S & Q Financial Services Pty Ltd (SQFSPL), managed by Stuart and Quresh, provides accounting,…

S & Q Financial Services Pty Ltd (SQFSPL), managed by Stuart and Quresh, provides accounting, taxation, and financial planning services to clients. Note that SQFSPL is registered for GST. The balance sheet for SQFSPL as at 31 March 2018 is as follows: S & Q Financial Services Pty Ltd. Balance sheet As on 31 March 2018 Liabilities and Equities Amount Assets Amount Accounts payable Salary payable GST Equity: Capital, Stuart $ 100 000 Capital, Quresh 75 500 Total Liabilities and equity $ 22 600 1 000 1 400 1 75 500 $ 2 00 500 Cash Accounts receivable Supplies Computers and Equipment Furniture Building Total Assets $ 51 000 6 000 12 000 9 500 15 000 1 07 000 $ 2 00 500 The unadjusted Trial balance at the end of the current period is as below: S & Q Financial Services Pty Ltd. Trial Balance June 30 2017 Account Name Dr Cr Cash at bank 66120.00 Account Receivable 4600.00 Supplies 12000.00 Computer and Equipment 9500.00 Office Furniture 18863.64 Building 107000.00 Account payable 22200.00 GST 2286.36 Gas & Electricity payable 0.00 Advertising payable 0.00 PAYGW 450.00 Water payable 170.00 Quresh, Capital 88000.00 Capital, Stuart 100000.00 Service Revenue 14363.64 Salaries Expense 5250.00 Advertising Expense 2272.73 Service/ Sales Discounts (8800 x 5% x 10/11) 400.00 Rent Expense 1090.91 Gas and Electricity Expense 218.18 Water Expense 154.55 Total 227470.00 227470.00 Assume that you are working in S & Q Financial Services Pty Ltd. (SQFSPL) as an accountant. At the end of each quarter, you are responsible for adjustments, preparation of financial statements, analysis of those statements, and finally reporting to the management. On 30th June 2017, you noticed the following: ? You have identified that an error occurred in recording a transaction for providing accounting services to a customer on 23rd of June. The accurate amount of services provided was $2 200. ? Salaries to employees remains due $200 (net of $20 PAYG). ? The firm charges depreciation on all of its fixed assets following an approach where initial years charges more depreciation and lower depreciation in the later years. Rates of depreciation are 20% for furniture and 10% for building. ? Only $6 675 of supplies remains in the stock at the end of the quarter. ? The firm maintains a 4% provision on the ending balance of account receivable of each quarter for doubtful debts. Additional information: The manager of the firm is concerned about the performance of the firm and he believes that changing depreciation rate and rate of doubtful debt instigate unethical accounting practices of the accountants. He also asserts that ratios analysis and comparative financial statements are ineffective approaches of measuring performance of the firm. However, he is thinking of changing accounting approaches like depreciation methods, approaches for recognizing uncollectible from account receivable could showing better financial performance. As an accountant of the firm you may evaluate the performance of the firm based on different ratios including net profit ratio, return on assets, return on equity/ capital and also comparative financial statements. Assignment Requirements: Based on the provided information above, you are required to prepare and present the following: i) Provide necessary entries for adjusting the Trial Balance at the end of the quarter 30th June, 2017. ii) As the firm determines financial performance quarterly, close the temporary accounts at the end of the quarter on 30th June by necessary entries. iii) Though it is not required but the firm prepares a worksheet quarterly. Prepare a worksheet for SQFSPL. iv) For determining the financial performance and position and for facilitating the analysis of their financial position, James Kate, the manager of SQFSPL asked you to prepare: (a) Income Statement (b) Owners’ equity statement (c) Balance Sheet (d) Comparative Balance Sheet (Trend Analysis) v) Calculate the ratios that the manager would like you to calculate. vi) Prepare a report for the manager and explain- (a) whether his concern is right, whether alternative accounting approaches (for depreciation and uncollectible) can help in improving financial performance; (b) explain the ratios of the firm comparing with the standard ratios; (c) Justify that “changing depreciation rate and rate of doubtful debt instigate unethical accounting practices of the accountants”. (d) Also evaluate that “ratios analysis and comparative financial statements are ineffective approaches of measuring performance of the firm”. Note: We recommend that you prepare and present requirements (i) – (v) in Excel. You may use the format shown on page 240 (for the income statement and statement of changes in equity), page 184 (for the balance sheet) and page 783 (for Comparative Balance Sheet or Trend analysis) of the Textbook: Nobles et al. 2016. Present the requirement (vi) in a MS Word document (expected 600 – 900 words) and use appropriate Harvard referencing style recommended by USC. —————————————— End of the Case ——————————————

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