Accounting Fundamentals: Income Statement, Financial Position, and Financial Ratios

ACCOUNTING
FUNDAMENTALS
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Table of Contents
INTRODUCTION...........................................................................................................................3
Question 1........................................................................................................................................3
(a) Preparation of income statement and statement of financial position of Wales Plc..............3
(b) Reason of balance statement of financial position.................................................................5
Question 2........................................................................................................................................5
(a) Calculation of following ratios for Sweet Plc for 2021 and 2020..........................................5
(b) Comment on the financial performance and position of Sweet plc.......................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10
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INTRODUCTION
Accounting is a process of recording financial transaction related to business. Also,
accounting is a process of measurement, processing and communication of financial as well as
non-financial information for the users decision-making purpose. The report will prepare income
statement and financial position statement of Wales plc along with reason of statement of
financial position balance. Lastly, the report will compute the financial ratios along with
interpretation on performance of Sweet plc.
Question 1
(a) Preparation of income statement and statement of financial position of Wales Plc
Income Statement
for the year ended 31st December 2021
Particulars Details Amount (£)
Sales Revenue 800000
Less Cost of Sales excluding goods sold to
customer yet not recorded 578650 - 980 577670
Gross Profit 222330
Less Operating Cost
Administration expenses 30000
Interest paid 2000
Directors remuneration 5000
Distribution cost 28000
Sales commission 3000
Total operating cost 68000
Net income before interest and tax 154330
Less Interest expenses 0
Net income before tax 154330
Less Corporation tax 100000
Net income 54330
Less Preference dividend paid 30000
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Net income available for equity shareholders 24330
Statement of financial position
as at 31st December 2021
Particulars Details Amount (£)
ASSETS
Non-current assets
Plant and Equipment 632730
Current assets
Inventory 330600
Trade receivable + goods sold to customer not
yet recorded (170125 + 980) 171105
Cash and bank 76250
Total Current assets 577955
Total assets 1210685
EQUITY AND LIABILITIES
Current liabilities
Trade payable 171355
Tax payable 100000
Sales commission payable 3000
Total current liability 274355
Non-current liability
4% Debentures 100000
Net assets 836330
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