Required:

(1)        Show the financial statements using the “cash basis”.  PREPARE the Cash Flow Statement and the Income Statement for the year ended 31 December 2020 and the Balance Sheet as at 31 December 2020 for Ace Goods Enterprise.

(2)        Using the financial statements that you prepared in part 1, evaluate the overall performance and position of the business for its first year of operations.

(3)        IDENTIFY 5 items that you would have to show in the financial statements if you had used the “accrual basis” to prepare these statements. Explain briefly but clearly how each of these items would need to be recorded in the relevant financial information. Determine the profit that would be recorded under an accrual basis.

(4)        Explain to Jose the importance of the qualitative characteristics from the NZ Framework and why it is important that the accrual basis is used because of these qualitative characteristics.