Accounting Fundamentals: Final Accounts and Ratio Analysis

Accounting fundamentals
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Contents
Main Body.......................................................................................................................................3
Question 1....................................................................................................................................3
Question 2....................................................................................................................................5
References......................................................................................................................................11
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Main Body
Question 1
A. Final Accounts of the company
Income Statement for the year ended 31st December 2019
Particulars Amount (£)
Gross Revenue 826650
Less: Cost of sales (578650)
Gross Profit 248000
Operating Expenses:
Administrative Expenses 30000
Selling and distribution expenses (inc. outstanding commission) 31000
Other indirect expenses 5000
Add: Other operating income (inc. accrued sales debtors) 980
Net Operating Profit 182980
Less: Depreciation expenses 0
Earnings before Interest and taxes 182980
Less: Interest expenses 2000
Earning before tax 180980
Less: Corporate taxes 68000
Earning after tax/profit attributable to shareholders 112980
Dividend Paid: Ordinary dividend paid – 20000
Preference dividend paid – 30000
50000
Statement of Financial Position as at 31st December, 2019
Particulars Amount (£)
Non-current Assets
Property, plant and equipment 632730
Current Assets
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Inventory 330600
Trade receivables (inc. accrued sales debtors) 171105
Cash 12900
Total Assets 1147335
Current Liabilities
Trade Payables 171355
Other creditors (inc. outstanding commission) 3000
Non-current liabilities
Loans and other borrowings (4 % Debentures) 100000
Net Assets 872980
Equity
Ordinary Share capital 610000
Retained profits 262980
Total Equity 872980
Notes:
 Ordinary Shares - £1 equity shares – 310,000
Add: 10% £1 preference shares – 300,000 = 610,000
 Non-current Assets: Plant & Machinery – 632,730
 Retained Profit: Opening Profit – 132,000
Add: Profit adjustments – 18,000
Add: current year profit - 112,980 = 244,980
 There has been reported £3000 as outstanding commission which has not been recorded
in ledgers yet but to present a true picture, they are to be reflected in financial statements.
Therefore, company needs to pass following journal entry:
Commission A/c Dr. 3000
To Outstanding Commission A/c. 3000
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