preparation of General Journal
In Holy Pty. Ltd.’s books
To Acquire the Holt Trading
Recording Acquisition of Asset Amounting to $15million
| Date | Details | Debit | Credit |
| Asset | 15,000,000 | ||
| Holt Trading Asset | 15,000,000 |
Recording Gross Sales Amounting to $120 Million
| Date | Details | Debit | Credit |
| Cash | 120,000,000 | ||
| Sales | 120,000.000 |
To Record Share Capital
| Date | Details | Debit | Credit |
| Gary and Anita Cash | 200,000 | ||
| Holt Trading Share Capital | 200,000 |
To record Firm’s Fees Expenses paid
| Date | Details | Debit | Credit |
| Legal Fees | 3000 | ||
| Cash | 3000 |
To record Holt Acquisition at the Acquisition Date
| Date | Details | Debit | Credit |
| Equipment | 600,000 | ||
| Cash | 250,000 | ||
| Good will* | 100,000 | ||
| Bank Loan | 350,000 | ||
| Share Capital | 600,000 |
Holt Trading Balance Sheet
| HOLT TRADING BUSINESS | |||
| STATEMENT OF FINANCIAL POSITION | |||
| AS AT 31-12-XXX | |||
| Non-Current Asset | Cost | Acc. Dep | NBV |
| Equipment | 600,000.00 | 600,000.00 | |
| Goodwill* | 100,000.00 | 100,000.00 | |
| Other Assets | 15,000.00 | ||
| Total Non-Current Assets | 700,000.00 | ||
| Current Assets | |||
| Cash | 450,000.00 | ||
| Current Liabilities | |||
| Bank Loan | 350,000.00 | ||
| Net Asset/ Working Capital | 100,000.00 | ||
| Total Assets | 800,000.00 | ||
| Financed By | |||
| Share Capital | 800,000.00 | ||
Financial Reporting Responsibilities of Directors
Directors have the responsibility of exercising the utmost duty of care and due diligence both in general law and in compliance with the Corporation Act. The director is a crucial pillar of corporate governance since it is placed on the top organizational hierarchy in its management. As director of the proposed company, the core responsibility is in managing the operation and affairs of the company both in the short and long-run.
Furthermore, they are required to exercise reasonable steps that will guide and monitor company operation and management. Some of the critical financial responsibilities will include being familiar with the business operation, and ensure it is successfully managed. Furthermore, exercise an appropriate duty of care and due diligence in discharging their duties. This means that the company director will be required to comply with the financial reporting and audit requirement of the company’s Act as well as ensuring that proper books and records are kept.
The company’s financial record needs to be appropriately recorded to explain the business transaction, financial position, and performance. Secondly, it needs the director will be required to ensure that the financial statement shows an accurate and fair view. The director will also ensure that the financial records are accurate and apply recommended or appropriate accounting policies and design or implement the proper control system and processes. Apart from those mentioned above, the directors are required to lodge or submit the financial reports with the ASIC. Thus, the declaration are meant to provide a reasonable assurance that the company is able to pay off the outstanding debt when they fall due. This information is crucial to the directors because of assuring the interested stakeholders on both the solvency and liquidity of the company. It also saves the company from being declared bankrupts and creating a conflict with other stakeholders such as suppliers, lenders or creditors.
Furthermore, they need to ensure that the financial statement and notes comply with the required standards and reflect the true and fair view as well as the financial position of the company at a particular period. Additionally, in the event the company is listed, the directors will require both the chief financial officer and chief executive officer a statement of declaration to exercise the due diligence in their operation and core duties. This means that every director will be required to exercise competence, and diligence in understanding the financial report that will be disclosed to the public. The actions of the director or company employee will save them from incurring costs such as litigation and other costs which might be detrimental to the company. Thus, the directors need to understand and focus on the financial report content and review the financial statements with that of the director report to determine that the information is in line with the financial concepts and principles to ensure the matters familiar or unfamiliar are not omitted.
Moreover, the directors are required to delegate other accountants in the preparation of the books of account. In making the inquiries, they are expected to obtain the professional accounting advice on applying the financial statement in compliance with the accounting standard to reflect the true and fair view. The advice should be from a chartered accountant with the required echelon of expertise in accounting standards to ensure the information is not subjective or biased. The data need to be presented in time and correct analysis, documentation and verification need to be objective for the purpose of audit.This will provide auditors with an opportunity to offer an independent assurance of the financial information. The directors are the gatekeepers of the financial system; hence, they are required to provide useful and meaningful information through the financial report to ensure confidence and informed market and users.
Directors, management, and employees need to furnish the auditor with all the explanations and information required during the audit. This means that the financial risks, severe accounting judgment, and dilemmas that may affect the financial report need to be disclosed to the auditors. Thus, the director needs to ensure that auditors’ independence is safeguarded and not compromised by fact or appearance.
In conclusion, the directors play a critical role in ensuring the corporate governance principle is upheld. They also ensure that the financial statement comply with the required standards and that they are free from misstatement, errors and fraud.
