Introduction to Accounting and Finance - Desklib

UGB 163 Introduction
to Accounting and
Finance

INTRODUCTION
Accounting is defined as a method in which day to day record of certain task is being handled
and on other side when ansh defined as a why the term that emphasize on managing the assets
and liabilities of the particular business. Both the terms are basically important for the business
as they are are helps in installation the financial position of an organisation. Accuracy in these
aspects helps in knowing the particular knowledge and the growth of the business which can we
take its effective decision. This report is is inducted into parts the first question is deal with the
preparation of income statement and balance sheet. second question will give the solution for
analysing the break even point and the margin of safety additional e analyse whether the
different types of budgets are related for all type of business or not. Third question will evaluate
the project for deciding that whether should be accepted or not and also analysed the advantage
and disadvantage of various techniques of investment appraisal. It also assess the pros and cons
of budget for making the business plan.
TASK
Question 1: Produce an income statement and balance sheet of Tom and Jerry Ltd.
Profit and loss account of Tom and Jerry Ltd. for the year ending 30st December, 2020
Particulars £ £
Sales revenue 633000
- Cash sales 504000
- Credit sales 129000
Less: Cost of goods sold 644175
Purchases (486000 + 39000) 525000
Wages 117000 119175
Add: Outstanding 2175
Add: Closing Stock 228000
Gross Profit 216825
Less: Operating Expenses 148200

Depreciation on Van 9600
Electricity bill 5700 7725
Add: outstanding 2025
Rent 112500 90000
Less : Prepaid rent 22500
Rates 6900 5775
Less: Prepaid rates 1125
Van running expenses 33600
Provision for doubtful debts 1500
Net Profit 68625
Statement of financial position of Tom and Jerry Ltd. as on 30st December, 2020
Assets £ £
Delivery van 60000 50400
Less: Depreciation 9600
Current Assets 597525
Prepaid rates 1125
Prepaid rent 22500
bank 281400
Inventory 228000
Trade receivables 66000 64500
Less : Provision for doubtful debts 1500
Total 647925
Liabilities and capital £ £
Equity 180000 248625

Less: Profit 68625
Long term Borrowing 302100
Current Liabilities 97200
Wages outstanding 2175
Outstanding electricity bill 2025
Trade payables 93000
Total 647925
Working Notes:
 Prepaid rent = 112500 – 90000 = £ 22500
 Prepaid rates for the time period of 1st January, 2021 to 31st March, 2021
Prepaid rates = 4500 * 3 / 12 = £1125
 Depreciation on van = (Price – scrap value) / Number of years
= (60000 – 12000) / 5
= 48000 / 5
= £ 9600
 Calculation of cash at bank
Balance in beginning = £ 180000
less: paid for inventory = £ 39000
Add: cash sales = £ 129000
Add: cash received from trade receivables = £ 438000
Less : paid to trade payables = £ 393000
Less: Van running expenses = £ 33600
Balance = £ 281400
 Calculation of trade receivables
Credit sales = £ 504000
Less: received £ 438000
Balance = £ 66000
 Calculation of trade payables