index

a2 Milk Company (a2C) 92 packages 324–5 AASB 14, 41–2 data security 409 AASB 5 Non-current Assets Held for Sale and Discounted accounting standards 807–8 Operations 603, 608 new revenue recognition 158–9, 820 AASB 101 Presentation of Financial Statements 26, 27, for public sector 807 537, 603 setting 41 revisions to 609, 648 accounting transactions AASB 102 Inventories 279, 284, 286, 504 analysing 95–100 AASB 107 Statement of Cash Flows 645, 648 bank borrowings 96 AASB 108 Accounting Policies, Changes in Accounting case study 861–3 Estimates and Errors 603, 607, 811 cash in advance from customers 97 AASB 116 Property, Plant and Equipment 477, 484, cash payments 98, 99 493, 795 cash payments for employees 100 AASB 117 Leases 482, 483, 550, 555 cash purchases 97 AASB 118 Revenue 157, 820 chart of accounts 110 AASB 119 Employee Benefits 607 dividends payments 99 AASB 123 Borrowing Costs 481 identifying processes 95 AASB 133 Earnings per Share 741 issuing shares for cash 96 AASB 136 Impairments of Assets 492 purchases on credit 99 AASB 137 Provisions, Contingent Liabilities and recording in general ledgers 111 Contingent Assets 430, 536, 816 recording in journal form 108–9 AASB 138 Intangible Assets 498, 499, 501, 607 services rendered for cash 98 AASB 141 Agriculture 503, 504 summary of 100 AASB 1053 Application of Tiers of Australian Accounting accounts 101 Standards 42, 807 accounts payable 99 AASB CF 2013-1 Amendments to the Australian accounts payable subsidiary ledgers 344 Conceptual Framework 802 accounts receivable 19, 98, 428 ACCC 16, 804 accounts receivable control See accounts receivable accelerated depreciation methods 488 accounts receivable subsidiary ledgers 344 accountability objectives 802 accrual-based accounting 814 accountants, diversity of roles and career paths 7–8 case study 861–3 accounting 6 versus cash-based 155–6 accountability objectives 802 accruals 556 cost principles 795 accruals adjusting entries 162, 169–73 decision-usefulness objectives 802, 808 accrued expenses 171–3, 175 entity concepts 44, 794 accrued interest 171–2 full disclosure principles 795 accrued revenues 170–1, 175 going concern principle 794–5 accrued salaries 172–3 monetary principles 793 accrued expenses 162 accounting concepts 44 adjusting entries 171–3, 175 accounting controls 329 accrued revenues 162 accounting cycle, steps in 182–3 adjusting entries 170–1, 175 accounting equations 818 accumulated depreciation 484 accounting information, transforming accounting acid tests 732 data into 337–43 COPYRIGHTEDactive MATERIALmarkets 499 accounting information systems 94, 326–8 See also additions and improvements 491–2 computerised accounting information systems adjusted trial balances compared with trial balances 178 case study 867–9 adjusting entries 161–77 See also accruals adjusting development considerations for 327–8 entries; prepayments adjusting entries internal control systems 328–36 case study 861–3 principles of 327 general journals 175 accounting period concepts 44, 154, 794 recording in general ledgers 176–7 adjusting entries 161–77 types of 162, 175 relationship between revenues, expenses and 822 using worksheets 187–8 relationship with revenues, expense recognition administrative controls 329 and 160 administrative expenses 233 reversing entries 173 ageing the accounts receivable methods 433 accounting principles 44–5 agricultural activities 503 accounting processes 6–7 agricultural assets 503–4 case study 860–78 agricultural produce 504

Index 931

BMIndex 931 6 April 2015 10:17 AM Air New Zealand Australian Securities and Investments Commission aircraft renewal programs 483 (ASIC) 16, 17, 40–1, 804, 831 average age analysis 507 efficacy of 592 innovative use of non-current assets 477 review focus 159 airline industries Australian Securities Exchange (ASX) 11, 12, 34, aircraft renewal programs 483 42, 593 average age analysis 507 Australian Securities Exchange (ASX) Corporate generating profit from non-current assets 477 Governance Council 42 takeovers 592 Corporate Governance Principles and allotment of shares 597 Recommendations (2nd edition) 330 allowance for doubtful debts 430–1, 432, 656–7 Corporate Governance Principles and allowance methods Recommendations (3rd edition) 330 bad debts 664 Principles of Good Corporate Governance and Best uncollectable accounts 430–5 Practice Recommendations 34, 330 amortised cost method using the effective Australian Taxation Office (ATO) 7, 17, 240, 804, 831 interest rate 546 average age analysis 507–8 amortising, natural resources 505–6 average collection period 441–2, 734 Anchor 404 case study 870 annual impairment tests 501 average cost method annual reports 32–3 case study 867–9 Ansett 477 perpetual inventory systems 292 Apple Inc. average cost methods 279, 283–4 See also moving cash flow management 642 weighted average methods percentage of intangibles to total assets 498 average days in inventory 735 product life cycles 286 average useful life analysis 506–7 research and development costs 502 application money 597 bad debts expense 429–30, 434 apps for fast food industry 3 bad debts write-offs 664 Arrium Limited 619 calculating 656–7 ASIC See Australian Securities and Investments case study 870 Commission (ASIC) GST and 435 asset registers 497 balance sheets See statement of financial position asset turnovers 508–9, 739 Ballina Fishermen’s Co-operative Ltd 12 assets 21 bank borrowing transactions 96, 113 debit and credit procedures 103 bank errors 413, 419 defining 814–16 bank reconciliation case study 869–70 effect of inventory errors on 296–7 bank reconciliation internal controls 412–19 normal balances 103 electronic banking 420 proposed changes to definition and recognition 818 previous month’s 417 recognition criteria 815–16 reconciliation procedures 414–19 associations 12 bank reconciliation statements 419 Attaché 352 bank statements 413, 416 Auditing and Assurance Standards Board (AUASB) 41 banks and borrowing restrictions 562 auditors 36 barcodes 223 internal 330, 334 basic accounting equations 24, 95–6, 106 auditor’s reports 36–8 Bega 404 audits 7 Berkshire Hathaway 598 AUSkey 17 Bermagui Pre School Co-operative Society Limited 12 Australian Accounting Research Foundation (AARF) bias in information 810 798 Billabong International Ltd 648 Australian Accounting Standards Board (AASB) 14, biological assets 503, 504 41–2 Bloomberg World Index 828 Australian Bureau of Statistics 50 Bluetooth technology 94 Australian business numbers (ABNs) 595 bonds 542, 543 Australian Business Register 17 book value 484 Australian company numbers (ACNs) 595 bookkeeping 7 Australian Competition and Consumer Commission borrowing costs 537, 546 (ACCC) 16, 804 brand names 502 Australian Forest Growers 12 Brunswick 92 Australian Medical Association 12 business activity statements (BAS) 240

932 Index

BMIndex 932 6 April 2015 10:17 AM business environments and decision making 4–6 cash receipts journals 361–4 business organisations bank reconciliations 417 case study 860–1 checking ledgers 364, 369 main forms of 9–11, 590 journalising and posting 363 other forms of 11–13 posting procedures 364 sustainability and environmental tracking 20 cash return on sales ratios 676–7, 740–1 business transactions and cash 406–8 cash-based accounting versus accrual-based 155–6 cash-generating units 492 call on capital 597 Catchafire 8 Canada and GST 239 Centro Group 592 capital expenditure ratios 673–4 Certified Practising Accountants (CPAs) 43 capitalising interest 480 changes in accounting estimates 606 Carbon Disclosure Leadership Index (CDLI) 828 changes in accounting policies 606–7 Carbon Disclosure Project (CDP) 828 chart of accounts 110, 113 Carbon Performance Leadership Index (CPLI) 828 Chartered Accountants Australia and New Zealand 43 CarbonSystems 20 See also Envizi Chartered Accountants (CA program) 43 Cardrona Alpine Resorts 677 cheques 411 carrying amounts 166, 484 See also book value clearing 412 cash dishonoured 413, 417 assessing adequacy 426–7 unpresented 413, 415 bank reconciliation internal controls 412–19 chief executive officers (CEOs) 593 business transactions and 406–8 chief financial officers (CFOs) 7 case study 869–70 claims of creditors and owners 24 effect of major accounting transactions on 407 classification processes 6 inflows 408 classified statement of financial position 26–7 internal control 409–27 Clive Peeters 335 outflows 408 closing entries payments internal control 410–11 journalising 181 petty cash internal control 412 periodic inventory systems 298–9 receipts internal control 409–10 perpetual inventory systems 297–8 cash accounts 418 posting procedures 182 cash budgets 422–5 closing the books 180–2 collection from customers 424 cloud accounting systems 333, 352 See also MYOB materials 424 AccountRight Plus; payments for materials 424 Coca Cola Amatil 268–9 sales 423 cost flow methods 279, 284 selling and administrative expense 424 depreciation expenses 485 cash debt coverage 58, 59, 676, 736 dividend payments 105 cash disbursements journals 367 percentage of intangibles to total assets 498 cash discounts 227 See also settlement discounts percentage of PPE to total assets 478 cash dividend declared accounts 600 receivables turnover and average collection cash dividends 599–600 period 442 cash equivalents 426 Coca-Cola Bottles (Perth) Pty Ltd 268 cash flow management of small businesses 421 Coles 44 cash flow statement See statement of cash flows cost flow methods 284 cash flows 642 Colorado Group Ltd 11 See also Fusion Retail Brands cash in advance from customer transactions Pty Ltd 97, 114 commercial accountants 7 cash accounts 118 of Australia 828 cash management principles 420–2 communication of financial information 7 cash over and short 449 companies 10–11, 591 See also corporations cash payment transactions 98, 99 advantages and disadvantages 594 cash payments for employee transactions 100, 117 organisational structure 593 cash payments journals 367–9 See also cash process of forming 595 disbursements journals sources of funds 18 bank reconciliations 418 sources of information about 50 checking ledgers 369 Companies Act 592 posting procedures 367–8 Companies Act 1856 40 cash payments transactions 115 Companies Act 1993 (NZ) 10 cash puchase transactions 97, 113 comparability of information 47, 811

Index 933

BMIndex 933 6 April 2015 10:17 AM computerised accounting information systems 349–54 Corporations Act 2001 (Cwlth) 10, 40, 592, 595 See also cloud accounting systems cost constraints on information 47–8 advantages and disadvantages 353–4 cost flow methods basic features of 350–3 consistency of application 286 e-commerce considerations 354 effect on statement of financial position 285 modules 350 effect on tax 285 computerised accounting systems 103 effects on financial statements 284–6 computerised inventory systems 223 cost of goods purchased 274–5 Conceptual Framework 13–15, 825–6 cost of sales (COS) 222 current content of 800–1 calculating 276–7 current developments in 790–1 using periodic systems 274–7, 280 development of 42 cost principles 45, 795 developments and improvements to 799 Country Road’s cost flow methods 284 financial statements 20–40 CPA Australia 8, 43 general purpose financial reporting objectives 13–14 credit cards, advantages of 443–4 issues with 800 credit purchase transactions 99, 116 qualitative characteristics 45–8 credit purchases 225 reporting entities 14–15 credit rating agencies 543 revisions proposed for 800, 824 credit risk 439–40 users of 804–5 disclosures 441 Conceptual Framework for Financial Reporting 2010 21, reporting 440–1 800, 802–3, 831 See also Conceptual Framework credit risk ratios 440 conceptual frameworks, history and development 797–801 creditors’ subsidiary ledgers See accounts payable consigned goods 276 subsidiary ledgers consignment stock 276 credits 101 Consumer Price Index (CPI) 271 cross-references in ledger accounts 111–12, 113 contingent liabilities 555–8 Ltd 739 disclosures 795 CSR Ltd 44 continuous life 592 changes in accounting policies 607 contra accounts 484 depreciation expenses 166 contra asset accounts 166 Dividend Reinvestment Plan (DRP) 602 contra equity accounts 598 share buybacks 594 contra revenue accounts 230–1 current assets 27, 429 contract interest rates 542, 543 current cash debt coverage 675, 732–3 contributed equity 96 Fantastic Holdings and Nick Scali Limited 56–7 reporting 612–14 current cost measurements 824 control accounts 344 current liabilities 28, 536 relationship with subsidiary ledgers 345 calculating mortgage liabilities 550 convertible notes 541 Domino’s Pizza Enterprises Ltd 29 cooperatives 12 current ratios 54–5, 561, 675, 731–2 copyrights 502 customers’ subsidiary ledgers 344 corporate collapses 330, 592 corporate fraud 335–6 Dare Gallery 51 corporate governance 329–30 data security 409 Corporate Governance Principles and Recommendations David Jones 828 (2nd edition) 330 days in inventory 287–8 Corporate Governance Principles and Recommendations debentures 18, 541 (3rd edition) 330 accounting issues 543–4 corporate governance statements 34 determining market value of 542–3 corporations 591–5 disadvantages 542, 619 ability to acquire capital 592–3 redeeming at maturity 544 advantages and disadvantages 594 redeeming before maturity 544–5 characteristics of 591–4 debit and credit procedures company management 593 assets and liabilities 103 continuous life 592 dividends 104 government regulations 594 expenses 104–5 limited liability of shareholders 591 hiring employees 99 organisational structure 593 retained earnings 104 separate legal existence 591 revenues 104–5 transfer of shares 591–2 share capital 103–4

934 Index

BMIndex 934 6 April 2015 10:17 AM debits 101 settlement 227–8, 242–3 debt financing 58, 97, 534–5 trade 228 advantages over ordinary shares 541 discussion papers 800, 818, 823, 824 versus equity financing 618–20 dishonoured cheques 413, 417 debt securities 18 dividend payout ratios 617, 742 debt to equity ratios 736 dividend payouts 616–17 debt to total assets ratios 57–9, 535, 562, 735–6 variability among companies 617 debtors’ subsidiary ledgers See accounts receivable dividends 18, 24, 590, 599–603 subsidiary ledgers case study 874–5 decision-making processes in business 4–6 corporations’ payments 105 decision-usefulness objectives 802, 808 debit and credit procedures 104 declaration dates and cash dividends 600 forms of 599–603 deferrals See prepayments dividends payment transactions 99, 117 delivery dockets 340 Domino’s Pizza College 330 Deloitte 7 Domino’s Pizza Enterprises Ltd 2–3, 17 Deloitte Touche Tohmatsu 36 auditor’s reports 36–8 depletion of natural resources 505–6 cost flow methods 284 deposit in transit See outstanding deposits credit risk note in financial statement 441 depreciable amounts 486–7 credit risk ratios 440 depreciation 28 current assets 27 case study 871 current liabilities 29 disclosures 490, 491 debt and equity financing 97 methods for PPE 486–9 depreciation expenses 166 periodic 490–1 depreciation policy disclosures 490 PPE 483–91 developments in accounting systems 94 prepayments adjusting entries 165–7 directors’ reports 35 Property Group 12 financial reports frequency 7 Diana Ferrari 11 intangible assets 28, 499 differential financial reporting 807–8 non-current assets 28 diminishing-balance method 486, 487–8 See also notes on accounts receivable 431 accelerated depreciation methods notes to the financial statements 34 direct method for statement of cash flows 647, 648, percentage of intangibles to total assets 498 654–62, 663 percentage of PPE to total assets 478 direct write-off methods 664 PPE 28 case study 870, 872 presenting receivables in notes of financial effects of 430 statements 439 uncollectable accounts 429–30 ratio of cash to daily cash expenses 427 directors’ reports 34–5, 101, 744 receivables as percentage of assets 428 Domino’s Pizza Enterprises Ltd 35 reserves and retained earnings disclosure disclosures 614–15 biological assets 504 retained earnings 31 change in depreciation methods 491 Safe Delivery Program 330 changes in accounting estimates 606 statement of cash flows 32, 33 changes in accounting policies 606–7 statement of changes in equity 30 changes in equity 613 statement of financial position 30–2 contingent liabilities 795 statement of profit or loss 30, 31 credit risk 441 double-entry systems 102–5 depreciation 490 Dow Jones Sustainability World Index 828 intangible assets accounting policies 500 Dun & Bradstreet 722 prior period errors 604 reserves and retained earnings disclosure earning power 603 614–15 earnings before interest and tax (EBIT) 562 discontinued operations 608 earnings management 168, 296 discount allowed 231 earnings per share (EPS) 741 discount received 227 e-banking 408 discounting processes 542 e-commerce discounts accounting software considerations 354 cash 227 data security 409 purchase settlement 237 ED/2010/2 Conceptual Framework for Financial sales 231, 273 Reporting: The Reporting Entity 791, 794, 807

Index 935

BMIndex 935 6 April 2015 10:17 AM electronic banking 408–9, 420 face value electronic funds transfer (EFT) 409, 411 notes payable 537 electronic spreadsheets 353 unsecured notes 542 mortgage schedules 548 factoring 443 employees hire transactions 99, 116 fair value accounting 495 end of reporting period 44 faithful representation of information 47, 810 enterprise resource planning (ERP) systems 353 Fantastic Holdings 49 entity theories 790, 806 asset turnovers 508–9 environmentally sensitive businesses 830 average age of PPE 508 Envizi 20 average useful life analysis 507 Epilepsy Association of Australia 12 cash debt coverage 59 equation analyses 226 cost flow methods 284 equity 24 current ratios 54 case study 873–5 debt to total assets ratios 58 changes in accounting estimates 606 dividend payouts 617 changes in accounting policies 606–7 gross profit ratios 235 debt versus equity financing 618–20 inventory turnover and days in inventory 288 decision-making processes 590 liquidity ratios 561 defining 818 operating expenses to sales ratios 236 discontinuing operations 608 profit margins 51–2 dividends 599–603 return on assets 50–1 dividends record analysis 616–17 fast food industry See Domino’s Pizza Enterprises Ltd earning power 603 Fernwood 152 earnings performance analysis 617–18 FIFO methods See first-in, first-out (FIFO) method effect of inventory errors on 296–7 finance leases 482, 551, 815 effect of share dividends on 602 accounting for 553–4 prior period errors 603–6 financial accounting 5 relationships of accounts affecting 105 financial accounting records, maintaining accurate 7 share issues 596–8 Financial Accounting Standards Board (FASB) 798 statement of changes in equity reporting 611–12 Concept Statement 1 802 statement of financial position reporting 612–16 General Standards 280 statement of profit or loss and other comprehensive joint projects with IASB 799, 826–7 income reporting 609–11 financial capital concepts 823 equity financing 97 financial controllers 593 versus debt financing 618–20 financial data 743 equity investors 16 financial information errors categories of primay users 15–16 bank 413, 419 comparability of 811 inventory 295–7 enhancing qualitative characteristics 47, 48, posting 122 810–12 prior period 603–6 external users 17–20, 45–6 rounding 549 external users and needs 16 ethical investments 828 faithful representation 47, 810 events 94–5 fundamental qualitative characteristics 46–7, 48, Excel spreadsheets 353 809–10 mortgage schedules 548 internal users of 16–17 exempt supplies 240 relevancy of 46–7, 809–10 expense recognition criteria 159–60, 821–3 sources of information about 50, 742–3 relationship with revenue recognition, accounting timeliness of 812 period concepts and 160 understandability of 812 expenses 19 verifiability of 811 concepts of capital 823 Financial Market Authority (FMA) 592 debit and credit procedures 104–5 financial ratio classifications 49 defining 821 financial reporting relationship between revenues, accounting period constraints of 47–8, 813–14 concept and 822 defining and recognising elements in 814–23 exposure drafts 791, 794, 799–800, 807 differential 807–8 eXtensible Business Reporting Language (XBRL) 19, enhancing qualitative characteristics 810–12, 813 829, 830–1 fundamental qualitative characteristics 809–10, 813 External Reporting Board (XRB) 42, 808 future developments for 826–31

936 Index

BMIndex 936 6 April 2015 10:17 AM measuring elements of 823–4 fraudulent reporting 168 social and environmental aspects 649–50 free cash flows 672–3, 736–7 tiered systems 807–8 ‘free from’ food businesses’ complex recording users of 804–5 processes 92–3 XBRL lodgements 831 free on board (FOB) shipping point 276 Financial Reporting Act 1993 42, 592 Freedom Foods Group Limited 92, 110 Financial Reporting Act 2013 42, 808 debt and equity financing 97 Financial Reporting Board (FRC) 41 developments in accounting systems 94 Financial Reporting Council 745 Freedom Nutritional Products 18 financial reporting environment 40–3 freight costs 226–7 financial statements 20–40 See also notes to the recording (periodic system) 272 financial statements freight-in accounts 226 accounting processes for generating 337–8 freight-out accounts 227 analysis and decision making 48–9 full disclosure principles 45, 795 case study 876–8 furniture retailers See Fantastic Holdings; Nick Scali Limited effect of cost flow methods 284–6 Fusion Retail Brands Pty Ltd 11 elements in 814 external users 334 GAAP See generally accepted accounting principles fraudulent reporting 168 (GAAP) horizontal analysis 723–6 gain on sale 496 liquidity ratios analysis 559–61 gains 156, 819 non-current assets reporting 506 general expenses 233 prepared from adjusted trial balance 179–80 general journals 108, 119 presenting receivables in 438–9 adjusting entries 175 financial statements analysis effect of special journals on 369–70 common-size format 730 journalising and posting 370 limitations of 743–5 using 347 ratio analysis 731–43 general ledgers 111, 119–20, 337 types of comparative analysis 722–30 after write-offs 432 vertical analysis 727–30 cross-references 111–12 financial year 154 recording adjustments 176–7 financing activities 18, 645 relationship with subsidiary ledgers 344 cash inflows and outflows 646 general purpose financial reporting 13–14 determining net cash used 662 objectives of 801–3 effect on cash 407 users of 15–16, 803 finished goods inventory 270 generally accepted accounting principles (GAAP) 40, first-in, first-out (FIFO) methods 279, 280–1, 284–5 48, 793, 798 advantages of 285 integrating and applying 826 perpetual inventory systems 291–2 summary of various aspects of 825–6 Fisher & Paykel 44 global financial crisis (GFC) 18 receivables as percentage of assets 428 Global Manufacturing Purchasing Manager Index Fitness First 152 (PMI) 271 fixed assets 18 Global Reporting Initiative (GRI) 828–9 FOB destination 276 going concern principles 44–5, 794–5 FOB shipping point 276 Goodlife Health Clubs and recognising accounting Fonterra Co-operative Group Limited 404–5 periods 152–3 percentage of PPE to total assets 478 goods and services tax (GST) 239–44 segment reporting 478 bad debt write-offs 435 foreign currencies 369 case study 864–6 Foreign Investment Review Board 592 exemptions to 240, 361 forensic accounting 335–6 impact on non-current assets 481–2 592 inventories puchase 241 The Framework (1989) 798, 799 overview of processes 239–40 Framework for the Preparation and Presentation of purchase returns 241–2 Financial Statements See Framework (1989) remitting to taxation authorities 243–4 franchises 2–3, 4, 502–3 sales 242 fraud sales returns and allowances 242 e-commerce 409 settlement discounts 242–3 inventories 275–6 goods in transit 276 occupational 276, 335 goods on consignment 276

Index 937

BMIndex 937 6 April 2015 10:17 AM goodwill 28, 499, 503 IFRS 15 Revenue from Contracts with Customers 158, Google 502 229, 820, 823 government accountants 8 impairment losses 492 government sectors 12–13 See also public sectors implicit interest rates 553 GRI 828–9 income See also gains; revenues Grinders Coffee 268 alternative presentations of 610 gross margin 233 concepts of capital 823 gross profit, presentation in profit or loss defining 819 statements 233 recognition criteria 819–20 gross profit margins 739–40 incorporated associations 12 gross profit ratios 234–6 incorporation of companies 10 GST See goods and services tax (GST) incremental borrowing rates 553 GST-free supplies 240 independent internal verification 333–4 indirect method Harris Scarfe 296 adjustments 667 Holdings 222 cash flows from operating activities 662–7 purchase settlement discounts 237 statement of cash flows 647 value of inventories 231 industry averages comparisons 722 health and fitness businesses, accounting information technology’s impact on inventory systems 224 periods in 152–3 input tax credit 240 health foods businesses’ complex recording input taxed supplies 240 processes 92–3 Institute of Public Accountants (IPA) 43 high turnover businesses 51 Institute of Supply Management 271 HIH 330 insurance, prepayments adjusting entries 164–5 historical cost measurements 824 intangible assets 498–503 See also goodwill horizontal analysis 723–6 amortising 499–500 case study 878 Domino’s Pizza Enterprises Ltd 28 HP 475 identifiable 499 impairment tests 501 IAS 1 Presentation of Financial Statements 26, 27, subsequent expenditures 500–1 537, 603 types of 501–3 revisions to 609, 648 unidentifiable 499 IAS 2 Inventories 279, 284, 286, 504 integrated accounting systems 350 IAS 7 Statement of Cash Flows 645, 648 inter-entity basis comparisons 722, 731 IAS 8 Accounting Policies, Changes in Accounting interest Estimates and Errors 603, 607 adjusting accrued 171–2 IAS 15 Information Reflecting the Effects of Changing formula for 171 Prices 158 interest coverage 562, 736 IAS 16 Property, Plant and Equipment 477, 484, 493, 795 interest expenses 546 IAS 17 Leases 482, 483, 550, 555 interim/final cash dividend declared accounts 600 IAS 18 Revenue 157, 820 internal auditors 330, 334 IAS 19 Employee Benefits 607 internal control systems IAS 23 Borrowing Costs 481 accounting information systems 328–36 IAS 33 Earnings per Share 741 bank reconciliation internal controls 412–19 IAS 36 Impairments of Assets 492 cash payments 410–11 IAS 37 Provisions, Contingent Liabilities and Contingent cash receipts 409–10 Assets 430, 536, 816 documentation procedures 332 IAS 38 Intangible Assets 498, 499, 501, 607 establishing responsibilities 330 IAS 41 Agriculture 503, 504 independent internal verification 333–4 IASB See International Accounting Standards Board limitations of 335 (IASB) management’s responsibilities 329–30 IASB Staff Paper July 2014, Effect of Board Redeliberations petty cash funds 448–9 on DP A Review of the Conceptual Framework for physical, mechanical and electronic controls 332–3 Financial Reporting 800, 802, 803, 818, 824 PPE 497 iFLYflat 8, 671 principles of 330–4 IFRS 3 Business Combinations 499 purchases and payments cycle 342–3 IFRS 5 Non-current Assets Held for Sale and Discounted sales and receivables cycle 342 Operations 603, 608 segregation of duties 331–2 IFRS 6 Exploration for and Evaluation of Mineral types of 329 Resources 505 use of forensic accounting 335–6

938 Index

BMIndex 938 6 April 2015 10:17 AM internal reports 234 inventory systems 222–4 See also computerised internal sales orders 338 See also picking slips inventory systems; periodic inventory systems; International Accounting Standards Board (IASB) 41, perpetual inventory systems 797 impact of information technology on 224 Conceptual Framework 799–800 integrated 342 Effect of Board Redeliberations on DP A Review inventory turnover 287–8, 734–5 of the Conceptual Framework for Financial investing activities 18–19, 645 Reporting 800 cash inflows and outflows 646 Framework for the Preparation and Presentation of determining net cash used 661 Financial Statements 798 effect on cash 407 International Financial Reporting Standard for Small IP Australia 501 and Medium-sized Entities (IFRS for SMEs) 807 IPONZ 501 joint projects with FASB 799, 826–7 irregular items 603 A Review of the Conceptual Framework for Financial issue price 542, 596 Reporting (DP/2013/1) 800 International Farm Comparison Network 404 Jag 11 International Federation of Accountants (IFAC) 43 James Hardie 592 International Financial Reporting Standard for Small JB Hi-Fi 220–1, 222 and Medium-sized Entities (IFRS for SMEs) 807 asset turnovers 739 International Financial Reporting Standards (IFRS), financial statements analysis 727 countries currently considering 798 journalising 108, 118–20 International Financial Reporting Standards cash payments journals 367, 368 (NZ IFRS) 42, 808 cash receipts transactions 361–3 International Public Sector Accounting Standards Board purchases journals 365–6 (IPASB) 807 revaluations 494–5 International Public Sector Accounting Standards journals 108–9, 337 (IPSAS) 42, 807, 808 recording transactions 108–9 internet and data security 409 JP Morgan 271 internet banking 408 Kathmandu’s cost flow methods 284 intra-entity basis comparisons 722, 731 KeepCups 830 inventories Kiwi Co-operative Dairies 404 analysis of turnover 287–8 KPMG 7 case study 864–7 classifying 270–1 language of business 6 See also accounting closing entries for merchandising (periodic last-in, first-out (LIFO) methods 279, 280, 281–3, 285 method) 298–9 perpetual inventory systems 292 closing entries for merchandising (perpetual Le Cornu 51 method) 297–8 leases 551–5 See also finance leases; operating leases consistency of cost flow method application 286 advantages of 551 cost flow methods 278–84, 291–4 popularity with local and state governments 552 determining quantities (periodic system) 275–6 repayment schedules 554 effect of errors on assets and equity 296–7 reporting 555 effect of errors on profit 295–6 ledgers See general ledgers fraud 275–6 lenders 16 managing 220–1 lessees 482, 551 merchandising businesses 270 lessors 482, 551 profitability measures for 234–8 LG Electronics, Inc 474–5 purchase returns GST 241–2 percentage of intangibles to total assets 498 purchases GST 241 percentage of PPE to total assets 478 recording cost of goods purchased (periodic research and development costs 501–2 system) 274–5 liabilities 21, 24 See also contingent liabilities; recording purchases 225–8 non-current liabilities recording purchases (periodic system) 272 case study 871–3 recording sales of 229–32 classifications based on uncertainties 556 recording sales (periodic system) 273 debit and credit procedures 103 recording transactions (periodic system) 271 defining 816–17 sales GST 242 normal balances 103 sales returns and allowances GST 242 recognition criteria 817–18 settlement discounts GST 242–3 recording payroll and deductions payable 538–9 valuing at lower of cost and net realisable value 286 revenues received in advance 539–41

Index 939

BMIndex 939 6 April 2015 10:17 AM licences 503 monetary principles 44, 793 LIFO conformity rule 285 Moody’s 722 LIFO methods See last-in, first-out (LIFO) method mortgages 545–9 limited liability partnerships 10 rounding errors 549 limited liability shareholders 10, 591 schedule 547–9 LinkedIn 8 moving weighted average methods 292 liquid investments 421 Myer, theft and impact on business 275 liquidity ratios 49, 53–7, 731–5 MYOB 103, 346, 413 assessing 675 MYOB AccountRight Live 325, 333, 352 financial statements analysis 559–61 MYOB AccountRight Plus 325, 350–3 loans payable by instalment 545–50 invoices 352 accounting for 546–9 receipts payments 353 local governments and leasing options 552 sales commands 351 long service leave 539 MYOB Australia Ltd 324 loss 19 narration 108, 115 loss on sale 496–7 National Broadband Network (NBN) 534 lower of cost and net realisable value (LCNRV) 286 natural resources 505–6 low-turnover businesses 51 NBN Co 534 net purchases 274–5 Mainland 404 net realisable value (NRV) 286 management accounting 5 net sales 232 management and internal controls New Zealand responsibilities 329–30 accounting and auditing standards boards 42–3 management remuneration 153 changes to financial reporting requirements 808 manual accounting systems 350 exempt supplies 240 manufacturing businesses financial year end in 44 inventories 270 GAAP 48 operating cycles 420 GST 239 market interest rates 542, 543 GST Return 240 market value 542 IRD numbers 595 bonds 543 milk production industry 404–5 matching technique 160, 822 partnerships legislation 10 materiality of information 46–7, 809–10 Rural Broadband Initiative (RBI) 534 Mathers 11 Ultra Fast Broadband (UFB) 534 measurement processes 6 zero rated supplies 240 merchandising businesses 222 New Zealand Banking Group (ANZ) 828 accrual-based accounting 155 New Zealand Dairy Board 404 closing entries (periodic method) 298–9 New Zealand Dairy Group 404 closing entries (perpetual method) 297–8 New Zealand Inland Revenue (NZIR) 7, 240 expense recognition criteria 160 New Zealand Stock Exchange (NZX) 43, 596 inventories 270–1 Nick Scali Limited inventory systems in 222–4 asset turnovers 508–9 operating cycles 222, 223, 420 average age of PPE 508 revenue recognition criteria 159 capital expenditure ratios 674 worksheets for closing entries 299–300 cash debt coverage 59, 676 Michael Hill International Limited 588, 591 cash return on sales ratios 677 dividend payouts 616–17 current cash debt coverage 675 interim dividends 599 current ratios 54 return on ordinary shareholders’ equity 618 debt to total assets ratios 58 share issues 592–3 dividend payouts 617 share splits 598 free cash flows 672–3 shareholder rights 595 gross profit ratios 235 statement of changes in equity 611–12 inventory turnover and days in inventory 288 statement of comprehensive income 610–11 liquidity ratios 561 statement of financial position 612 operating expenses to sales ratios 236 Microsoft 475, 502 profit margins 51–2 product life cycle 671 profitability ratios 49–50 mining industries return on assets 50–1 calculating depleting natural resources 505–6 statement of cash flows 55–6 reducing debt 619 statement of financial position 53

940 Index

BMIndex 940 6 April 2015 10:17 AM Nike’s accounting systems 94 ordinary repairs 491 nominal accounts See temporary accounts ordinary shares 595 non-current assets 18 compared with debt financing 541, 618 case study 870–1 Original Mattress Factory 51 decision making regarding 476–7 other revenue, presentation in profit or loss Domino’s Pizza Enterprises Ltd 28 statements 233 generating profit from 477 outstanding deposits 413 impact of GST on 481–2 ownership rights of shareholders 591–2, 595 other 503–6 reporting in financial statements 506 Pacioli, Luca 102 non-current liabilities 28–9, 541–5 Pactum 92 calculating mortgage liabilities 550 Paramount 92 determining market value of unsecured notes Partnership Act 10 542–3 Partnership Act 1908 (NZ) 10 Domino’s Pizza Enterprises Ltd 29 partnerships 9–10, 11 issuing unsecured notes 543–4 limited liability 10 redeeming unsecured notes at maturity 544 patents 501 redeeming unsecured notes before maturity 544–5 pay-as-you-go (PAYG) withheld tax payable 538 unsecured notes 541–2 payment dates and cash dividends 600 non-financial information sources 744 payroll and payroll deductions payable 538–9 non-profit entities 591 PBE standards 808 non-reporting entities 807 periodic inventory systems 223, 271–8 normal balances case study 866–7 assets and liabilities 103 closing entries (merchandising business) 298–9 expenses and revenues 105 compared with perpetual 224, 273–4 Nortel 475 cost of goods purchased 274–5 notes 542 See also bonds determining cost of sales 274–7 notes payable 537–8 determining inventory quantities 275–6 notes receivable 428, 436–8 inventory cost flow methods 278–86 disposing of 437–8 presentation of statement of profit or loss 277–8 exchanging 438 recording purchases 272 honouring 437–8 recording sales 273 recognising 437 recording transactions 271 valuing 437 permanent accounts 180 notes to the financial statements 33–4 perpetual inventory systems 222–3 Domino’s Pizza Enterprises Ltd 34 average cost method 292 not-for-profit accountants 8 closing entries (merchandising business) 297–8 not-for-profit entities 8 compared with periodic 224, 273–4 not-for-profit organisations 12–13 FIFO method 291–2 novated leases 554–5 LIFO method 292 recording purchases 226 occupational fraud 276, 335 recording sales 229 off-balance-sheet financing 482 sales journals 358–9 on account 98 petty cash funds 412, 448–9 on credit 98 physical capital concepts 823 One.Tel 330, 592 physical inventory counts 275 online banking 408 picking slips 338 operating activities 19, 645–6 Plush 51 cash inflows and outflows 646 positive accounting theories 790 determining cash flow (indirect method) 662–7 post-closing trial balances 182 determining net cash used (direct method) 654–62 posting errors 122 effect on cash 407 posting procedures 111–12, 119–20 operating cycles 27, 156–7 cash payments journals 367–8 merchandising businesses 222, 223 cash receipts journals 363, 364 service businesses 223 purchases journals 366 operating expenses, presentation in profit or loss sales journals 359, 360 statements 233–4 special journals 348–9 operating expenses to sales ratios 236–67, 740 PPE See property, plant and equipment (PPE) operating leases 482, 551 Prada 475 accounting for 552 preference shares 595

Index 941

BMIndex 941 6 April 2015 10:17 AM prepaid expenses 162 revaluations 493–5, 795 adjusting entries 163, 175 reversing impairments 493 prepayments 162 reversing revaluations 495 prepayments adjusting entries 162–9 revising depreciation methods 490–1 depreciation 165–7 sale of assets 496 insurance 164–5 scrapping assets 497 prepaid expenses 163 subsequent expenditures 491–2 revenues received in advance 167 types of 478 service revenue accounts 167–8 proprietary companies 591 See also private companies supplies 163–4 proprietary theories 790–1, 806 present value measurements 824 prospectus 596 present value of payments 542, 543 provision for doubtful debts 431 price/earnings ratio (P/E ratio) 741–2 provisions 555–8, 816 Principles of Good Corporate Governance and Best recording for warranties 557–8 Practice Recommendations 330 reporting for warranties 558 prior period errors 603–6 public accountants 7–8 adjusting 606 public benefit entities (PBE) standards 808 effect on financial statements 604–6 public companies 591 private companies 591 debt financing 541 case study 860–78 public sectors 12–13 private placements 596 accounting standards 807 case study 874–5 bad debts write-offs 435 product life cycles 670–2 purchase allowances 226 professional accounting bodies 43 purchase discounts 227–8 profit 19 recording (periodic system) 272 compared with net cash 648, 663 purchase orders 340 effect of inventory errors on 295–6 purchase returns 226 profit margin ratios 52 purchase returns and allowances, recording profit margins 51–2, 738–9 (periodic system) 272 profit or loss summary 181 purchase settlement discounts 237 profitability ratios 49, 50, 676–7, 731, 737–43 purchases and payments cycle 340–3 relationships among 737 internal control systems 342–3 promissory notes 436–7 purchases journals 365–6 property, plant and equipment (PPE) 18, 477–98 See also checking ledgers 369 fixed assets; intangible assets; non-current assets expanding 366 asset turnovers 508–9 posting procedures 366 average age analysis 507–8 average useful life analysis 506–7 Airways Limited 828 calculating cost of land 480 aircraft maintenance expenses 491 calculating cost of machinery 482 debt and equity financing 97 calculating cost of vehicle 481 depreciation expenses 166 calculating impairments 492–3 hold on dividends during GFC 18 comparing various depreciation methods 489–90 percentage of PPE to total assets 478 depreciation 483–91 receivables as percentage of assets 428 depreciation case study 871 revenues received in advance 539–40 depreciation disclosures 490 quick ratios 559, 561, 732 See also acid tests depreciation factors 484 QuickBooks 103, 352, 413, 420 depreciation methods 486–9 324 determining cost of plant and equipment 481 determining cost of property 479–81 ratio analysis 48, 50 disposing of assets 495–7 financial statements 731–43 Domino’s Pizza Enterprises Ltd 28 ratio of cash to daily cash expenses 426 effects of capitalising versus expensing 480 ratios 48 factors in calculating depreciation 485 raw materials 270 impact of GST on non-current assets 481–2 Readify 673 leasing considerations 482–3 realisable (settlement) value measurements 824 loss on sale 496–7 receivables percentage in relation to total assets 478 accelerating cash receipts 443 recording process 497 analysing and managing 439–44 revaluation journal entries 494–5 basic principles of managing 444

942 Index

BMIndex 942 6 April 2015 10:17 AM case study 869–70 revenue reserves 614 credit card sales 443 revenues 19, 663–4, 819 debt collection strategies 442–3 debit and credit procedures 104–5 establishing payment periods 439 new standards for 820 estimating allowances for uncollectables 433–5 recognition criteria for service businesses 157–8 evaluating balance 441–2 relationship between expenses, accounting period extending credit 439 concept and 822 monitoring collections 439–40 when to recognise 152–3 notes receivable 436–8 revenues received in advance 162, 539–41 See also other 429 unearned revenue as percentage of assets 428 adjusting entries 175 presentation in financial statements 438–9 prepayments adjusting entries 167 recording and reporting 428–44 reversing entries 173 recording estimated uncollectables 431–2 A Review of the Conceptual Framework for Financial recording write-off of uncollectable accounts 432 Reporting (DP/2013/1) 800, 818, 823, 824 recovering uncollectable accounts 433 Appendix B 805 uncollectable accounts (allowance method) 430–5 revolving charge accounts 733 uncollectable accounts (direct write-off 828 method) 429–30 risk management systems 328 using factors 443 risk-free investments 421 receivables turnover 441–2, 733–4 Rivers (Australia) Pty Ltd 591 case study 870 R.M. Williams Pty Ltd 11, 591 recoverable amounts 492 rotation of duties 334 related activities 331–2, 343 running balance accounts 101, 102 related purchasing activities 331, 343 related sales activities 331 SaaS companies 588 relevancy of information 46–7, 809–10 SACs See Statement of Accounting Concepts (SACs) reporting entities 14–15, 805–8 Sage ACCPAC 352 defining 805–6 salaries, adjusting accrued 172–3 differential financial reporting 807–8 salary packaging 554–5 indicators for 806 sales and receivables cycle 338–42 See also revenue cycle reporting entity concepts 794 internal control systems 342 research and development costs 501–2 sales discounts 231 reserves reporting 614 recording (periodic system) 273 residual value 485 See also salvage value; trade-in value sales invoices 107, 225, 229 resource providers 804 sales journals 358–61 retail businesses 222 advantages of 359 determining inventory costs 284 checking ledgers 369 lobby to tax goods bought overseas 361 checking postings 359, 360 operating cycles 420 journalising credit sales 358–9 retail inventory methods 284 sales returns and allowances 230–1 retained earnings 23–4, 40, 612 See also retained profits recording (periodic system) 273 debit and credit procedures 104 sales revenue 222 Domino’s Pizza Enterprises Ltd 31 presentation in profit or loss statements 232–3 reporting 614 salvage value 485 retained earnings accounts 105 Santos Ltd retained profits 604 depreciation expenses 485 return on assets (ROA) 50–1, 738 dividend payouts 617 return on ordinary shareholders’ equity (ROE) 617–20, SAP 353, 413 737–8 SBR initiatives 17, 831 revaluations schedule of accounts payable 345 impact on bottom line 495 schedule of accounts receivable 345 non-current assets 493–5 segmental data 745 PPE 795 segregation of duties 331–2, 342, 410 revenue cycle 338–41 Select Harvests’ biological assets disclosures 504 revenue recognition criteria 156–8 service businesses merchandising businesses 159 accrual-based accounting 155 new standards for 158–9 expense recognition criteria 160 relationship with expense recognition and accounting, operating cycles 223 period concepts and 160 revenue recognition criteria 157–8

Index 943

BMIndex 943 6 April 2015 10:17 AM service revenue accounts 167–8 calculating cash receipts from customers 654–7 services rendered for cash transactions 98, 114 calculating change in accounts payable 665 settlement discounts 227–8 calculating change in accounts receivable 663–4 calculating GST 242–3 calculating change in accrued expenses payable 665 Seven Media Group 745 calculating change in income tax payable 665–6 share buybacks 594 calculating change in inventory 664–5 share capital 18, 96 See also contributed equity; stock calculating change in prepaid expenses 665 case study 874–5 calculating depreciation expense 666 debit and credit procedures 103–4 calculating depreciation expense and loss on sale of reporting 612–14 equipment 660 share dividends 601–2 calculating gain/loss on sale of non-current assets 666 case study 874–5 calculating increase in equipment 661 effect on equity 602 calculating increase in land 661 recording bonus shares 601 calculating increase in notes payable 662 share issues 596–8 calculating increase in ordinary shares 662 private 596 calculating increase in retained earnings 662 public 597–8 classifying 645–6 share splits 598 completing preparation for 662 shareholders determining cash flow from operating activities 662–7 equity 24 determining net cash used by financing activities 662 limited liability 10, 591 determining net cash used by investing activities 661 ownership rights 591–2, 595 determining net cash used by operating shares for cash transactions 96, 112 activities 654–64 Six Degrees Executive 673 determining net increase and decrease 654 small businesses Domino’s Pizza Enterprises Ltd 32, 33 benefits of cloud accounting 333 evaluating capital expenditure ratios 673–4 cash flow management 421 evaluating free cash flow 672–3 smooth earnings 173 formatting 647–8 SofasToGo 52 impact of product life cycles on 670–2 Software as a Service (SaaS) companies 588 interrelationship between statement of financial sole proprietorships 9–13 position and 26 sole traders 9, 11 Nick Scali Limited 55–6 solvency 57–9 preparing 651, 653 solvency ratios 49, 57, 562–3, 676, 731, 735–7 preparing statement of financial position for 651 source documents 107, 337 preparing statement of profit or loss for 652 South Gippsland Herd Improvement Association Inc. 12 purpose of 644–5 special journals 347–9 significant non-cash activities 646–7 advantages 349 sources of information for 650–1 effect on general journals 369–70 usefulness of 649–50 posting procedures 348–9 statement of changes in equity 21, 23–4, 337 specific identification methods 279 Domino’s Pizza Enterprises Ltd 30 Standard & Poor 543 equity 611–12 Standard Business Reporting (SBR) initiatives 17, 831 statement of financial position 21, 24–5, 39 Star Track Express’ inventory systems 224 after write-offs 432 state governments and leasing options 552 disclosures 27 Statement of Accounting Concept 1 (SAC 1) 14, 42, 799, Domino’s Pizza Enterprises Ltd 30–2 800, 802, 805, 806 effect of cost flow methods on 285 Statement of Accounting Concept 2 (SAC 2) 42, 799 equity 612–16 withdrawal of 802 formats of 728 Statement of Accounting Concept 3 (SAC 3) 42, 799 horizontal format 25 Statement of Accounting Concept 4 (SAC 4) 42, 799 interrelationship between statement of Statements of Accounting Concepts (SACs) 798–9 cash flows and 26 statement of cash flows 21, 25–6, 337 Nick Scali Limited 53 adjustments for current assets and liabilities 667 prepared from adjusted trial balance 180 adjustments for non-cash items 667 reporting leases 555 assessing liquidity, solvency and profitability 674–7 as source of information for statement of calculating cash payments for income tax 660–1 cash flows 652 calculating cash payments for operating statement of profit or loss 23, 39, 337 expenses 658–60 case study 866–7 calculating cash payments to suppliers 657–8 Domino’s Pizza Enterprises Ltd 30, 31

944 Index

BMIndex 944 6 April 2015 10:17 AM effect of cost flow methods on 284–5 Tiger Holdings 592 fully classified 234 Tigerair Australia 592 prepared from adjusted trial balance 179 time value of money 542 presentation in periodic system 277–8 timeliness of information 47, 812 presenting gross profit 233 times interest earned 562, 736 See also interest coverage presenting operating expenses 233–4 Tip Top 404 presenting other revenue 233 total comprehensive income 609 presenting sales revenue 232–3 trade debtors 428 as source of information for statement of trade discounts 228 cash flows 652 trade-in value 485 statement of profit or loss and other comprehensive trademarks 502 income 23, 609–11 transactions 6, 94 See also accounting transactions stewardship 802, 804 treasurers 593 stock 96 trial balances stocktakes 275 compared with adjusted trial balances 178 Storm Financial Limited 592 limitations 122 straight-line depreciation 486–7, 507 preparing post-closing 182 subprime mortgage crisis 546 triple bottom line reporting 827 subsidiary ledgers 344 trustees 12 advantages 346 trusts 12 PPE 497 relationship with control accounts 345 unadjusted trial balance 178 relationship with general ledgers 344 understandability of information 47, 812 summarisation processes 6–7 unearned revenue 97, 540 suppliers’ invoices 225 United Kingdom, value-added tax (VAT) 239 suppliers’ subsidiary ledgers 344 United States supplies, prepayments adjusting entries 163–4 conceptual framework developments 798 sustainability and environmental tracking 20 LIFO conformity rule 285 sustainability reporting 19–20, 827–30 subprime mortgage crisis 546 Sybiz 352 units-of-production method 486, 488–9 unlimited liability 10 tabular summaries 102 unpresented cheques 413, 415 T-account forms 101, 102, 118 unsecured notes 18, 541 tax invoices 107 accounting issues 543–4 taxable supplies 240 determining market value of 542–3 taxation authorities 240 disadvantages 542, 619 technology redeeming at maturity 544 Bluetooth and information sharing 94 redeeming before maturity 544–5 fast food industry 3 useful life 485 impact of product cycles 286 impact on business environment 5 value in use 492 Telecom NZ 534 value-added tax (VAT) 239 See also goods and intangible assets policies disclosures 500 services tax (GST) percentage of intangibles to total assets 498, 499 verifiability of information 47, 811 state of financial stability 537 vertical analysis 727–30 telecommunications industry’s growth and case study 878 debt financing 534–5 Virgin Australia 592 Group 534 virtual banking 408 debt to total assets ratios 562 Vodafone 110 dividend payments 105 receivables as percentage of assets 428 free cash flows 672 liquidity ratios 560 warranties 816 statement of financial position 559–60 recording provisions 557–8 working capital 561 reporting 558 temporary accounts 180 weighted average unit costs 283 Ten Network Holdings 745 Ltd 110, 740–1 The Dun & Bradstreet Reference Book 439 asset turnovers 739 The Hyperfactory 649–50 average collection period 734 theft and impact on business 275 average days in inventory 735 Thomson Inc. 475 business diversification 720–1

Index 945

BMIndex 945 6 April 2015 10:17 AM Wesfarmers Ltd (continued) dividend payout ratios 742 cash debt coverage 736 dividend payouts 617 current cash debt coverage 733 earnings per share (EPS) 741 current ratios 731 free cash flows 737 debt to total assets ratios 735 gross profit margins 739–40 dividend payout ratios 742 inventory turnover 734 earnings per share (EPS) 741 operating expenses to sales ratios 740 free cash flows 737 price/earnings ratio (P/E ratio) 741–2 gross profit margins 739–40 profit margins 739 inventory turnover 734 receivables turnover 733, 734 operating expenses to sales ratios 740 retail inventory method 284 price/earnings ratio (P/E ratio) 741–2 return on assets (ROA) 738 profit margins 739 return on ordinary shareholders’ equity (ROE) 738 quick ratios 732 statement of cash flows 733 receivables turnover 733 statement of financial position return on assets (ROA) 738 (horizontal analysis) 724 return on ordinary shareholders’ equity (ROE) 738 statement of financial position statement of financial position (vertical analysis) 728–9 (vertical analysis) 729–30 statement of profit or loss (horizontal analysis) 725 times interest earned 736 statement of profit or loss (vertical analysis) 727 Western Star 404 theft and impact on business 275 Westfield Group’s debt and equity financing 97 times interest earned 736 Banking Corporation 828 total group sales (horizontal analysis) 723 Westpoint Corporation 592 work in process 270 White Sky 8 work in progress 270 wholesalers 222 workers compensation 539 Williams the Shoemen 11 working capital 54, 561 Woolworths Limited 222, 828 worksheets asset turnovers 739 adjusting entries 187–8 average collection period 734 closing entries (merchandising business) average days in inventory 735 299–300 business diversification 720–1 cash debt coverage 736 XBRL 19, 829, 830–1 cash return on sales ratios 740–1 Xero 324, 352 cost flow methods 284 Xero Ltd 588 current cash debt coverage 733 contributed equity note disclosures 613–14 current ratios 731 share listing 598 debt to total assets ratios 735 directors’ reports 744 zero rated supplies 240

946 Index

BMIndex 946 6 April 2015 10:17 AM