Accounting Fundamentals: Profit & Loss, Financial Position, Ratio Calculations and Performance Evaluation

FUNDAMENTALS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Profit and Loss statement for the year ended 31st December 2020 for Kedison PLC................1
Statement of financial position for the year ended 31st December 2020 for Kedison PLC........2
b) Explaining the reason for the statement of financial position balance....................................3
Question 2........................................................................................................................................3
Calculating ratios as below:.........................................................................................................3
b) Analyzing the financial performance of Chocco plc...............................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Fundamentals of accountings play important role in obtaining accuracy and relevant
structure of business transaction. In the currents scenario, it is crucial for the organization to
have appropriate information in order to formulate effective decision making. The present
report will give emphasis on Profit & loss, financial position and ratio calculations along
with interpretation to get deeper in sights.
MAIN BODY
Question 1
A)
Profit and Loss statement for the year ended 31st December 2020 for Kedison PLC
Dr. Cr.
Particulars Amount Particulars Amount
By Gross profit 248,000
To
Administrative
expenses 30,000
To Interest paid 4,000
To Distribution
costs 28,000
To Directors
remunerations 5,000
To Corporation
tax 68,000
To sales man
commission 3,000
To Net profit 110,000
248,000 248,000
Income statement helps in getting information regarding the earning and expenses
incurred for specified period of time (Liu and Blanchett, 2021). Above illustrated table indicate
P&L of 2020 for Kedison Plc. From the evaluation of income statement, it can be interpreted
that firm’s net income for the present year is 110000. In order to get smooth functioning of
organization Kedison PLC has given emphasis on incurring expenditure regarding the
administration, interest distribution, paying taxation, salesman commission so that effectual
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outcome can be derived (Laibson, Maxted and Moll, 2020). The gross profit has been derived by
deducting cost of goods sold from the revenue generated.
Statement of financial position for the year ended 31st December 2020 for Kedison PLC
Amount
Assets
Current Assets
Closing Stock 329,620
Debtors 170,125
Trade Receivables 980
Cash and bank 12,900
Fixed Assets
Plant and
equipment 632,730
Total assets 1,146,355
liabilities Amount
Current Liabilities
Outstanding
interest 2000
Outstanding
Commission 3000
Trade creditors 171,355
Tax payable 68000
Long term
borrowing
Debentures 100,000
Equity
£1 ordinary shares 310,000
10% £1 preference
shares 300,000
Retained profits 82,000
Profit for the year 110,000
Total equity and
liabilities 1146355
Above illustrated table indicates the financial health of Kedison PLC. for the 2020 and it
reflects that firm is having positive liquidity. There are several benefits of formulation of
financial position as it helps in getting deeper insights about firm’s performance. The current
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