2022-06-25
Question 1 A
|
Detailing of Expenses |
£ |
|
Administrative Expenses |
|
|
Insurance expenses |
15,000 |
|
Staff pension costs |
180,000 |
|
Legal fees |
12,260 |
|
Administration expenses |
53,200 |
|
Electricity |
13,050 |
|
Loss on inventory writedown |
3,000 |
|
Depriciation Leasehold land and building |
13,000 |
|
|
289,510 |
|
Finance Expenses |
|
|
Bank loan interest |
600 |
|
|
600 |
|
Selling & Distribution Expenses |
|
|
Distribution and selling expenses |
206,800 |
|
Bad debts |
1,100 |
|
Depriciation Vehicle |
20,736 |
|
Depriciation Leasehold land and building |
6,500 |
|
|
235,136 |
|
|
|
|
Witcher PLC |
||||
|
Statement of Profit and Loss |
||||
|
For the year ending 31 March 2020 |
||||
|
Year ending 31 March |
||||
|
Notes |
2020 |
2019 |
||
|
Revenue |
4,947,540 |
|||
|
Opening inventory |
119,500 |
|
||
|
Add: Purchases |
3,782,500 |
|
||
|
Less Closing Inventory |
(180,000) |
|
||
|
Cost of Sales |
(3,722,000) |
|
||
|
Gross Profit |
1,225,540 |
|||
|
Other Income |
|
|||
|
Administrative Expenses |
(289,510) |
|||
|
Selling & Distribution Expenses |
(235,136) |
|
||
|
Operating Profit |
700,894 |
|||
|
Finance Expenses |
(600) |
|
||
|
Profit before Tax |
700,294 |
|||
|
Tax Expense |
(121,500) |
|
||
|
Profit and Total Comprehensive Income for the Financial Year |
578,794 |
|
||
Question 1 B
|
WITCHER PLC |
|||||
|
STATEMENT OF CHANGES IN EQUITY |
|||||
|
FOR THE YEAR ENDED 31 MARCH 2020 |
|||||
|
Issued, subscribed and paid up share capital |
Share Premium |
Retained Earnings |
Other Reserves |
Total |
|
|
£ |
£ |
£ |
£ |
£ |
|
|
Balance as at 31 March 2019 |
750,000 |
100,000 |
96,730 |
380,000 |
1,326,730 |
|
Comprehensive Income |
|||||
|
Profit for the year |
|
|
578,794 |
|
578,794 |
|
Other comprehensive income for the year |
|
|
|
|
|
|
Total comprehensive income for the year |
|
|
578,794 |
|
578,794 |
|
Total comprehensive Income |
750,000 |
100,000 |
675,524 |
380,000 |
1,905,524 |
|
Transactions with Owners |
|||||
|
Increase in Share Capital |
125,000 |
250,000 |
|
|
375,000 |
|
Dividends |
|
|
(150,000) |
|
(150,000) |
|
Total Transactions with Owners |
125,000 |
250,000 |
(150,000) |
|
225,000 |
|
Balance as at 31 March 2020 |
875,000 |
350,000 |
525,524 |
380,000 |
2,130,524 |
Question 1 B
|
WITCHER PLC |
||||
|
STATEMENT OFFINANCIAL POSITIONS |
||||
|
AS AT 31 MARCH 2020 |
||||
|
2020 |
2019 |
|||
|
Note |
£ |
£ |
||
|
ASSETS |
||||
|
NON CURRENT ASSETS |
||||
|
Leasehold land & buildings |
3 |
1,657,500 |
|
|
|
Vehicles |
4 |
31,104 |
|
|
|
1,688,604 |
|
|||
|
CURRENT ASSETS |
||||
|
Trade Receivables |
9 |
314,700 |
|
|
|
Inventory |
177,000 |
|
||
|
Prepaid Expense |
10 |
2,000 |
|
|
|
Cash and bank balances |
11 |
376,800 |
|
|
|
870,500 |
||||
|
TOTAL ASSETS |
2,559,104 |
|
||
|
EQUITY AND LIABILITIES |
||||
|
SHARE CAPITAL AND RESERVES |
||||
|
Authorized share capital |
875,000 |
|
||
|
Issued, subscribed and paid up share capital |
12 |
875,000 |
||
|
Share Premium |
350,000 |
|||
|
Retained Earnings |
525,524 |
|||
|
Other Reserves |
380,000 |
|
||
|
2,130,524 |
||||
|
NON CURRENT LIABILITIES |
||||
|
Bank Loan |
13 |
9,000 |
|
|
|
Provision for decommissioning cost |
14 |
|
|
|
|
9,000 |
|
|||
|
CURRENT LIABILITIES |
||||
|
Trade Payable |
15 |
296,830 |
|
|
|
Tax Payable |
16 |
121,500 |
|
|
|
Other Payables Electricity |
17 |
1,250 |
|
|
|
419,580 |
|
|||
|
TOTAL LIABILITIES |
428,580 |
|||
|
Contingencies and commitments |
18 |
|||
|
TOTAL EQUITY AND LIABILITIES |
2,559,104 |
|
||
Question 2 A
|
A: Profit Sharing between Partners for Period Ending 30 Sep 2019 |
||||
|
Geralt |
Yennifer |
Ciri |
Total |
|
|
£ |
£ |
£ |
£ |
|
|
Expenses |
||||
|
Salary expense |
22,500 |
22,500 |
22,500 |
67,500 |
|
Annual event payement to Ciri |
|
|
2,000 |
2,000 |
|
Interest expense |
225 |
|
|
225 |
|
Total Expenses |
22,725 |
22,500 |
24,500 |
69,725 |
|
Interest Income |
3,750 |
3,750 |
3,000 |
10,500 |
|
Remaining Profit |
7,603 |
7,603 |
5,069 |
20,275 |
|
Income allocation |
34,078 |
33,853 |
32,569 |
100,500 |
Question 2 B
|
B: Capital & Current Accounts |
|||||||
|
Capital Account as at 30 Sep 2019 |
|||||||
|
Geralt |
Yennifer |
Ciri |
Geralt |
Yennifer |
Ciri |
||
|
£ |
£ |
£ |
£ |
£ |
£ |
||
|
To Loan Account |
|
50,000 |
|
To Balance b/d |
50,000 |
50,000 |
40,000 |
|
To Bal c/d |
50,000 |
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
50,000 |
50,000 |
40,000 |
50,000 |
50,000 |
40,000 |
||
|
Current Account as at 30 Sep 2019 |
|||||||
|
Geralt |
Yennifer |
Ciri |
Geralt |
Yennifer |
Ciri |
||
|
£ |
£ |
£ |
£ |
£ |
£ |
||
|
To interest Account |
225 |
|
|
To Balance b/d |
10,000 |
15,000 |
|
|
To Drawings Account |
9,000 |
|
|
To Salary Account |
22,500 |
22,500 |
24,500 |
|
To Cash Account |
|
48,853 |
|
To interest Account |
3,750 |
3,750 |
3,000 |
|
To Bal c/d |
34,628 |
|
32,569 |
P&L Profit share |
7,603 |
7,603 |
5,069 |
|
|
|
|
|
|
|
||
|
43,853 |
48,853 |
32,569 |
43,853 |
48,853 |
32,569 |
||
Question 3 A
|
A: Calculation of Inventory Value of Kikimora as at 31 Dec 2019 |
||||
|
Units |
Value |
|||
|
£ |
||||
|
Opening |
200 |
3,000 |
||
|
Purchases |
15,000 |
225,000 |
||
|
Sold |
(13,850) |
(207,750) |
||
|
NRV adjustment of 5 units |
(25) |
|||
|
Total |
1,350 |
20,225 |
||
|
Inventory Value of Kikimora as at 31 Dec 2019 is £20,225. |
||||
Question 3 B
|
B: Calculation of Inventory Value of Shtriga as at 31 Dec 2019 |
|||
|
Fifo Method |
|||
|
Date |
|
Units |
Balance Units |
|
|
|
|
|
|
1 Jan |
Opening Inventory |
400 |
400 |
|
1 Jan |
Purchase |
6,000 |
6,400 |
|
Jan Jun |
Sold |
(4,500) |
1,900 |
|
1 Jul |
Purchase |
5,000 |
6,900 |
|
Jul Dec |
Sold |
(3,000) |
3,900 |
|
Inventory Value of Shtriga using Fifo Method as at 31 Dec 2019 is £70,200. (3,900 units X £18) |
|||
|
Date |
Purchase |
Sales |
Balance |
||||||
|
|
Unit |
Unit Cost |
Total |
Unit |
Unit Cost |
Total |
Unit |
Unit Cost |
Total |
|
|
|
£ |
£ |
|
£ |
£ |
|
£ |
£ |
|
1 Jan |
|
|
|
|
400 |
22.000 |
8,800 |
||
|
1 Jan |
6,000 |
20.00 |
120,000 |
|
|
6,400 |
20.125 |
128,800 |
|
|
Jan Jun |
|
|
4,500 |
20.125 |
90,563 |
1,900 |
20.125 |
38,238 |
|
|
1 Jul |
5,000 |
18.00 |
90,000 |
|
|
6,900 |
18.585 |
128,238 |
|
|
Jul Dec |
|
|
|
3,000 |
18.585 |
55,755 |
3,900 |
18.585 |
72,482 |
Inventory Value of Shtriga using AVCO Method as at 31 Dec 2019 is £72,482.
Question 3 C
|
C: Trading Account for the year ending 31 Dec 2019 |
||
|
|
NILFGAARD |
|
|
|
£ |
£ |
|
Net Sales |
|
715,500 |
|
Opening Inventory |
11,800 |
|
|
Add: Purchases |
435,000 |
|
|
Less Closing Inventory |
(92,707) |
|
|
Cost of Goods Sold |
|
(354,093) |
|
Gross Profit |
|
361,407 |
|
|
|
|
|
|
|
|
Question 4 A
Business Entity Concept
The business entity concept means that the transactions related to a business must be recorded separately from those of its owners and any other business. In other words, while recording transactions in a business, we take into account only those events that affect that particular business; the events that affect anyone else other than the business entity are not relevant and are therefore not included in the accounting records of the business.
Example: All the expenses recorded in Question 1 are business expenses. None of directors personal expenses are recoded in business books.
Matching Concept
The matching principle requires that revenues and any related expenses be recognized together in the same reporting period. Thus, if there is a cause and effect relationship between revenue and certain expenses, then record them at the same time. If there is no such relationship, then charge the cost to expense at once. This is one of the most essential concepts in accrual basis accounting, since it mandates that the entire effect of a transaction be recorded within the same reporting period.
Examples: In Question 1, distribution and selling expense in trial balance included £2,000 pertaining to period 1st April to 30th June 2020. Our accounting period is ending at 30th March 2020, hence, we did not take this £2,000 as period expense due to matching concept.
Prudence Concept
Prudence concept of accounting states that an entity must not overestimate its revenues, assets and profits; besides this it must not underestimate its liabilities, losses and expenses.
Example: In Question one, inventory at year end included some item costing £10,000 having NRV of £7,000. As per prudence concept, we provided £3,000 as provision for obsolete stock and did not overstate our assets.
Question 4 B
Shareholder’s need of Financial Information:
Shareholders of corporations need financial information to help them make decisions on what to do with their investments (shares of stock), i.e. hold, sell, or buy more.
They need information to assess the companys potential for success and profitability. Investors may predict future dividends based on the profits disclosed in the Financial Statements. Furthermore, risks associated with the investment may be gauged from the Financial Statements. For instance, fluctuating profits indicate higher risk. Therefore, Financial Statements provide a basis for the investment decisions of investors. i.e. hold, sell, or buy more.
Employee’s need of Financial Information:
Employees are interested in the company’s profitability and stability. They are after the ability of the company to pay salaries and provide employee benefits. They may also be interested in its financial position and performance to assess company expansion possibilities and career development opportunities. They use Financial Statements for assessing the companys profitability and its consequence on their future remuneration and job security.
Creditor’s need of Financial Information:
Trade creditors or suppliers are interested in the company’s ability to pay obligations when they become due. They are nonetheless especially interested in the companys liquidity – its ability to pay short term obligations. Financial statements offer creditors a comprehensive look at the financial health of a business. Details such as income, existing debt obligations, expenses, salaries, profit and cash flow all factor into the overall business financial profile. Creditors use financial statements to determine if the business represents a sound credit risk, as well as its ability to repay debt as agreed. They are interested in current ratio, debt equity ratio, sources of payments etc.
Related Post
2021-01-05
Integrated Professional Skills in Digital Age
In terms of ICT, any digital technology that facilitates the acquisition and use of information by i
2021-02-02
Introduction of Primark
Retailer Primark specializes on apparel, accessories, and footwear, and is one of the largest in the
2022-02-08
Goals have a clearly established goal for the company
a healthier lifestyle has been developing, including customer goods and services. Governments and NG
Essay Writing Prices