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

ACCOUNTING
FUNDAMENTALS

Table of Contents
Question 1......................................................................................................................................3
a) Preparation of Income Statement for the year ended 31st December 2021 for Wales Plc and
Statement of financial position at that date.....................................................................................3
b) Reason behind balanced financial statement..........................................................................4
Question 2......................................................................................................................................4
a) Calculation of following ratio for Sweet Plc for 2021 and 2020.............................................4
b) Comment on the profitability, liquidity, market, solvency and Efficiency performance of sweet
plc...................................................................................................................................................5
References.....................................................................................................................................7

Question 1
a) Preparation of Income Statement for the year ended 31st December 2021 for Wales Plc
and Statement of financial position at that date
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
Net income available for equity shareholders 24330
Statement of financial position as at 31st December 2021
Particulars
Detail
s
Amoun
t
ASSETS
Non-current assets
Plant and Equipment 632730
Current liabilities
Inventory
33060
0
Trade receivable + goods sold to customer not yet recorded
(170125 + 980)
17110
5
Cash and bank 76250
Total Current liability 577955
Total assets
121068
5
EQUITY AND LIABILITIES
Current liabilities
Trade payable
17135
5
Tax payable
10000
0
Sales commission payable 3000