Accounting Fundamentals: Financial Statement Preparation and Financial Ratios

ACCOUNTING
FUNDAMENTALS

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
Question 1....................................................................................................................................1
Question 2....................................................................................................................................1
CONCLUSION................................................................................................................................1
REFRENCES...................................................................................................................................1

INTRODUCTION
Accounting fundaments are basic principle on which the whole structure of accounting has
been run. Business organization follow principles and rules , and theses provides guiding
regarding how managers needs to record, analyse and interpret their financial as well as
accosting information in from of their stockholder. This report has been prepared to solve
problems of Eccles Plc and Choco Plc by preparing income as well as financial statement. It also
define value of ratio for analysing financial performance of companies.
Question 1
Preparation of financial statement of Eccles plc
Income statement
For the year ended on 31st December 2018
Particulars Amount(£)
Sales 826,650.00
Add: Goods sold on 31st 980.00 827,630.00
Cost of goods sold
-
578,650.00
Add: goods sold at 31st
-
980.00
Gross Profit 248,000.00
Less: Expenses
Administrative expenses 30,000.00
Directors Remuneration 5,000.00
Distribution cost 28,000.00
Add: commission not recorded 3,000.00 66,000.00
Operating Profit 182,000.00
Interest paid 2,000.00
Net income before tax 180,000.00
Less: Tax 68,000.00
Net income 112,000.00
1

Statement of Financial Position
as on 31st December, 2018
Particulars Amount(£)
Non-Current Assets
Plant & Equipment 632,730.00
Current Assets
Stock 330,600.00
Less: Goods sold at
31st
-
980.00
Debtors 170,125.00
Add: goods sold at
31st 980.00
Cash and bank 12,900.00 513,625.00
Total Assets 1,146,355.00
Current Liabilities
Trade creditors 171,355.00
Sales commission 3,000.00
Tax 68,000.00
-
242,355.00
Noncurrent Liabili-
ties
4% Debentures 100,000.00
-
100,000.00
Net Assets 804,000.00
Equity
£1 Ordinary shares 310,000.00
10% Preference shares 300,000.00
Retained earnings 132,000.00
Add: Net income
2