Accounting Fundamentals

Accounting Fundamentals

Contents
QUESTION 1..................................................................................................................................1
QUESTION 2..................................................................................................................................3
(a) Calculating the ratios for Jerry plc for both 2019 and 2018...................................................3
(b) Discussing situation of Jerry Plc revealed by the ratios of this company..............................5
QUESTION 3..................................................................................................................................6
(a) User groups of company accounts and their interested in the information provided in
financial statements.....................................................................................................................6
(b) Advantages and disadvantages of a highly regulated financial reporting regime..................7
(c) Limitations of financial statements........................................................................................8
REFERENCES..............................................................................................................................10

QUESTION 1
Wales plc’s income statement for the year ended 31st December 2019
Particulars Amount Amount
Sales (A) 30300000
Cost of sales 16220000
Less: Depreciation on plant (25600000*10%) 2,560,000
Total cost of sales (B) 13,660,000
Gross profit (A - B) 16,640,000
Administrative expenses:
Administrative expenses 2920000
Add: Insurance fees 500
Add: Irrecoverable debt 240
Add: Allowance for receivables (2% of
8240000) 164800
Add: Depreciation on Buildings
(16000000*2%) 320000
Total Administrative expenses 3405540
Distribution expenses 2160000
Operating profit 11,074,460
Income tax liability 1600000
Profit 9,474,460
Statement of Financial Position for the year ended 31st December 2019
Particulars Amount Amount
ASSETS
Non current assets:
Land 20000000
Plant 25600000
Accumulated depreciation 4960000
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