Accounting Fundamentals: Financial Statements and Ratio Analysis

FUNDAMENTALS

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
QUESTION- 1.................................................................................................................................1
a) Financial statements of Kedison PLC.....................................................................................1
b) Reason for balancing of the statement of financial position...................................................4
QUESTION-2..................................................................................................................................4
a) Ratio calculations....................................................................................................................4
b) Interpretation of ratios.............................................................................................................7
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
The current project shall be highlighting upon the preparation of the financial statements
in the business and accordingly the calculations are made in respect of the company data that is
available. These statements shall be showing the financial position and the profitability of the
business. Apart from that it shall also reflect the ratio analysis of the company data that is there
for the particular year of the company. The ratios of the company shall be facilitating the
comparison internally as well as with the competitors of the company.
MAIN BODY
QUESTION- 1
a) Financial statements of Kedison PLC
Profit and loss statement for the year ended 31st December 2020
Particulars Amount
Sales 826650
Less: Cost of Sales -578650
Gross Profit 248000
(-) Administrative expenses -30000
(-) Interest paid -4000
(-) Directors remuneration -5000
(-) Distribution costs -28000
(-) Sales commission -3000
(-) Corporation tax -68000
Net Profit 110000
(-) Preference dividend -30000
Earnings available to equity shareholders 80000
(-) Ordinary dividend -20000
Retained earnings 60000
1

Statement of financial position as on 31st December 2020
Particulars Amount Amount
ASSETS
Fixed assets
Plant and equipment 632730
Current assets
Stock 329620
Debtors 171105
Cash and Bank 12900
Total assets 1146355
LIABILITIES
Long term liabilities
4% Debentures 100000
Current liabilities
Creditors 171355
Outstanding commission 3000
Outstanding interest 2000
Tax payable 68000
Shareholders equity 802000
Ordinary shares 310000
10% preference shares 300000
Profit for the period 110000
Retained earnings 82000
2