Accounting for Managers

Running head: ACCOUNTING FOR MANAGERS
Accounting for Managers
Name of the Student:
Name of the University:
Author’s Note:

1ACCOUNTING FOR MANAGERS
Table of Contents
Answer to question 1:......................................................................................................................2
Sub part A:...................................................................................................................................2
Sub part B:...................................................................................................................................5
Answer to question 2:......................................................................................................................6
Sub part A:...................................................................................................................................6
Part 1:.......................................................................................................................................6
Part 2:.......................................................................................................................................7
Part 3:.......................................................................................................................................7
Part 4:.......................................................................................................................................8
Part 5:.......................................................................................................................................9
Sub part B:...................................................................................................................................9
References and bibliography:........................................................................................................11

2ACCOUNTING FOR MANAGERS
Answer to question 1:
Sub part A:
Ken Kennett Building Services
Income Statement for the year ended .......
Particulars Amount Amount
Building Services Revenue $ 5,50,000
Cost of materials consumed $ 3,10,000
Direct labour costs $ 1,53,500
Total Direct Expenses $ 4,63,500
Gross Profit $ 86,500
Operating Expenses:
Motor Vehicle Expenses $ 5,600
Electricity and Telephone
Expenses $ 4,000
Total Operating Expenses $ 9,600
Net Profit $ 76,900
Income statement is the statement of financial performance, in which the net operating
result of the entity is measured with the details of every component of incomes and expenses.
There are various methods of preparing income statement. In the first part of the income
statement, incomes are presented with a breakup of operating revenues and non operating
revenues. Cost of revenue is deducted from the total revenue to find out the gross profit. For
entities trading in merchandise, the cost of goods sold is deducted, and for entities providing
services, the cost of revenue or the direct costs are deducted from the service revenue to find out
the amount of gross profit. In other words, all the direct costs are deducted from the revenues to
get the amount of gross profit. In the given case study, the Ken Kennett Building Services is a
construction company, and have two major components of the direct expenses, one is the

3ACCOUNTING FOR MANAGERS
materials consumed and the other is the direct wages. In the second part of the income statement
all the indirect expenses or all the operating expenses are deducted from the gross profit to find
out the net operating result or the net profit. In the above statement, all the incomes and expenses
of Ken Kennett Building Services have been arranged in such manner and the net profit is
computed to $76,900. The next part of the financial statement is the Statement of Financial
position or the balance sheet, which is prepared as follows.
Ken Kennett Building Services
Balance Sheet as at ..........
Amount Amount
Current Assets:
Cash and Cash Equivalent $ 4,300
Accounts Receivable $ 80,000
Inventory $ 18,000
Total Current Assets $ 1,02,300
Non-Current Assets:
Equipment $ 68,000
Motor Vehicle $ 32,000
Total Non-Current Assets $ 1,00,000
Total Assets $ 2,02,300
Current Liabilities:
Accounts Payable $ 30,000
Outstanding Expenses $ 3,500
Total Current Liabilities $ 33,500
Non-Current Liabilities: $ -
Total Liabilities $ 33,500
Net Assets $ 1,68,800
Equity:
Owner's Capital $ 97,600
Drawings $ (5,700)
Retained Earnings $ 76,900