Question

It is spring of 2020, you have not been able to find work As a clever forward-looking business student, you have decided to get experience by starting and operating your own business, a lemonade stand you have named “spring cookie”. In your planning you have identified that there is potential to build a sustaining company, and as such you set up an accounting system and formal business structure and you have no business partners.

Set up all the required Financial Statements, with proper formatting

show the equation structure for each, and give examples of all accounting items that will likely be included in each statement

also, Pick an option for your business for "spring cookie" and support your reasoning for why it is most appropriate?

you will have to follow IFRS or ASPE and why?

Answer 1

Financial statemens as per IFRS

Continuing operations
Revenue	Revenue from lemonade sale	a
Cost of sales of goods	Cost of materials-lemons, sugar, salt, water, soda, ice	b
Cost of providing services	Labor costs	c
Gross profit		d= a-b-c
Distribution costs	packagings of lemondae-glass, straws	e
Administrative expenses	Electricity, accounting, rent, stationery,depreciation of equipments, etc	f
Net impairment losses on financial and contract assets	NA	g
Other income	rent, interest, sale of assets, etc	h
Other gains/(losses) – net	NA	i
Operating profit		j=d-e-f-g+h+i
Finance income	Interest of investments if any	k
Finance costs	Cost of borrowed funds for starting business	l
Finance costs		m=k-l
Share of net profit of associates and joint ventures accounted for using the equity method	NA, as newely started business	n
Profit before income tax		o=j+m+n
Income tax expense		p
Profit from continuing operations		q=o-p
Profit from discontinued operation	NA, as new business there are no other segments	r
Profit for the period		s=q+r
Other comprehensive income	income from gain of available for sale investments if any	t
Other comprehensive income for the period, net of tax		u=t-tax
Total comprehensive income for the period		v=s+u

Balancesheet
ASSETS
Non-current assets
Property, plant and equipment	refrigerator, mixer grinder, lemonade van, generator	a
Investment properties	NA, new business	b
Intangible assets	NA, new business	c
Deferred tax assets	difference between tax liability on book basis and tax basis	d
Other assets		e
Financial assets		f
Other loans and receivables	loan given to others	g
Total non-current assets		h=a+b+c+d+e+f+g
Current assets
Inventories	Stock of raw material-salt, sugar, lemon, etc	i
Other current assets		j
Trade receivables		k
Cash and cash equivalents	Cash and bank	l
Contract assets		m
Short term investments	bonds, securities, if any	n
Total current assets		o=i+j+k+l+m+n
Total assets		p=h+o
LIABILITIES
Non-current liabilities
Borrowings	Bank loan	q
Deferred tax liabilities		r
Provisions		s
Total non-current liabilities		t=q+r+s
Current liabilities
Trade and other payables	creditor payments	u
Contract liabilities		v
other Current tax liabilities		w
Borrowings	working capital loans	x
Provisions		y
Total liabilities		z=t+u+v+w+x+y
EQUITY
Common stock	Owner's contribution	a1
Addition paid in capital	NA, owned business	b1
retained earings	NA, newly started business	c1
Non-controlling interests		d1
Total equity		e1=a1+b1+c1+d1
Total liabilities and stockholders' equity		f1=z+e1

Cash flow statement
Cash flow from opearting activities
Cash generated from opertaions	pofit of business
Interest received
Less: interest paid
Income tax paid	taxes on income
Net Cash flow from opearting activities
Cash flow from investing activities		total a
Payments for property, plant and equipment	purchase of assets
Payments for investment property
Payments for financial assets
Proceeds from sale of property, plant and equipment
Repayment of loans by related parties
Net cash (outflow) from investing activities		total b
Cash flows from financing activities
Proceeds from issues of shares and other equity securities
Proceeds from borrowings
Repayment of borrowings
Dividends paid to company’s shareholders
Share issue and buy-back transaction costs
Net cash (outflow) from financing activities		total c
Net increase in cash and cash equivalents		a+b+c
Cash and cash equivalents at the beginning of the financial year

FInancial statements as per ASPE

Income statement
Revenue
Cost of Sales
	Opening inventory
	Purchases
	Closing inventory
Gross profit
Expenses
	Depreciation
	rent
	electrcity
	interest on loan
Other income
	Dividend income
	unrealised gain on investments
Income before taxes
Income tax
Net Income

Balancesheet
Assets
Current Assets
	Cash
	Short term investments
	Accounts receivable
	inventories
	Other current assets
	Total current assets
Long term investments
Property, plant and equipment, net
Other non-current assets
Total assets
Liabilities and stockholders' equity
Current liabilities
	Accounts payable
	Accrued expenses
	unearned revenue
	short term notes payable
	Dividend Payable
	Total current liabilities
Long term debt
Other non-current liabilities
Total liabilities
Stockholders' equity
Common Stock
Additional paid-in capital
Retained earnings
Total Stockholders' equity
Total liabilities and stock holders' equity

Cash flow statement
Opearting activities
	Net income
	items not affecting cash
		Depreciation
		amortisation
		Unrealised gain
	Changes in working capital
Investing activities
	Purchase of assets
	Proceeds from disposal of assets
Financing activities
	Dividends paid
	proceeds from borrowings
	share holders' capital

There are many similarities and certain variations in both the methods of financial reporting. IFRS is a more detailed version of reporting

Many of the standards in ASPE provide options for companies that are meant to be simpler to implement and more relevant and adaptable to the size of the business.

Hence, if the owner intends to operate as a private company ASPE is a better and simpler form of reporting whereas if the owner wished to go public in a year or two IFRS is nore preferable

So if the comapny plans to list the stock in future IFRS is preferable. Also it will also be useful if the start-up is looking to be acquired by a company already reporting under IFRS