1.. Stakeholder And Information Needs. Accounts Used To

1. Stakeholder and information needs: Accounts used to satisfy information requirements. Owners: Likely to be concerned with all aspects of the business including profitability and financial sustainability. Financial Accounts: Profit, cash position, assets, balance sheets and income statements. Employees: occupational health and safety compliance obligations, Fair work and minimum pay conditions, Superannuation obligations and job security. Social Accounts: Safe work practices, supplier screening processes. Environmentalists: Pollution, carbon footprint and other environmental issues. Environmental Accounts: Carbon footprint, recycling policy, use of water. Government: Provide financial information in order to assess their tax†¦show more content†¦A social impact in the extraction of raw materials is the effect that it would cause on the local community. This would be good as the company should ensure that their supplier provide jobs for the local community and it would then make the local community thrive as result making it a positive effect and should be written in social reports to maximise the benefit and they should promote their assistance of the local community. A social impact in the manufacturing stage of the supply chain is child labour. The computers being made in developing countries often people are so desperate resulting in children being exploited. They make these children work long hours for less than minimum wage. This is highly unethical and the company should regulate their suppliers rigorously ensuring that they hire employees of working age and provide them with fair pay. By doing this the business would be socially responsible resulting in the increase in popularity of their company resulting in higher dividends for shareholder and increase profit margins. 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Men and Their Music in Death of a Salesman by F. Scott...

Describing auditory sensations in text is often very difficult. Nevertheless, Arthur Miller in his play Death of a Salesman and F. Scott Fitzgerald in his novel The Great Gatsby. Music is a very useful method of communicating in prose because it can give off a sensation to the reader that mere text or dialogue cannot. Although the authors use drastically different types of music, one using popular music and the other using solo instrumental music, both authors are very effective. The authors use music ironically in order to undermine the classical masculinity of their characters. Both Willy and Gatsby are originally portrayed as prime examples of traditional masculinity. Wilily is described as a well-respected and successful traveling salesman. Similarly, Gatsby is a military man with an Oxford education. Both men are described as classical epitomes of masculinity: self-reliant, financially successful men who lead a life that others aspire to. 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Foundation of Taxation Law Professional Obligations

Question: Describe about the Foundation of Taxation Law for Professional Obligations. Answer: 1. Issue Fred is an English resident and following points are noteworthy is his case. He has come to Australia to discharge his professional obligations, The duration of stay is not fixed but the same has continued for 11 months and likely to continue in the future. His wife also has moved to Australia while his children had to stay back due to college in London. Taking the above into consideration, the tax residency of Fred for the current year needs to be determined. Rule The various relevant tests that are available for the determination of tax residency are highlighted as per the tax ruling TR98/17 and also subsection 6(1), ITAA 1936 (Deutsch et. al, 2016). Domicile Test The given test is applicable for residents of Australia as being a domicile holder of Australia is the primary condition for passing this test. Additional requirement is that permanent residence of the taxpayer must be located in Australia only (Woellner, 2013). Resides Test The given test is applicable for foreign residents only and decides tax residency based on the below mentioned factors (Barkoczy, 2014). Visit Purpose Significant purposes of visit include long term employment (in excess of 6 months), education courses Frequency with which the taxpayer goes to the country of origin and the purpose and duration of the same. The ties that the taxpayer has in professional, personal and business sphere while in Australia. 183 Day Test The above test is applied for determining tax residency of foreign residents staying in Australia. These residents need to comply with the following two conditions (Coleman, 2011). Physical presence of the concerned taxpayer in Australia for atleast 183 days. Intention on taxpayers behalf to make Australia as permanent home in the future. Superannuation Test The above test is applicable only to determine tax residency of Australian government employees stationed outside Australia based on whether or not they contribute to the specific superannuation fund (Sadiq et. al., 2016). Application As Fred is an English resident working for a British company, thus domicile test and superannuation test hold no utility. The relevant tests are as discussed below. Residency Test Fred satisfies the test as explained below. Employment of 11 months amounts to significant reason to come to Australia. Not even a single visit to England in 11 months before moving there when ill. Life and behaviour of Fred in England and Australia is comparable as wife is also with Fred. 183 Test Even though the minimum stay condition is satisfied but still fails to clear the rest as Fred has no plans to settle in Australia. This may be inferred from his lack of any investment of fixed nature in Australia besides keeping his home in England on rent and not disposing off the same. Conclusion Fred would be classified as a tax resident of Australia for the current financial year. 2. I. Californian Copper Syndicate Ltd v Harris (Surveyor of Taxes) (1904) 5 TC 159 The given company purchased a copper mine in New Zealand but could not begin copper mining as the company was short on funds. This shortage of funds was known to the personnel of the company before they made the decision to buy the mine. Despite lack of funds to operate the mine, the taxpayer purchased this asset as the same could be sold to the rival mining company and in the process the company could realise gains. The company meticulously executed its plan and by giving away the mining land obtained a small stake in the other company whose market valuation was much higher than the proceeds spent on buying the land. The company in defence claimed that transaction should not attract any tax burden as the company has altered between two capital assets i.e. land and shares (Nethercott, Richardson Devos, 2016). As the tax authorities believed that the gains would be assessable, the matter landed in court where it was advocated that the income realised by the company through sale of mining land for the shares ownership would be assessable for tax. The central reasoning offered by the court in this regards was that the company executed the whole transaction in a meticulous manner with profit intention and the gains from this isolated transaction were held taxable (Gilders et. al., 2015). II. Scottish Australian Mining Co Ltd v FC of T (1950) 81 CLR 188 As per the relevant details of the case, the taxpayer (company) purchased a land to engage in coal mining which was continued for a long period stretching into multiple decades. However, as the coal reserves progressively deteriorated on the land and therefore a time came when commercial mining was not feasible. The company decided that it would be best served by selling this land but due to coal mining it was in such shape that selling it in that form was not viable. Hence, a plethora of development activities were undertaken which involved plotting, making provisions for road, parks which ensured that the land could be sold. In the process, sizable gains were made by the company (Jade, 2016). The matter was brought to the notice of the court which opined that it is apparent that the land was used for its intended purpose for as long as possible and the selling of land afterwards amounts to realisation of capital asset. As a result, the proceeds were termed as capital and non -assessable for tax purpose (Sadiq et. al., 2016). III. FCT v Whitfords Beach Pty Ltd (1982) 150 CLR A fishing company bought a land situated alongside the beach as it required a land for drying of the fishing equipment. During the initial period, the land was used for this purpose only and there was no intention on the part of the shareholders to develop this land. However, subsequently the shareholders decided to quit the business and hence sold the company to three land development companies which bought it primarily for the land which they considered highly valuable. These new shareholders commenced development of plots on this land along with requisite development activities for value enhancement. They also introduced modifications in the AoA of the company so as to reflect land development. Subsequently, the plots were sold and the taxpayers reaped humongous profits (CCh, 2016a). The court in this matter opined that with regards to the new shareholders, it is apparent that the land development was carried out as part of the business as the same was inducted into the AoA. Also, it goes well with the nature of business of shareholders which also were real estate development companies. Thus, the receipts from sale of plots were classified as ordinary income and assessable (CCh, 2016a). Statham Anor v FC of T 89 ATC 4070 A landestate was passed on to Statham Anor who decided to commence a cattle business on this piece of land. However, due to lack of experience their business could not flourish and eventually it floundered. But the taxpayers needed money to sustain their living and hence had no option but to liquidate the land asset that they possessed. Before liquidating the same, the taxpayers divided the land into various plots so as to easily sell these to prospective investors and retail customers. The taxpayers advocated that they were not involved in any land business and hence the proceeds derived must not be tax assessable (CCh, 2016b). The court passed the verdict in agreement with the taxpayer and highlighted that the land sale was essentially forced and the taxpayers did not engage in any advertisement or major development work to enhance the proceeds available from the land. Hence, the actions of the taxpayer could be characterised as realisation of the capital asset and thus proceeds derived would not be assessable (CCh, 2016b). V. Casimaty v FC of T 97 ATC 5135 In this case, the taxpayer (Casimaty) inherited a large parcel of land from his father which he planned to use in his family business of farming. He took loan from the bank so as to make a decent living income from farming. However, due to unexpected brought, the production of crops was adversely impacted which eventually led to very little income which was not sufficient to service the outstanding debt. Also, in the meanwhile, his physical health deteriorated and in order to manage the same, more loan was assumed. Soon he was caught up in a debt trap and hence to get out of this deplorable situation, he decided to sell off a huge portion of the land. The proceeds were used to settle the outstanding debt liabilities. Casimaty continued practicing farming on the remaining land (CCh, 2016c). The court in the given case ruled that the selling of the land amounted to realisation of the capital asset as the taxpayer did not liquidate the land asset with profit intention and the sale of land was not preceded in a commercial manner by taking land development activities and advertisement. Hence, due to financial distress he was forced into making the sale of land. Further, his continued involvement of farming in the remaining land indicated that no business intention was present. Thus, the proceeds were held as non assessable.(CCh, 2016c). VI. Moana Sand Pty Ltd v FC of T 88 ATC 4897 As per the case details, Moana Sand Pty purchased a piece of land with the intention of carrying out sand mining. The company also obtained approvals and required permission from the government to carry on with the same. However, due to continuous mining the sand content got depleted to such an extent that commercial mining became unfeasible. In such a scenario, the company made the decision to sell the land but due to mining it was in such shape that without carrying out filling activities, the same was not possible. However, the company went ahead and did significant investment in the various development activities on the property and developed a whole township. In the process, the company was able to derive huge gains (Deutsch et. al., 2016). The court in this matter opined that while it is correct that the original intent of the taxpayer was to do mining which it indeed performed, however, the development of land by investment of significant capital amounts to change in intention and hence the proceeds from the land development project would be considered as assessable as the company specifically deployed capital to derive gains from this isolated transaction (CCH, 2014). VII. Crow v FC of T 88 ATC 4620 In this case, the taxpayer using borrowed money purchased five blocks of land for farming, The taxpayer did commence farming but within a short period of time began sub-division of the land and sold the plots at huge profits. This process continued unabated over year when there was continuous buying and selling of land while the taxpayer did not conduct farming again. The relevant tax authority opined that business was being carried out and hence proceeds are taxable. The taxpayer disagreed and opined that he was selling land to discharge outstanding debt, The court disagreed with the explanation offered by the taxpayer and ruled that proceeds would be assessable as the original intention of taxpayer was to engage in land development business which he knew would offer more lucrative returns than farming (CCh, 2016d). Case 8: McCurry Anor v FC of T 98 ATC 4487 In this case, the taxpayers were two brothers i.e. McCurry and Anor who had bought a land which had some old establishments. The taxpayers took some loan from the bank and carried out construction of three townhouses on the piece of land. Further, while the construction process was ongoing, the taxpayers engaged in advertisement so as to find the best buyer for the townhouses. However, despite their advertisement, they were not able to liquidate these as they were not getting the expected returns. They decided to hold on the townhouses and meanwhile even used one for their personal dwelling. Within a year, all the townhouses were liquidated and taxpayers made huge profits (CCh, 2016e). The taxpayers advocated that the proceeds should not be assessable as they sold capital assets for paying their debts. However, the court disagreed with their argument and opined that the land was purchased with the explicit intent of profiteering for which there was indulgence in advertisement and attempts of profit maximisation. Thus, the income from the sale was held assessable as per relevant provisions of ITAA 1936 (CCh, 2016e). References Barkoczy,S 2014,Foundation of Taxation Law 2014,6th eds., CCH Publications, North Ryde CCh 2016a, FC of T v Whit fords Beach Pty Ltd (1982) 150 CLR, Available online from https://www.iknow.cch.com.au/document/atagUio549860sl16841994/federal-commissioner-of-taxation-v-whitfords-beach-pty-ltd-high-court-of-australia-17-march-1982 (Accessed on September 15, 2016) CCh 2016b, Statham Anor v FC of T 89 ATC 4070, Available online from https://www.iknow.cch.com.au/document/atagUio544343sl16788832/statham-anor-v-federal-commissioner-of-taxation-federal-court-of-australia-full-court-23-december-1988 (Accessed on September 15, 2016) CCh 2016c, Casimaty v FC of T 97 ATC 5135, Available online from https://www.iknow.cch.com.au/document/atagUio539843sl16716249/casimaty-v-fc-of-t-federal-court-of-australia-10-december-1997 (Accessed on September 15, 2016) CCb 2016d, Crow v FC of T 88 ATC 4620, Available online from https://www.iknow.cch.com.au/document/atagUio545564sl16800674/crow-v-federal-commissioner-of-taxation-federal-court-of-australia-17-august-1988 (Accessed on September 15, 2016) CCh 2016e, McCurry Anor v FC of T 98 ATC 4487, Available online from https://www.iknow.cch.com.au/document/atagUio539084sl16707683/mccurry-anor-v-fc-of-t-federal-court-of-australia-15-may-1998 (Accessed on September 15, 2016) CCH 2014, Australian Master Tax Guide 2014, 52nd eds., Wolters Kluwer, Sydney Coleman, C 2011, Australian Tax Analysis, 4th eds., Thomson Reuters (Professional) Australia, Sydney Deutsch, R, Freizer, M, Fullerton, I, Hanley, P, Snape, T 2016, Australian tax handbook 9th eds., Thomson Reuters, Pymont Gilders, F, Taylor, J, Walpole, M, Burton, M. Ciro, T 2015, Understanding taxation law 2015, 7th eds., LexisNexis/Butterworths Jade 2016, Scottish Australian Mining Co Ltd v FC of T (1950) 81 CLR 188, Available online from https://jade.io/j/?a=outlineid=64663 (Accessed on September 15, 2016) Nethercott, L, Richardson, G Devos, K 2016, Australian Taxation Study Manual 2016, 4th ed., Oxford University Press, Sydney, Sadiq, K, Coleman, C, Hanegbi, R, Jogarajan, S, Krever, R, Obst, W, and Ting, A 2016,Principles of Taxation Law 2016,8th edn, Thomson Reuters, Pymont Woellner, R 2013, Australian taxation law 2013, 7th eds., CCH Australia, North Ryde

Transaction Analysis and Statement of Cash Flows Preparation free essay sample

UVA-C-2297 July 28, 2009 DOG CONCIERGES, LLC: TRANSACTION ANALYSIS AND STATEMENT OF CASH FLOWS PREPARATION Part I Although he owned his own business, Jeff Birch was a financial novice. His passion was dogs, and he had finally made the move to start a specialty dog services business in an upscale section of a large mid-Atlantic city. In its first two years, Dog Concierges, LLC, had grown to about $650,000 in sales. Historically, he had left all financial concerns in the hands of his sister, Jennifer Birch, an aspiring CPA. But she had recently graduated from college and was leaving in a month to start her career in Atlanta. Jeff had asked her to give him a crash course in Accounting 101, so he had some handle on the accounting process and the resultant financial statements—well enough, at least, to converse in an informed manner with his sister’s replacement. He had not minded totally leaving the books to her, but he now felt the need to be better informed, since her replacement would not be his â€Å"trusted little sis. We will write a custom essay sample on Transaction Analysis and Statement of Cash Flows Preparation or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page † Jennifer had thought long and hard about how to cram the equivalent of an entire semester of Accounting 101 into a manageable hour-long tutorial that Jeff conceivably could internalize. She had gravitated to an approach reliant on diagrams, with a minimum of traditional technical jargon. She crafted the diagram depicted in Exhibit 1, explaining to Jeff that it had the capacity to illustrate all his financial transactions. The key to keeping his financial records correct and up to date, she said, was to ask three questions for every business event, all the while keeping the equality of the starting equation true: 1. What parts of the diagram were affected? 2. What direction (increase or decrease)? 3. By what dollar amount? After presenting the diagram and its underlying explanation to Jeff, Jennifer decided she needed to give him a bit of homework. She crafted a number of hypothetical business events that she knew were representative of some the business was likely to incur; those events are listed This case was prepared by Mark E. Haskins, Professor of Business Administration. It was written as a basis for discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright  © 2009 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to [emailprotected] com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. ? -2- UVA-C-2297 below. She then instructed Jeff to explain to her, for each of those independent business events, which part of the diagram was affected, in what direction, and by what dollar amount. Jeff felt a bit uncomfortable having to perform for his sister, but he knew it was for his own good. So, he began. Common Business Events 1. Sold capital stock for $15,000 to three investors. 2. Purchased $55,000 of product raw material on account from suppliers. 3. Sold products for $40,000 cash that had cost $29,000 to make. 4. Borrowed $30,000 from the bank, due in 120 days, with an interest rate of 6%. 5. Collected a $4,500 account receivable from a veterinarian customer. 6. Bought a used pickup truck for $8,000 cash. 7. Disbursed cash dividends of $1,500 to owners. . Paid a $2,500 account payable owed to a supplier. 9. Recognized $3,500 annual depreciation on a small warehouse the company owned. 10. Sold an old shed no longer needed that had a recorded cost of $14,000 for $17,500 cash. 11. Accrued 90 days of interest on the bank loan. Part II Jeff’s sister had taught him well. Not only did he accomplish the task she had set up for him, but he also was able to craft a curr ent balance sheet and income statement by using the actual account information Jennifer had recently codified for the current year-end (Exhibits 2 and 3). He now wanted to check his understanding of how to construct a statement of cash flows. He believed that if he understood â€Å"how it was constructed,† his understanding of â€Å"what it depicts† would be cemented. Using a bit of basic algebra, Jennifer had transformed the relationships depicted in Exhibit 1 to reflect the underlying fundamental construction of a statement of cash flows (see Exhibit 4). In essence, the statement was to depict the change in cash by reporting the changes in all the other balance sheet accounts. Jeff figured he could use the Exhibit 4 information to both construct and interpret a statement of cash flows. He considered it imperative that he be able to explain why he crafted the statement of cash flows the way he did, rather than relying on a mechanical execution of the Exhibit 4 aid. So, using the net income and depreciation figures -3- UVA-C-2297 from the income statement in Exhibit 3 and the balance sheet changes he noted in the margin in Exhibit 2, he set out to construct a statement of cash flows for this year for Dog Concierges, LLC. Jennifer did remind him that the â€Å"building† and the â€Å"retained earnings† line items required a bit of special handling. That didn’t faze Jeff in the least. In fact, he felt so confident that he could craft a correct statement of cash flows for this year that he personally bet his sister $100. As he began, he wondered if the bet was a financial event he would have to reflect in the statement. What irony if he lost the bet because he didn’t correctly report the bet in the statement of cash flows! Part III Jeff was feeling pretty confident. He decided to also use the Dog Concierges, LLC, statement of cash flows for the previous year (see Exhibit 5) and the balance sheet as of the end of the previous year (see Exhibit 2), to re-create the balance sheet for the year ended two years earlier. He thought he’d be finished in time to make his 4:00 p. m. tee time. -4Exhibit 1 DOG CONCIERGES, LLC: TRANSACTION ANALYSIS AND STATEMENT OF CASH FLOWS PREPARATION Details of the Basic Accounting Equation UVA-C-2297 Assets (A) Current Assets Cash A/R Inventory Ppd/A Noncurrent Assets Buildings Land Vehicles Investments = Liabilities (L) Current Liabilities A/P W/P I/P T/P Noncurrent Liabilities Bonds payable Long-term loan Short-term loan + Owners’ Equity (OE) Contributed Retained Capital Earnings Net income (Dividends) Revenues (Expenses) Note: A/R = accounts receivable Ppd/A = prepaid assets A/P = accounts payable W/P = wages payable I/P = interest payable T/P = taxes payable Source: Adapted from a similar exhibit presented in Mark Haskins, The Secret Language of Financial Reports (New York: McGraw-Hill, 2008). -5Exhibit 2 DOG CONCIERGES, LLC: TRANSACTION ANALYSIS AND STATEMENT OF CASH FLOWS PREPARATION Balance Sheets as of December 31 (in thousands) This Year $100 100 120 320 320 80 $720 $180 30 210 200 410 120 190 $720 Last Year $110 90 100 300 280 100 $680 $130 40 170 220 390 110 180 $680 Change –10 +10 +20 UVA-C-2297 Cash Accounts receivable Inventory Total current assets Building (net of accumulated depreciation) Other Total assets Accounts payable Taxes payable Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total liabilities and owners’ equity Source: Created by case writer. +40 –20 +50 –10 –20 +10 +10 -6Exhibit 3 DOG CONCIERGES, LLC: TRANSACTION ANALYSIS AND STATEMENT OF CASH FLOWS PREPARATION Income Statement (for this year ended December 31, in thousands) UVA-C-2297 Sales Cost of goods sold Gross profit Depreciation expense Miscellaneous expense Net income Source: Created by case writer. 650 450 200 (45) (130) $25 -7Exhibit 4 DOG CONCIERGES, LLC: TRANSACTION ANALYSIS AND STATEMENT OF CASH FLOWS PREPARATION Derivation of Statement of Cash Flows UVA-C-2297 Panel A 1. Assets = Liabilities + Owners’ Equity 2. Current Assets + Noncurrent Assets = Current Liabilities + Noncurrent Liabilities + Contributed Capital + Retai ned Earnings 3. Cash + A/R + Inventory + Ppd/A + Vehicles + Buildings + Land + Investments = A/P + W/P + Short-term loans + I/P + Bonds Payable + Long-term loan + Contributed Capital + Net Income – Dividends 4. Cash = Net Income – A/R – Inventory – Ppd/A – Vehicles – Buildings – Land – Investments + A/P + W/P + Short-term loans + I/P + Bonds Payable + Long-term loans + Contributed Capital – Dividends 5. ?Cash = Net Income – ? A/R – ? Inventory – ? Ppd/A – ? Vehicles – ? Buildings – ? Land – ? Investments + ? A/P + ? W/P + ? I/P + ? Short-term loans + ? Bonds Payable + ? Long-term loans + ? Contributed Capital – Dividends Note: The delta (? ) notation signifies â€Å"the change in. † Source: Created by case writer. -8Exhibit 4 (continued) UVA-C-2297 Panel B: Section of the statement of cash flows where the line item is usually presented Net Income – ? A/R – ? Inventory – ? Ppd/A + ? A/P + ? I/P + ? T/P + ? W/P – ? Vehicles – ? Buildings* – ? Land – ? Investments – ? Short-term loans + ? Bonds Payable + ? Long-term loans + ? Contributed Capital – Dividends ? Cash + Beginning Cash = Ending Cash Cash flows from operations Cash flows from investing Cash flows from financing *There are three common ways, assuming it is reported as net of accumulated depreciation (which is the case here), a depreciable asset account such as â€Å"buildings† (or â€Å"vehicles†) is likely to have changed during a year. The monetary amount of each should be reported separately in a statement of cash flows. The three are: (1) purchase payment(s) for acquiring an additional building (to be reported in CFFI); (2) proceeds from sale (to be reported in CFFI); and (3) depreciation expense for the year, which must be added back as a cash expense (to be reported in CFFO). Source: Adapted from a similar exhibit presented in Mark Haskins, The Secret Language of Financial Reports (New York: McGraw-Hill, 2008). 9Exhibit 5 DOG CONCIERGES, LLC: TRANSACTION ANALYSIS AND STATEMENT OF CASH FLOWS PREPARATION Statement of Cash Flows (for last year, in thousands) Net income Depreciation expense Accounts receivable increase Inventory decrease Accounts payable increase Taxes payable increase Cash flow from operations Purchase building Other assets increase Cash flows from investing Payment on long-term debt Purchase of common stock Payment of dividends Cash flows from financing Increase in cash Beginning cash Ending cash Source: Created by case writer. UVA-C-2297 $39 20 (3) 12 21 3 92 (3) (20) (23) (28) (16) (10) (54) 15 95 $110