PREPARE FINANCIAL REPORTS
FACILITATOR MANUAL & ASSESSMENT
BSBFIA401A
Precision Group (Australia) Pty Ltd
9 Koppen Tce, Cairns, QLD, 4870
Email: info@precisiongroup.com.au
Website: www.precisiongroup.com.au
© Precision Group (Australia) Pty Ltd
BSBFIA401A
Prepare Financial Reports
ISBN: 978-1-74238-
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Table of Contents
2
3
4
5
7
Legend
Qualification Pathways
Qualification Rules
Introduction
BSBFIA401A/01 Maintain Asset Register
Key Points
Prepare a register of property, plant and equipment from fixed asset transactions in accordance with organisational policy and procedures
Determine method of calculating depreciation in accordance with organisational requirements
Maintain asset register and associated depreciation schedule in accordance with organisational policy, procedures and accounting requirements
13
15
‘True’ or ‘False’ Quiz
BSBFIA401A/02 Record General Journal Entries for Balance Day Adjustments
Key Points
Record depreciation of non-current assets and disposal of fixed assets in accordance with organisational policy, procedures and accounting requirements
Adjust expense accounts and revenue accounts for prepayments and accruals
Record bad and doubtful debts in accordance with organisational policy, procedures and accounting requirements
Adjust ledger accounts for inventories, if required, and transfer to final accounts
23
25
‘True’ or ‘False’ Quiz
BSBFIA401A/03 Prepare Final General Ledger Accounts
Key Points
Enter general journal entries for balance day adjustments in general ledger system in accordance with organisational policy, procedures and accounting requirements
Post revenue and expense account balances to final general ledger accounts system
Prepare final general ledger accounts to reflect gross and net profits for reporting period
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41
‘True’ or ‘False’ Quiz
BSBFIA401A/04 Prepare End of Period Financial Reports
Key Points
Prepare revenue statement in accordance with organisational requirements to reflect operating profit for reporting period
Prepare balance sheet to reflect financial position of business at end of reporting period
Identify and correct, or refer errors for resolution in accordance with organisational policy and procedures
49
‘True’ or ‘False’ Quiz
50 Summary
51 Bibliography
53 Assessment Pack
Facilitator Manual BSBFIA401A Prepare Financial Reports
© Precision Group (Australia) Pty Ltd
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Use considered risk taking in your ‘grey’ area
...and others will follow you!
Legend
This symbol indicates the beginning of new content. The bold title matches the content
of the competency and they will help you to find the section to reference for your
assessment activities.
Activity: Whenever you see this symbol, there is an activity to carry out which has been
designed to help reinforce the learning about the topic and take some action.
This symbol is used at the end of a section to indicate the summary key points of the
previous section.
This symbol is used to indicate an answer to the Candidate’s questions or notes to assist
the Facilitator.
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Facilitator Manual BSBFIA401A Prepare Financial Reports
© Precision Group (Australia) Pty Ltd
Qualification Pathways
“There are always two
choices. Two paths to
take. One is easy. And
its only reward is that
it’s easy”. Source Unknown
This unit of competency is provided to meet the requirements of BSB07 Business Services
Training Package although it can be used in a range of different qualifications. The BSB07
Business Services Training Package does not state how a qualification is to be achieved. Rather,
Registered Training Organisations are required to use the qualification rules to ensure the needs
of the learner and business customer are met. This is to be achieved through the development
of effective learning programs delivered in an order that meets the stated needs of nominated
Candidates and business customers.
Facilitator Manual BSBFIA401A Prepare Financial Reports
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Qualification Rules
“You’re either part of
the solution or part
of the problem.”
Eldridge Cleaver
Qualification requirements include core and elective units. The unit mix is determined by
specific unit of competency requirements which are stated in the qualification description.
Registered Training Organisations then work with learners and business customers to select
elective units relevant to the work outcome, local industry requirements and the qualification
level.
All vocational education qualifications must lead to a work outcome. BSB07 Business Services
Training Package qualifications allow for Registered Training Organisations (RTOs) to vary
programmes to meet:
Specific needs of a business or group of businesses.
Skill needs of a locality or a particular industry application of business skills.
Maximum employability of a group of students or an individual.
When packaging a qualification elective units are to be selected from an equivalent level
qualification unless otherwise stated.
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Facilitator Manual BSBFIA401A Prepare Financial Reports
© Precision Group (Australia) Pty Ltd
Introduction
“Whether as an
individual, or as part of
a group, real progress
depends on entering
whole-heartedly into
the process and being
motivated to make you a
more deeply satisfied
human being.”
Source Unknown
This unit of competency is all about preparing financial reports. It is for anyone who is working,
or who wants to work in business. It will help you with the skills you need to demonstrate
competency for the unit BSBFIA401A Prepare Financial Reports. This is one of the units that
make up the Certificates in Business.
This training is broken up into four distinct sections. These are:
1. Maintain Asset Register
2. Record General Journal Entries for Balance Day Adjustments
3. Prepare Final General Ledger Accounts
4. Prepare End of Period Financial Reports
At the conclusion of this training you will be asked to complete an assessment pack for this
unit of competency. The information contained in the Candidate Resource will assist you to
complete this task.
Facilitator Manual BSBFIA401A Prepare Financial Reports
© Precision Group (Australia) Pty Ltd
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Facilitator Manual BSBFIA401A Prepare Financial Reports
© Precision Group (Australia) Pty Ltd
PART 1:
Maintain Asset Register
Key Points Section 1
An asset register is used to record the purchase and disposal of all fixed assets
in a business.
All fixed assets should be depreciated. This involves determining which method
of depreciation to use (the most common methods being reducing balance and
straight line).
The asset register should record all depreciation information.
Facilitator Manual BSBFIA401A Prepare Financial Reports
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Part 1: Maintain Asset Register
One of the costliest aspects of doing business is the purchase and maintenance of your fixed
assets. Fixed assets are any form of asset that can not be easily turned into cash. They need to
be sold in order for you to turn them into a liquid asset. Often, fixed assets are referred to as
property, plant and equipment, as these are the three types of asset that are most commonly
fixed.
Because of the expense involved in purchasing fixed assets, it is important that as a business
you have procedures in place for recording their purchase, and disposal, as well as depreciation
(which allows you to expense out the cost of the purchase over a number of years – thus
reducing your profit and subsequently tax obligations).
AASB116 covers the accounting standard requirements with regard to maintaining fixed assets.
In this section, we will learn about the compilation of a fixed asset register, as well as examining
the concept of depreciation and the common methods used for calculating it.
A fixed asset register is a system that is used to compile and hold details of each fixed asset that
a business owns. These details are quite comprehensive and will include all of the following:
Serial number of the asset (or an asset ID code)
A description of the asset in question
The date it was purchased
How much it was bought for
How it was paid for
The depreciation method and rate used for the asset
The asset’s current book value
The date it was sold or disposed of
The reason for any such disposal or sale
How much was gained from the sale of the asset.
This information is critical to a business because it allows the business to:
Check the presence of assets in their business, that is, are they actually there?
Determine the current net book value of an asset, so that this can be added into the
ledger accounts.
Determine how values in the balance sheet are obtained.
Determine the finance status of any asset, which is important if an asset is to be
sold.
An asset register may be manual or computerised. For the most part, modern businesses use a
computerised system, however, you can use a card based system where every asset has a card,
which is filled in with all the relevant details on it.
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Facilitator Manual BSBFIA401A Prepare Financial Reports
© Precision Group (Australia) Pty Ltd
Part 1: Maintain Asset Register
Any organisation needs to attempt to report depreciation accurately in its financial statements
and books for two main reasons. The business needs to try and match its income and expenses
and it needs to ensure that in the books its asset values are not overstated. Think of a car; you
know that it is worth less in year 5 than it is in year 1.
Depreciation is a method that is used to ‘write off’ the value of fixed assets over the useful life
of that asset, turning the asset’s cost into a business expense. In order for depreciation to be
effective, the business must ensure that it is applied consistently across its business operations
and in line with general rules with regard to depreciation in terms of tax.
Let’s now look at two major methods that are used to depreciate fixed assets.
Straight Line Depreciation
This method of depreciation is the easiest to calculate and is therefore the one that you see
used most often. Using this method, an organisaion will determine the salvage value (this is
the value of an asset at the end of its life) of a fixed asset, subtract that from the original cost
of the asset and expense the remaining value over the useful life of the asset equally each year.
The amount that will be depreciated each year is calculated by:
(cost of asset – salvage value) / life span of asset in years
Let’s now look at an example:
Star Industries buys a new car for $21,000 and it is expected that this car has a useful life to the
organisation of 6 years. At the end of 6 years, it is expected that the car will be worth $4,000.
Star will be able to depreciate the asset at a rate of $2,833 a year – calculated by (21,000 17,000) / 6. The depreciation schedule for this asset would look like:
Book Value Beginning of Year
Depreciation
Expense
Accumulated
Depreciation
Book Value End of Year
$21,000
$2,833
$2,833
$18,167
$18,167
$2,833
$5,666
$15,334
$15,334
$2,833
$8,499
$12,501
$12,501
$2,833
$11,322
$9,668
$9,668
$2,833
$14,655
$6,835
$6,835
$2,833
$16,998
$4,002
(Scrap Value)
Facilitator Manual BSBFIA401A Prepare Financial Reports
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Part 1: Maintain Asset Register
Reducing Balance method
This method of depreciation attempts to capture a higher level of depreciation in the early
years of an asset’s life, with lower values in later years. Cars and computers are two assets that
generally lose their value faster in early years. This method of depreciation is calculated simply
by multiplying the book value at the beginning of the year by a specific depreciation rate. The
Australian Taxation Office produces Tax tables that list depreciation rates for specific assets, or
in some cases it is common to see a rate of double the straight line rate. So, for example in our
last example, depreciating an asset over 6 years gave us a depreciation rate of 17% a year –
using the reducing balance method we could depreciate at 34% a year, which would give us a
depreciation table of:
Book Value Beginning of
Year
Depreciation
Expense
Accumulated
Depreciation
34%
$7,140
$7,140
$13,860
$13,860
34%
$4,712
$11,852
$9,148
$9,148
34%
$3,110
$14,962
$6,038
$6,038
34%
$2,052
$17,014
$3,986
$21,000
(Original Cost)
Depreciation
Rate
Book Value End of Year
Earlier in this section, we examined the asset register. Let’s now look at how the register is
maintained and used. The major change to any fixed asset register entry over time will
concern depreciation and book value. The process of updating these values is simplified by
using depreciation schedules such as those provided in Tax tables as mentioned previously.
A depreciation schedule should show the book value at the beginning of each year, the rate
of depreciation applied (if the method requires it, the depreciation expense, the accumulated
depreciation and the book value at the end of each year.
Looking at the above example, you can see that the original book value was $21,000 with
$7,140 being depreciated in the first year. This means that at the start of the second year, the
depreciation is applied and the book value should be $13,860 and so on. This means that you
need to ensure that the book value in the asset register is changed to reflect this each year.
As mentioned earlier, computerised systems simplify this process in that they will automatically
calculate the book value each year for you.
The next step in the process is to examine how the depreciation schedule is applied to the
books. We will cover this in more detail when we look at balance day adjustments.
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Facilitator Manual BSBFIA401A Prepare Financial Reports
© Precision Group (Australia) Pty Ltd
Part 1: Maintain Asset Register
“Before you
can really start
setting financial
goals, you need
to determine
where you stand
financially.”
David Bach
Facilitator Manual BSBFIA401A Prepare Financial Reports
© Precision Group (Australia) Pty Ltd
11
Part 1: Maintain Asset Register
Activity One
Calculate straight line depreciation on the following asset:
A computer was purchased for $1,799. It will be depreciated over 3 years, with a residual value
of $299.
Answer to Activity One
Book Value Beginning of
Year
$1799 (Original
Cost)
12
Depreciation
Expense
Accumulated
Depreciation
Book Value End of Year
$500
$500
$1,299
$1,299
$500
$1000
$799
$799
$500
$1500
$299
Facilitator Manual BSBFIA401A Prepare Financial Reports
© Precision Group (Australia) Pty Ltd
Part 1: Maintain Asset Register
Section 1 - ‘True’ or ‘False’ Quiz
True
False
Plant is an example of a fixed asset.
An asset register is used merely as a record of an item’s purchase.
It is a security measure, helps assist with asset valuation and determines
the financial status of an asset.
There is only one form of depreciation.
There are numerous methods used to calculate depreciation.
The Australian Tax Office produces depreciation tables for common
assets.
Depreciation only affects the asset register.
It is also entered into journals and ledgers.
Reducing balance captures a higher level of depreciation in the early
years of an asset’s life, with lower values in later years.
Straight line is calculated using the following formula - (cost of asset –
salvage value) / useful life span of asset in years.
The major change to any fixed asset register entry over time will
concern depreciation and book value.
Depreciation allows for the writing off of an asset’s cost over its lifetime.
A serial number need not be recorded in an asset register.
The asset register should include a serial number (on an asset ID code).
Facilitator Manual BSBFIA401A Prepare Financial Reports
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