suppliers then
they could ask for SPFS

d) Identify the users that can only rely on GENERAL PURPOSE FINANCIAL STATEMENTS
Ans: GPFS can satisfy the employees, Traders creditors and suppliers to satisfy their needs
Balance sheet statement, Income statement

e) Determine whether Seaside Ltd is a small proprietary company under the ASIC Corporations
Act 2001.
Ans: Small proprietary company
Gross revenue is Less than 50 million. Seaside satisfy this
Assets are less than 25 million. Not this
Less then 100 employees. Seaside satisfy this
Since it satisfies 2 out of three it is a small ltd company
 RMIT Classification: Trusted

Corporation Act 2001 - Section 292

If you fail 3 or 2 outa three than you are a large company otherwise you are small

f) As Seaside’s accountant, advise the company about its possibilities to prepare GENERAL
purpose financial statements in compliance to AASB, and/or SPECIAL purpose financial
statements
Ans: Seaside company can do not need to make GPFS since it’s a small company but they
can choose to make if they want to.

QUESTION 2

What is ‘corporate social-responsibility reporting’?

A management concept whereby companies integrate social and environmental concepts in

their business operations and interactions with their stakeholders.

Reporting of non-financial metrics which fosters trust companies transparency and improved
their reputation.

IFRS foundation – International Accounting standards board – IFRS Accounting standards –

ISSB International Sustainability Standards Board

In Australia we have only AASB

QUESTION 3

Identify some responsibilities that you think organisations have in relation to how they conduct their
operations (they could be social, environmental or financial responsibilities). Having done this, think of
some “accounts” that could be produced by the organisation to indicate how it has performed in
relation to those expected responsibilities.

QUESTION 4

Organisations have for many years been emitting numerous chemicals into the atmosphere and this
has created various negative environmental impacts, including climate change.

Required: Does the release of the chemicals impact the emitting organisations’ profits? If not,
why not?