VHDL assignment,one week dead line,if u have any doubts,plz let me know,even though i am unware of those,will take help from tutor
chenponlineassighmenthelp
FinReporting05Reservesetcupdated.pptxChapter 5
Reserves, Provisions and Dividends
1
5.1
Income Tax
2
PAYG Instalments
The PAYG Installment System applies to taxpayers with business and investment income.
3
PAYG Instalments
Most taxpayers with business or investment income will pay tax instalments quarterly.
4
PAYG Instalments
Quarterly payments will be due 28 days after the end of each quarter:
5
28 October
28 February (one month extension)
28 April
28 July
AASB 112 ‘ Income Taxes’
6
Annual company income tax = taxable income * company tax rate.
Income tax expense is charged against profits for the year.
The balance payable in respect of the current period’s taxable income is a liability called Current Tax Payable.
Income Tax
Under the PAYG Instalment system:
The first three quarterly income tax payments are based on sales or income whereas the final payment is an adjustment.
7
Income Tax
8
5.2
Reserves
9
Chapter 5
Reserves
Reserves are that part of Shareholder’s Equity that are not issued or paid-up capital or retained profits.
10
Chapter 5
Sources of Reserves
Transfer of profits into a reserve for a specific reason or future need.
Asset revaluation gains can be directly posted to the reserve.
11
Common Types of Reserves
12
Reserves
Asset Revaluation Reserve
Capital Profits Reserve
Currency Fluctuations Reserve
Dividend Equalisation Reserve
General Reserve
Categories of Reserves
13
1. Realised Gains
2. Unrealised Gains
3. Shareholder Contributions
5.3
Provisions
14
AASB 137 Provisions, Contingent Liabilities and Contingent Assets
Provisions:
Represent a present obligation resulting from a past event
Require a probable outflow of resources to settle the obligation
Must be able to be reliably estimated.
15
AASB 137 Provisions, Contingent Liabilities and Contingent Assets
A probable obligation exists where it is considered more likely than not.
If it is a remote possibility only, then it does not need to be disclosed.
16
Types of Provisions
Provision for Annual Leave
Provision for Sick Leave
Provision for Long Service Leave
Provision for Dividend
Provision for Warranty
17
Provisions vs Reserves
18
Provisions
Provisions are liabilities. They are estimates of amounts to be paid in the future.
Reserves
Reserves are an increase in Shareholders Equity arising from profits to meet future needs.
Provisions vs Liabilities
19
Provisions
Provisions are estimates of future obligations.
Liabilities
Liabilities that represent a present obligation of the company arising from past events.
5.4
Accounting Entries
20
General Reserve
Created to transfer amounts from retained profits.
No specific purpose for the funds.
Can be used to shore up the Balance Sheet of a company.
21
General Reserve
Companies can use this reserve at their discretion.
There is no requirement to have a general reserve.
22
General Reserve – Accounting Entries
23
Dividend Equalisation Reserve
Established to set aside amounts for the payment of future dividends.
Can be used to pay usual dividends during a period of low profits.
24
Dividend Equalisation Reserve
It is not a requirement that a company establishes this reserve.
Can convince shareholders that the company is focused on providing dividends.
25
Dividend Equalisation Reserve – Accounting Entries
26
Asset Revaluation Reserve
Companies periodically assess and revalue assets such as Land and Buildings.
This is done to accurately reflect the true value of assets.
27
Asset Revaluation Reserve
Any gain from revaluing assets is not treated as profit.
The gain is transferred to the Asset Revaluation Reserve.
28
Asset Revaluation Reserve – Accounting Entries
29
Funding a Bonus Share Issue with an Asset Revaluation Reserve
The Asset Revaluation Reserve may only be used to fund bonus share issues.
30
Funding a Bonus Share Issue with an Asset Revaluation Reserve
31
Bonus Issues
32
Reasons for a Bonus Issue
A non-cash return to shareholders
To tell the market that the company expects good future profitability.
To use funds in the Asset Revaluation Reserve or other reserves which cannot be used elsewhere.
As a takeover defence.
Bonus Issues – Accounting Entries
33
Example: Bonus Share Issue
34
5.5
Dividends
35
Dividends
Dividends are a distribution to shareholders out of retained profits.
The company’s constitution will set out dividend policy or the Replaceable Rules may be adopted.
Interest is not payable on a dividend.
36
Interim and Final Dividends
The company constitution will usually allow the payment of an interim and final dividend.
An interim dividend is a dividend paid at some time throughout the accounting period.
37
Steps in Dividend Payment
38
The Declaration Date
The Closure of the Register and Date of Record
Ex-Dividend Date
Date of Payment
1. The Declaration Date
The Board of Directors resolves to pay an interim dividend during the year on a declared date.
39
2. The Closure of the Register and Date of Record
Notifications of share transfers before the date of record will mean that any new shareholder receives the dividend. However, notification on or after will mean that the previous shareholder receives the dividend.
40
3. Ex-Dividend Date
The ex-dividend date is 4 days before the date of record.
A purchaser of shares before the ex-dividend date is entitled to the dividend.
41
4. Date of Payment
Is the date on which the dividend cheques are mailed to shareholders or credited to shareholders.
42
Dividends – Accounting Entries
43
Example: Payment of Dividends
Example Continued
Self-Test Exercise
Self-Test Exercise
