Accounting Assignment | Accrual Accounting System

Added on - 21 Apr 2020

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Running head: ACCOUNTINGAccountingName of the Student:Name of the University:Authors Note:
1ACCOUNTINGTable of ContentsAccrual Accounting:..................................................................................................................2P4.10...........................................................................................................................................2Statement of Comprehensive Income........................................................................................3P 4.12..........................................................................................................................................3Interpretation of Financial Statement and Ratio........................................................................3P 5.6............................................................................................................................................3Interpretation of ratios................................................................................................................6P5.12...........................................................................................................................................6Reference....................................................................................................................................8
2ACCOUNTINGAccrual Accounting:P4.10Answer to Question A:According to the case, the total amount of insurance premium for 24 vehicles will be$9,600. Now as the business follows accrual accounting system and the insurance premiumperiod is January-December for each year, thus as per the company’s current financial year,the company has made a prepaid insurance for a period of 9 months starting from April-December which will be recorded in the balance sheet as prepaid insurance (Fullerton et al.,2014).Answer to Question B:The usage bills are sent on a quarterly and as the company’s financial period areJanuary-December, thus the amount for December will be shown in the financial statement ofthe company as outstanding bill whereas the bill amount will affect the cash flow statementafter the actual payment that is on the last day of February (Renz 2016).Answer to Question C:As the company has purchased the Asset (Computer Network Server) for $12,000 on30thJune, therefore, the depreciation for the same will be applicable from July to March ofthe next year i.e. for the period of 9 months. The amount of depreciation which is $1,800 willbe shown in the statement of Profit and loss as an expenses. Similarly in the financialstatement the value of the asset will get reduced by the amount of depreciation asaccumulated depreciation (Otley & Emmanuel, 2013). However there will be no effect of
3ACCOUNTINGdepreciation on the cash flow statement but the amount of depreciation will get deductedfrom cash flow from investing activities.Statement of Comprehensive IncomeP 4.12RosiIncStatement of Comprehensive IncomeParticularAmountAmountSales$200,000.00Closing Inventory$56,000.00Opening Inventory$12,000.00Change in Inventory$44,000.00Total Income (A)$244,000.00ExpensesPurchase$178,000.00Administrative Salary$5,000.00Office rent and utilities$3,100.00Commission$2,100.00Depreciation$2,500.00Income Tax Expenses$12,000.00Interest Paid$800.00Dividend Paid$5,000.00Total Expenses (B)$208,500.00Net Profit (A-B)$35,500.00Interpretation of Financial Statement and RatioP 5.6Statement showing RatioParticularsFormula20122011Profitability RatioNet Profit$8,100.00$7,980.00Income$34,000.00$29,000.00Net Profit Margin ratioNet Profit/Sales X 10024%28%
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