Accounting and Finance Assignment Solution
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Added on 2020-10-05
Accounting and Finance Assignment Solution
Added on 2020-10-05
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ACCOUNTING ANDFINANCE
Table of ContentsINTRODUCTION...........................................................................................................................1PART A – Gravepals Plc.................................................................................................................1PART B – Cornpeace Ltd................................................................................................................2a. Calculation of contribution per unit........................................................................................2b. Calculation of break-even point and margin of safety ...........................................................3c. Calculation of profit at 48000 tables at £13 per shelf.............................................................4d. Analysis of strategy.................................................................................................................4e. Assumptions of Break-even model and its utilization by different businesses.......................5PART C – Dane Jones Ltd ..............................................................................................................6a. Calculation of Payback period, accounting rate of return and net present value....................6b. Merits and limitations of various investment appraisal techniques........................................8c. Advantages and disadvantages of using budgets as tool for strategic planning....................10CONCLUSION .............................................................................................................................11REFERENCES .............................................................................................................................11
INTRODUCTIONAccounting refers to method of recording financial transactions associated with anorganization. Process of accounting involves steps of recording, classifying, summarizing andinterpreting financial data for communicating to interested users. Finance is defined as field orarea dealing with matters related to money management, allocation of assets as well as liabilities,investments (Anandarajan, Anandarajan, and Srinivasan, 2012). In this report, income statementand statement of financial position are prepared for Gravepals Plc. Then, break-even point,profit, contribution are calculated for Cornpeace Ltd, also assumptions related to break-evenanalysis are also discussed. Later, for Dane Jones Ltd, payback period, accounting rate of returnand net present value have been ascertained. Lastly, advantages as well as disadvantages ofvarious investment appraisal techniques and of budgets are given. PART A – Gravepals PlcFinancial statements of Gravepals Plc are given below:Income statement of Gravepals Plc for the year ended 2017ParticularsAmounts in £ParticularsAmounts in £Cost of sales297000Sales (cash and credit)336000Gross profit c/d 39000Total336000Total336000Bad debts1500Gross profit b/d 39000Van running expenses33600Rent 22500Rates (3375+2400)5775Depreciation9600Wages (117000)Add: outstanding wages(2175)119175Net loss158850electricity bill5700Total197850Total197850Balance Sheet of Gravepals Plc at the year ended 31 December, 2017Liabilities Amounts in £Assets Amounts in £Owner's equity (180000)Inventories525000Less: Net loss (158850)21150Prepaid rates4500accrued electricity bill 2025Prepaid rent 22500wages outstanding 2175Deliver van (60000-9600)50400Trade payables393000Trade receivables436500General reserves 350000Less: bad debts (1500)other current liabilities270550Total 1038900Total 10389001
Income statement: In a specific period, financial performance of Gravepals Plc isreported with one of the part of financial statements known as income statement. It is also knowas statement of revenue and expenses or profit and loss statement. Four important items coveredin this are gains or losses, expenses or revenues (Brown, Beekes and Verhoeven, 2011). Cashreceipts and cash payments are out of its coverage. Revenues and gains includes operatingrevenue, non-operating revenue, gains as well. On the other hand, expenses and losses coversexpenses associated with primary activities as well as secondary activities, losses. Balance sheet: Balance sheet refers to financial statement of Gravepals Plc whichconsists of equity capital, assets, total debt and liabilities for a particular point of time. There aretwo sides of balance sheet, assets and liabilities. It represents financial position of anorganization (Definition of Balance Sheet, 2018.). This also provides base for ascertaining ratesof return and capital structure. Assets can be said as resources and liabilities are considered asobligations or burden on company (Gippel, Smith and Zhu, 2015). PART B – Cornpeace LtdThese information are already given in situation:ParticularsAmount (£)Selling price13Actual production units70000Budgeted production units53000Variable cost (per unit):Materials 5.25labour2.95Variable overheads1.85Fixed costs:Production59000Selling 47600a. Calculation of contribution per unitContribution for actual production units (£)Particulars Amount (£)Total units70000Total sales revenue 910000Total variable costs (material+labour+overhead)703500Contribution 206500Contribution per unit 2.952
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