Accounting Fundamentals: Preparation of Financial Statements and Ratio Analysis

FUNDAMENTALS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
Question 1........................................................................................................................................3
(a) Preparation of profit and loss statement and statement of financial position........................3
(b) Reason behind balanced statement of financial position.......................................................5
Question 2........................................................................................................................................6
(a) Calculation of ratios for Chocco Plc for the year 2020 and 2019.........................................6
(b) Comment on the financial performance and position of Chocoo Plc....................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Accounting fundamentals is the basic accounting concepts, principles etc. which helps
the company in preparing and analysing the financial report (Dewi, Azam and Yusoff, 2019).
This report will discuss two questions. In first question, the report will calculate the income
statement and balance sheet along with the discussion of concept of double entry system. Lastly,
in the second question, the report will calculate the financial ratio along with the comment on the
performance of business.
Question 1
(a) Preparation of profit and loss statement and statement of financial position
Profit and Loss Statement for Kedison Plc
For the year ended 31st December 2020
Particulars Details Amounts (£)
Sales Revenue (note 1) 826650 + 980 827630
Less Cost of Sales -578650
Gross Profit 248980
Operating Expenses:
Administrative expenses 30000
Distribution cost (note 2) 31000
(28000 + 3000)
Directors remunerations 5000
Less Total operating expenses -66000
Income before interest and tax 182980
Less Interest Paid (note 3) 2000 + 2000 -4000
Income before tax 178980
Less Corporation tax -68000

FUNDAMENTALS

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
QUESTION 1 ..................................................................................................................................1
(a) Financial statement of Kedison PLC.....................................................................................1
(b) Reasons for balancing the statement of financial position....................................................3
QUESTION 2 ..................................................................................................................................4
(a)Calculate the following ratios for Chocco plc for 2020 and 2019, showing the formulas and
workings:.....................................................................................................................................4
(b) Comments on the financial performances and position of the Chocco Plc.........................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Fundamentals of accounting are basically a procedure of data entry along with
summarizing, recording, analysing and reporting the data which are related to the financial
transactions of business organizations (Lev, 2019). The current project is about the preparation
of financial statements within the business. According to this, all the important calculations have
been made in respect to the firm's data that are given in order to interpret the final results. The
statements will interpret the financial position and the profitability of the business. Apart from
this, the report has also describe the ratio analysis of the firm data that are given for two
particular years. The ratio analysis of the company provides data with comparing different sets
of financial data. This comparison will give a detailed understanding of the financial position of
the establishment.
MAIN BODY
QUESTION 1
(a) Financial statement of Kedison PLC
Profit and loss statement for the financial year ended 31st December 2020
Particulars Amount
Sales 826650
Less: Cost of sales 578650
Gross Profit 248000
(-) Administrative expenses 30000
(-) Interest paid (W.N. 1) 4000
(-) Directors remuneration 5000
(-) Distribution cost 28000
(-) Sales commission (W.N. 2) 3000
(-) Corporate tax 68000
Net Profit 110000
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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
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