Accounting Fundamentals Assessment 1

Accounting Fundamentals Assessment 1

INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Question 1........................................................................................................................................1
1. Prepare Income Statement of Wales Plc and Statement of financial position for the year end
31st December, 2019....................................................................................................................1
Question 2........................................................................................................................................3
1. Calculate the following ratios of Jerry Plc..............................................................................3
2. Discuss the organizational situation on the basis of calculated ratios.....................................7
Question 3........................................................................................................................................7
1. Identify three different user groups of company accounts......................................................7
2. Discuss the advantages and disadvantages of a highly regulated financial reporting regime. 9
3. Discuss the limitations of financial statements......................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Accounting fundamental principles are among the essential accounting aspects which all
companies need to concentrate on so that organizational effectiveness can be sustained (Burger
and Curtis, 2017). The accounting professionals may use financial reports such as income
statement, cash flow and balance sheet when planning to assess the potential business situation.
They can all assist in analyzing the actual business position and predicting it for the long term.
It's also really crucial for the companies' managers to truly make adequate and proper changes in
almost all of the accounting records so that the actual position of organization can be ascertained.
This report is focused on analysis of various accounting aspects which all agencies need to
concentrate on. This assessment covers a wide variety such as developing financial statements by
making the necessary changes, estimating ratios to determine the exact market situation etc. In
addition, this report further includes different users of financial statement and the benefit and
downside of tightly controlled financial reporting system and drawback of final accounts.
MAIN BODY
Question 1
1. Prepare Income Statement of Wales Plc and Statement of financial position for the year end
31st December, 2019
An income statement is a important document of financial statement that showing how
profitable is the business has been over a specified accounting periods (Cai, 2019). It shows the
income, except overall costs and losses. Below mention Wales’s income statement provides
better understanding.
Income and loss statement for the year end, 31st December 2019
Particulars Details (000) Amount (000)
Revenue £30,300
Less: COGS £ (16,220)
Depreciation on plant £2560
Gross profit £14,080
Selling and Administration Expenses:
Distribution Expenses £2,160
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Administration expenses £2,920
Dividends paid £560
Debenture interest paid £240
Insurance fees £500
Income tax £1600
Depreciation on Building £320
Debt (240+ 2% of 8240) = 404.8 approx. (405) £405 £ (8705)
Net Profit £5,375
A balance sheet is a main document of financial statement that shows the values of
company's assets, liabilities and equity of shareholders. The balance sheet is among the three
core financial reports that used to analyze a company's total worth. Balance sheet of Wales
mentioned below:
Balance sheet for the end of year, 31st December 2019
Liabilities Amount (000) Assets Amount (000)
Net profit £5,375 Building (Less dep or acc
dep)
£11,420
Retain profit £8,380 Plant (Less dep or acc dep) £18,120
Trade payable £4,480 Land £15,000
Debenture £4,000 Trade receivable (Less debt) £7,835
Share premium £5,000 Bank £320
Ordinary shares £29,000 Inventory £3,120
Insurance fees outstanding £500 Surplus £920
£56,735 £56,735
Working Notes:
Deprecation account:
Depreciation account of Building
Particulars Amount (£) Particulars Amount (£)
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