Accounting For Business: Income Statement, Balance Sheet, Investment Analysis, Financial Ratios

Accounting For Business

TABLE OF CONTENTS
SECTION A.....................................................................................................................................3
QUESTION 1...................................................................................................................................3
1 Income statement.....................................................................................................................3
2 Balance sheet............................................................................................................................4
SECTION B.....................................................................................................................................5
QUESTION 2...................................................................................................................................5
A Calculating the payback period...............................................................................................5
B Calculating net present value...................................................................................................5
C. Financial viability of investment and justification of one project..........................................6
D. Non- financial factors to be considered while finalising the decision...................................6
E. Calculating IRR......................................................................................................................7
QUESTION 4...................................................................................................................................7
A Calculating different ratios of both companies.......................................................................7
B Comparative analysis of financial performance of company..................................................8
REFERENCES..............................................................................................................................10

SECTION A
QUESTION 1
1 Income statement
Particular Details Amount
(in £)
Sales 20,000
Cost of sales
Opening inventory 2000
Purchases 16000
Less: Closing inventory [3000] [15000]
Gross Profit 5000
Expenses
Administration expenses 900
Salaries & wages [600 + 10] 610
Selling and distribution expenses [1000 - 100] 900
Depreciation on machinery 625
Depreciation of Building 100
Debenture interest [20 + 10] 30
Audit fee [100 + 40] 140
Bad debt 20
Directors’ remuneration 200
[3525]
Profit Before Tax 1475
Provision for taxation [200]
Profit After Tax 1275
Dividends – interim paid
-- final proposed [8000 x £0.10]
50
800 [850]
Retained profit for the year 425