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Sales 7515,000
Less Ȃ Return Inwards (124,000)
Turnover 7391,000
Opening inventory 455,000
Add Ȃ purchases 4641,000
Cost of goods for sale 5096,000
Less Ȃ closing inventory [W1] (347,000)
Cost of sale (4749,000)
Gross profit 2642,000
Add Ȃ discount received 65,000
2707,000
Less Ȃ property expenses 130,000
Marketing expenses [W2] 55,000
Wages & salaries [W4] 933,000
Other operating expenses 366,000
Receivable expenses 195,000
Loan note interest 43,000
Allowance for receivables [W3] 9,000
Depreciation Ȃ building [W5] 97,000
Motor vehicles [W7] 52,000
Furniture & equipments [W8] 312,000 (2192,000)
Profit before tax 515,000
Less Ȃ taxation (200,000)
Profit after tax 315,000
Retained earning B/D 410,000
Retained earning C/D 725,000
îî   

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*on-current assets: At cost Depreciation Total
Land 962,000 - 962,000
Buildings 2300,000 - 2300,000
Motor vehicles 312,000 156,000 156,000
Furniture & equipment 156,000 858,000 702,000
Total non-current assets 4120,000
Current assets:
Inventory [W1] 347,000
Receivables [W3] 1121,000
Prepayments: marketing expenses [W2] 10,000
Cash 20,000
Total current assets 1498,000
"       #$%

    
Capital and Equity:
Capital 2340,000
Add Ȃ Retained Earning C/D 725,000
Share premium 260,000
Revaluation [W6] 925,000
Total capital and equity 4250,000
*on-current liabilities:
7% loan notes 614,000
Current liabilities:
Payables 375,000
Tax 200,000
Accrued wages and salaries [W4] 55,000
Bank overdraft 124,000
Total current liabilities 754,000
"         #$%
£&' (

 Closing Inventory: £357,000 Ȃ £35,000

= £322,000

*et book value of closing inventory, £322,000 + £25,000

=£347,000

 Marketing Expenses: £65,000 Ȃ £10,000

= £55,000

 Total allowance for receivables: 5% * 1180,000

= £59,000

So, new allowance for receivable £59,000 - £50,000

= £9,000

And total receivables, £1180,000 Ȃ £59,000

= £1121,000

) Total Wages and Salaries: £878,000 + £55,000

= £933,000

# Depreciation of buildings: £1940,000 * 5%

= £97,000

$ Revaluation of buildings: £2300,000 - £(1940,000 Ȃ 468,000 - 97,000)

= £2300,000 - £1375,000

= £925,000

* Depreciation of Motor Vehicles: £(312,000 Ȃ 104,000) * 25%

= £208,000 * 25%

= £52,000

Total depreciation is, £52,000 + £104,000

= £156,000
% Depreciation of Furniture & Equipment: £1560,000 * 20%

= £312,000

Total depreciation is, £312,000 + £546,000

= £858,000

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Sales [W1] 98,180
Opening inventory 4900
Add Ȃ purchases [W2] 71,000
Cost of goods for sale 75,900
Less Ȃ closing inventory (5900)
Cost of sale (70,000)
Gross profit 28,180
Add Ȃ discount received 1110
Profit from the sale of motor van [W7] 100 1210
29,390
Less Ȃ rent and local taxes [W3] 2660
Wages 15,100
Motor vehicles expenses 3350
Postage and stationary 1360
Repair and renewals 600
Insurance [W4] 810
Irrecoverable debt 300
Depreciation Ȃ E471KBR 2600 (26,780)
*et profit 2610
Ñ +

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*on-current assets: At cost Depreciation Total
Motor van E471 KBR 13,000 2600 10,400
Current assets:
Inventory 5900
Prepaid insurance 200
Receivables 9200
Cash 2010
Total current asset 17,310
"       **

    
Capital and equity:
Capital [W8] 11450
Add Ȃ net profit 2610
Sale of private yacht 20,000
Less Ȃ drawings (9200)
Total capital and equity 24,860
Current liabilities:
Payables 2590
Rent and local tax accrued 260
Total current liabilities 2850
"         **

£&' (

1.  Sales ledger control account:


Dr Cr
Balance B/D 7320 Bank 96,000
Sales 98180 Balance C/D 9500
105500 105500

2.  Purchase ledger control account:


Dr Cr
Discount 1110 Balance B/D 4700
Payment 72,000 Purchase 71,000
Balance C/D 2590
75,700 75,700
3.  Rent and local tax account:
Dr Cr
Bank 2600 Balance B/D 200
Balance C/D 260 Income statement 2660
2860 2860

4.  Insurance account:
Dr Cr
Balance B/D 160 Income statement 760
Bank 800 Balance C/D 200
960 960

5.  Motor vehicle account A123 BWA:


6.  Provision for depreciation A123 BWA:
7.  Disposal account:
Dr Cr
Motor vehicle 10,000 Accumulated Depreciation 8000
Profit 100 Proceeds 2100
10,100 10,100

8.  Statement of affairs:
Cash 1970
Payables 4700
Receivables 7320
Accruals Ȃ rent and local taxes 200
Prepaid insurance 160
Inventory 4900
Motor vehicle 10,000
Provision for depreciation 8,000
capital 11450
24350 24350
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‰ +,    


Investment cost 8800
Less Ȃ net assets at fair value
Ordinary share capital 9260
Retained earning at acq. 750
10010
Group shares [70%] (7007)
Consolidates goodwill 1793

‰     

    

' - 

     

            %

    
Revenue [50,000 + 27,400] 77,400
Cost of sales [26,000 + 11,000 + 1200] (38,200)
Gross profit [24,000 + 16,400] 39,200
Less Ȃ expenses:
Distribution cost [2700 + 2300] 5,000
Administration cost [7,000 + 2792] 9792 (14,792)
Operating profit 24,408
Less Ȃ finance cost [8 - 6] 2
Profit before tax 24,406
Less Ȃ taxation [3700 + 3100] (6800)
Profit after tax 17,606
Less Ȃ minority share (2460)
Group profit 15,146
' - 

             %

    
*on current assets:
Goodwill [A] 1793
Tangible [30,000 + 14895] 44,895
Total non current assets 46,688
Current assets:
Inventory [3900 + 1665] 5565
Receivables [6850 + 4530 - 600] 10780
Cash and cash equivalents [1260 + 502] 1762
Total current assets 18107
"       $)*#

    
Capital and equity:
$1 ordinary share capital [26,000 + 9260] 35,260
Consolidated retained earnings [W1] 16,945
Minority interest [W2] 1803
Total capital and equity 44,748
*on current liabilities:
10% loan [80 - 60] 20
Current liabilities:
Payables [6645 + 3800 - 600] 9845
Tax [4080 + 2502] 6582
Total current liabilities 16,427
"         $*#

£&' (

1.  Consolidated reserves/retained earning


+ !Ñ --
Balance B/D at balance sheet 14145 5950
Less Ȃ Retained earning at acq. (750)
Unrealised profit (1200)
14145 4000
Add Ȃ group shares [70%] 2800
16945

2.  Minority interest:
[MI% * *A] + FV Ȃ Unrealised profit
= [30% * 5210] + 600 Ȃ 360
= 1803.
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*et profit 345,490
Less Ȃ partnerǯs salaries:
Jean 40,000
Kathryn 35,000
Meryl 30,000 (105,000)
240,490
Less Ȃ interest on capital: [W1]
Jean 2800
Kathryn 4000
Meryl 3200 (10,000)
Profits to be shared 230,490

Share of profit:[W2]
Jean 76,830
Kathryn 115,245
Meryl 38,415 230,490

î.Ñ
/   /        Ñ 

î  .  Ñ  î  .  Ñ 
Balance Balance
B/D - - 1800 B/D 2400 1600 -
Drawing 25000 22000 20000 Salaries 40000 35000 30000
Cap. a/c 97030 - - Int. cap 2800 4000 3200
Balance Share of
C/d 133845 49815 profit
76830 115245 38415
 ##%)# *$#  ##%)# *$#

Balance 133845 49815


B/D
î.Ñ
   /        Ñ 

î  .  Ñ  î  .  Ñ 
Goodwill - 54000 36000 Balance
Loan a/c 166030 - - B/D 35000 50000 40000
Balance Cash - 20000 25000
C/D - 67000 46000 Rev. 4000 6000 2000
Goodwill 30000 45000 15000
Current
account 97030 - -
166030 121000 82000 166030 121000 82000

Balance
B/D - 67000 46000

£&' (

1.  Interest on capital:
Jean: 35,000 * 8%
= 2800
Kathryn: 50,000 * 8%
= 4000
Meryl: 40,000 * 8%
= 3200

2.  Share of profit:
Jean: 230,490 * 2/6
= 76,830
Kathryn: 230,490 * 3/6
= 115,245
Meryl: 230,490 * 1/6
= 38,415
 / 0 #

Ñ/   

 

          ! 
  

    
Sales/ turnover 12363,000
Opening inventory 1620,000
Add Ȃ purchase 5200,000
Cost of goods for sale 6820,000
Less Ȃ closing inventory (1570,000)
Cost of sale (5250,000)
Gross profit 7113,000
Less Ȃ
Distribution cost [W1] 1256,000
Administration cost [W2] 1865,000
Bad debts 5,000
Provision for bad debts [W5] 7,000
Bank interest 5,000
Interest for loan [W3] 90,000 (3602,000)
Profit before tax 3511,000
Less Ȃ taxation [W4] (702,200)
Profit after tax 2808,800
Add Ȃ retained earnings B/D 415,000
Retained earnings C/D 3223,800
Ñ/  1 

       ! 
  

     
*on current assets: At cost Depreciation Total
Property 3100,000 750,000 2350,000
Plant & equipement 2200,000 520,000 1680,000
Vehicles 900,000 230,000 670,000
Total non current assets 4700,000
Current assets:
Inventory 1570,000
Receivables [W5] 1121,000
Prepaid insurance 25,000
Research and development cost for new product 350,000
Bank 350,000
Total current assets 3416,000
"       %$

    
Capital and equity:
Capital 700,000
Add - Retained earnings 3223,800
Reserves 250,000
Total capital and equity 4173,800
*on current liabilities:
Long term loan 1500,000
Current liabilities:
Payables 550,000
Tax 702,200
Rent owed 90,000
Bank overdraft 220,000
Loan interest 90,000
Total current liabilities 1652,200
"        
£&' (

1.  Distribution cost:
Distribution cost on trial balance 920,00 0
60% of rent owed 54,000
60% of prepaid insurance (15,000)
50 % of depreciation on property 31,000
60% of depreciation on plant
And equipment 132,000
Depreciation on vehicles 134,000
Total distribution cost: 1256,000

2.  Administration cost:
Administration cost on trial balance 1650,000
Wages and salaries 420,000
40% of rent owed 36,000
40% of prepaid insurance (10,000)
50% of depreciation on property 31,000
40% of depreciation on plant
And equipment 88,000
Research and development cost (350,000)
Total administration cost: 1865,000

3.  Interest of long term loan: 1500,000 * 6%


= 90,000

4.  Tax: 20% *

5.  Provision for doubtful debts: 5% * 1180,000


= 59,000

So, total receivables 1180,000 Ȃ 59,000


= 1121,000
 (

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 2 /   


  (
(Profit before interest and tax/Capital and equities) * 100%
= (25,000/130,000) * 100%
= 19.23%
 +     ' (
(Gross profit/sales revenue) * 100%
= (60,000/160,000) * 100%
= 37.5%
 *     ' (
(*et profit before tax/total sales revenue) * 100%
= (20,000/160,000) * 100%
= 12.5%
3 ƒ/ &4   (
(current assets - stocks)/current liabilities
= (75,000-45,000)/45,000
= 0.667 : 1
3 2 3    (
(average receivables/total credit sales) * 365
= (25,000/160,000) * 3 65
= 57.03 days
3 1'    (
(net profit after tax and preference dividend/number of ordinary shares
issued)
= (10,000/30,000)
= $ 0.333

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From: H*DStudent@Premier.net

To: ManagementAccounting@Premier.net

Subject: To improve performance indicators


Profitability:

Profitability means the ability of a business to generate net income on a consistent


basis. It indicates that how well a business is performing in terms of its ability to
generate the profit. In short, it means earning performance of the company. Here, I have
calculated three ratios of profitability to identify F Raserǯs profitability.Those three
ratios are gross Profit percentage, net profit percentage and ROCE. Here, ROCE is
19.23%, gross profit percentage is 37.5% and the net profit percentage is 12.5%. It is
not good enough for F Raser.These result are far below from the expected. The company
needs to improve itǯs earning performance by increasing sales.

Liquidity:

Liquidity is a financial term that means the amount of capital, or money, that is available
for investment. It is also the ability of an asset to be converted into cash quickly and
without any price discount. I have calculated acid test. The result is 0.661 which is
below 1. *ormally, current assets should be at least twice as much as the current
liabilities. So, the liquidity of F Raser is not good enough.

Efficiency:

Efficiency means the comparison of what is actually produced or performed with what
can be achieved with the same consumption of resources. It is an important factor in
determination of productivity. Here, I have calculated receivables collection period. The
result is 57.03 days. That shows F Raserǯs bad efficiency.

Investment:

Investment means the use of money in the hope of making more money. It is the
purchase of a financial product or other item of value with an expectation of favourable
future returns. In business, it is the purchase by a producer of a physical good in the
hope of improving future business. Here the earning per share is $0.33, which Sam
needs to improve that for get their more investor.

Overall, F Raser, the limited liability company is now in bad position. The company
should decrease itǯs cost and increase their sales. It should be more careful about itǯs
labour.