Principles of Accounts
Candidate #: 090046
Territory: Guyana
Year: 2018
Acknowledgement
The researcher wishes to thank her Principles of Accounts teacher, Sir Eugene Thompson, for
guiding her towards the completion of the Accounts School Based Assessment. The researcher
also wishes to thank her parents for providing the condiments necessary to get this School Based
Assessment completed.
Content Page
Acknowledgement ………………………………………………………………………….
Introduction …………………………………………………………………………………
Aims …………………………………………………………………………………………
Transactions …………………………………………………………………………………
Ledgers ………………………………………………………………………………………
Journals ………………………………………………………………………………………
Source Documents……………………………………………………………………………..
Recommendation .……………………………………………………………………………
Conclusion ……………………………………………………………………………………
Genius Furnishing is a business that produces a variety of furniture to give any room a
professional but homey feel. Genius Furnishing was established by Maleah Hopkinson who had
a passion for the unique designs, styles and sizes of furniture. Genius Furnishing is business that
deals with the production aspect meaning they use any suitable raw materials to create a finished
product that fits the standards of the business. The development of the business was funded by
Genius Furnishing is a sole trader business located at the Gafoors Houston Complex. Genius
Genius Furnishing is a manufacturing and service industry which is involved in the production of
finished unique and extraordinary pieces of furniture. Genius Furnishing is a business that aims
to make 100% profit and to become a renowned furniture business. This would involve buying
only the best raw materials and employing workers who are hard-working and skilled employees.
The mission statement of Genius Furnishing is, “To promote a homey but professional feel in
June 2nd 2017: Purchased goods on credit from T.Bolgobin for 50,000
June 9th 2017: Sold goods on credit: L.Laine 147,000, E.Anne 145,000, C.Caine 200,000
E.Anne $145,000
C. Caine $200,000
Dr Capital Cr
Balance c/d $1,502,000 Cash $1,502,000
Dr Cash Cr
Drawings $500,000
Wages $120,000
$2,056,000 $2,056,000
Cash $150,000
Cash $100,000
$300,000 $300,000
Dr Sales Cr
Balance c/d $899,000 L.Laine $147,000
E.Anne $145,000
C.Caine $200,000
Cash $200,000
Sales $207,000
$899,000 $899,000
$50,000 $50,000
Dr L.Laine Cr
Sales Cash
$147,000 $147,000
Dr E.Anne Cr
Sales Bank
$145,000 $145,000
Dr C.Caine Cr
Sales Return Inwards
$200,000 $200,000
Dr Bank Cr
E.Anne Rent $50,000
$145,000
$145,000
$145,000
Dr Machinery Cr
Cash $386,000 Balance c/d
$386,000
Dr Machinery Expenses Cr
Cash $100,000 Balance c/d
$129,000
Cash $29,000
$129,000
Dr Return Inwards Cr
C.Caine $200,000 Balance c/d
$200,000
Balance b/d $200,000
Dr Drawings Cr
Cash $500,000 Balance c/d
$500,000
Dr Motor Van Cr
Cash $252,000 Balance c/d
$252,000
Dr Return Outwards Cr
Balance c/d $30,000 T.Bolgobin $30,000
Dr Rent Cr
Bank $50,000 Balance c/d $50,000
Balance b/d $50,000
Dr Wages Cr
Cash $120,000 Balance c/d
$120,000
Debit Credit
Capital 1,502,000
Cash 389,000
Purchases 300,000
Sales/Turnover 899,000
Returns
Machinery 386,000
Rent 50,000
Wages 120,000
Bank 95,000
Drawings 500,000
2,451,000 2,451,000
Income Statement
Sales/Turnover 899,000
Less Expenses
Wages 120,000
Rent 50,000
638,000 _ 638,000
Current Assets
Cash 389,000
Bank 95,000
484,000
1,122,000
Capital
1,102,000
Current Liabilities
1,122,000
Ratio and Analysis
Profitability Ratios
Sales
= 429,000 x 100
899,000
= 47.72%
Capital
= 100,000 x 100
1,502,000
= 6.66 %
Expenses to Sales
Expenses x 100
Sales
= 329,000 x 100
899,000
= 36.6
Liquidity Ratios
Working Capital
= 484,000 – 20,000
= 464,000
Current Ratio
Current Liabilities
= 484,000 = x:1
20,000
= 24.2:1 = x:1
Activity Ratio
Asset Turnover
Total Assets
Sales
= 1,122,000
899,000
= 1.25
Payable Days
Payables x 365
Credit Purchases
= 20,000 x 365
50,000
= 146 days
Performance of the Business
Genius Furnishing is a sole trader business which specializes in the production of finished unique
When calculating the first category of ratios, profitability ratios, which includes the gross profit
margin, the return of capital employed and the expenses to sales ratio the following information
was gathered. It was found that when the gross profit margin was calculated, for every $100 in
sales the business is making 47.72% in gross profit. Since the gross profit margin is above 25% it
indicates that Genius Furnishing is financially efficient and stable and will therefore allow for the
business to cover its costs and it also gives it a competitive return for its investment in the
business. When calculating the return of capital employed it was found that for every $100 in
capital invested the owner is making 6.66% returns. Since the ROCE is less than the company’s
capital cost it indicates that the company is not employing its capital effectively and is not
generating shareholder value. When the expenses to sales ratio was calculated was shown that
for every $100 in sales the business incurs $36.6. With a ratio of 36.6% it shows that there is less
profitability.
When calculating the second category of ratios, liquidity ratios, which consists of the working
capital ratio and the current ratio. The working capital ratio is used in corporate finance to assess
a business' operational efficiency. When calculating the working capital ratio, it was found that it
is 464,000 which therefore means it has more than enough liquid funds to meet its short-term
obligations. The current ratio is intended to show the ability of a business to pay for its current
liabilities with its current assets, therefore when the ratio was calculated it was found to be
24.2:1. This therefore gives evidence that the company is well-positioned to cover its current or
short-term liabilities.
The calculations of the third category of ratios, activity ratio, includes the asset turnover ratio
and the payable days’ ratio. An asset turnover ratio measures the value of a business’ sales or
revenues generated relative to the values of its assets. When calculated, the asset turnover ratio
shows that assets are purchased 1 time per year. This therefore implies that the company is
generating less revenue per dollar of assets. The payable days’ ratio measures the number of days
that a company takes to pay its suppliers. Therefore, when this ratio was calculated it was shown
When considering the ledgers and all final accounts there is a vast comparison between the sales
and purchases of Genius Furnishing. According to the gathered information sales were said to be
a sum of $899,000 and purchases were said to be a sum of $300,000. The difference between the
two is a difference of $599,000. Therefore, it can be said that Genius Furnishing made a profit of
Sales Purchases
Recommendation
When considering the information gathered from Genius Furnishing’s financial accounts some
actions need to be taken so as to improve the effectiveness and profitability of the business. The
You need to show how you ended up the Cost of sales figure on the outside, this will include a
figure for closing stock which needs to be established, you can make up one let us say $45000,
that needs to be reflected in the Balance Sheet as well.
You need more graphs, that is why it is important to have expenses every week, you could have
shown weekly expenditure.
The names of persons go in the respective ledgers (T Accounts) Creditors in the payables ledger
while Debtors in the Receivables Ledger. All other accounts go in the General Ledger.