1) The very first error is in the name of the company that is mentioned as Bonza Juice Pty Ltd while the financial are created for Jazzy Juice Pty Ltd. This can create an issue of trademark (Fishman 2016). Thus, the name that has been written should be accurate and it should be the name of the company whose financials are being made or else it will draw legal consequences.
2) Incremental sales are mentioned as 150000 for the first year and also in every continuing year, an amount of 50000 has been added. It has been mentioned in the question that once the project of the new machine is undertaken sales of soft drinks and flavoured milk will be ceased. Also, the expected sales are $100000 for the first year, $120000 for the second year and a 5% increase thereof. Thus, the amount of $50000 that has been added serves no purpose. The sales of traditional juices will be $250000 every year. So, the overall sales will be $250000+ $100000 for the first year and continued in the same manner. $50000 is the wrong amount and will mislead the financial position of the business (Bahri, St-Pierre and Sakka 2017).
3) The amount of $5000 for the tools has been omitted. This reduces the expenses of the company and inflates the profits. Thus, every expense is required to be mentioned for the accurate position of the business (Hamilton and Smith 2017).
4) Total net working capital is about 20% of the number of sales. Since the amount of sales is depicted wrong, the amount of working capital required is also not accurate. This will create a problem while running the business as the business won’t be able to analyze the required working capital which will hamper the functioning of the business for its day to day business. So, for an accurate measure, it is required that each figure is anticipated carefully.
5) The formula for calculating the depreciation is wrong. Depreciation is calculated after reducing the value of salvage or sales from the cost and then dividing it by the number of the useful life of the machine. Here, the sale value has not been considered so the amount of depreciating drawn is misleading. This will create an impact on overall expenses and will, in turn, affect the value of profits for the business. Profits will reduce as extra depreciation is being charged as an expense. Thus, misleading representation of the statements.
The process of detecting errors improves learning. It gives an in-depth knowledge about the preparation of statements and also helps in knowing about the things that are to be kept in mind while preparing them (Helyer 2015). This assessment helped me in learning about the impacts that will be created if any amount is stated wrong or the legal consequences that will be drawn once the company uses another name that has not been registered in their name. The values if stated wrong in the statement will affect the overall financial statements. One figure will affect the other. These learnings will enable me to perform with better precisions in future practices.
Bahri, M., St-Pierre, J. and Sakka, O. 2017. Performance measurement and management for manufacturing SMEs: a financial statement-based system. Measuring Business Excellence, 21(1), pp. 17-36.
Fishman, S. 2016. Trademark: legal care for your business & product name. California: Nolo.
Hamilton, E. and Smith, J.L., 2017. Error or Fraud? The Effect of Omissions on Management's Fraud Strategies and Auditors' Evaluations of Identified Misstatements. The Effect of Omissions on Management's Fraud Strategies and Auditors' Evaluations of Identified Misstatements. [Online]. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3004090 [Accessed on April 13, 2020].
Helyer, R. 2015. Learning through reflection: the critical role of reflection in work-based learning (WBL). Journal of Work-Applied. 7(1), pp. 15-27.
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