Financial Analysis of Wesfarmers

This assignment presents a financial analysis of Wesfarmers, focusing on its working capital ratio and net profit after tax over several years. It includes calculations for the working capital ratio using provided data and analyzes the trend in net profit. The analysis culminates in a recommendation to Vikram regarding investing $50,000 in Wesfarmers based on the company's financial performance.

Running head: ACCOUNTING SYSTEMS AND PROCESSES
Accounting systems and Processes
Name of the Student:
Name of the University:
Author Note:

2
ACCOUNTING SYSTEMS AND PROCESSES
Table of Contents
Question 1........................................................................................................................................3
Question 2........................................................................................................................................3
Question 3........................................................................................................................................4
Question 4........................................................................................................................................5
Question 5........................................................................................................................................6
Question 6........................................................................................................................................7
Formula View:...............................................................................................................................10
Question 7......................................................................................................................................13
Question 8......................................................................................................................................18
Revised Data:.................................................................................................................................19
Question 9:.....................................................................................................................................19
Question 10....................................................................................................................................20
Question 11....................................................................................................................................21
Question 12....................................................................................................................................21
Question 13....................................................................................................................................22
Reference List................................................................................................................................26

3
ACCOUNTING SYSTEMS AND PROCESSES

4
ACCOUNTING SYSTEMS AND PROCESSES
Question 1:
Replacing of cell references with names helps user in defining and providing them with
accurate and appropriate information. Incorporated formula used in the cells becomes
meaningful only when they are named (Jia & Sun, 2015). This helps in creating a proper
correlation between various listed items.
Question 2:
Using minus sign and highlighting the figures with particular color such as red or green
will help in displaying negative numbers in bracket. Negative numbers are general displayed in
brackets by accountant because to show some unfavorable variances and making some credit
entries in any particular account (Averinà et al., 2014).

5
ACCOUNTING SYSTEMS AND PROCESSES
Question 3:
It is certainly possible that error can be incurred while performing financial study. Separation of
spreadsheets into report area and data entry areas would ease users and prevent them from
committing any errors. Separation of area would help in systematic entry of data and the
accuracy of information is depicted in the report area.

6
ACCOUNTING SYSTEMS AND PROCESSES
Question 4:
IF function is one the most popular function that is incorporated in Excel that make use of
logical test and facilitates logical comparison. There are two results obtained by performing IF
function that is the result and false result.
PERIOD Particulars Amount Remarks
September'17
Sales Revenue, less,
Total Expenses 54600
=IF(C7>0,"NET
PROFIT","NET LOSS")
September'17
Sales Revenue, less,
Total Expenses -43700
=IF(C8>0,"NET
PROFIT","NET LOSS")

7
ACCOUNTING SYSTEMS AND PROCESSES
Question 5:
Updating of inventories are done on periodic basis using the periodic system of
inventories. Cost of goods sold under this particular system is calculated by adding purchase mad
by organization to the inventories at beginning periods and then subtracting inventories value at
end of period. An organization employing periodic inventory system has both advantages and
disadvantages. No permanent employees are required to make physical count of incentives and
therefore this method is less expensive.
Question 6:
Normal view:
Formula View:

8
ACCOUNTING SYSTEMS AND PROCESSES
Normal view:

9
ACCOUNTING SYSTEMS AND PROCESSES
Formula View:

10
ACCOUNTING SYSTEMS AND PROCESSES
Normal view:

11
ACCOUNTING SYSTEMS AND PROCESSES
Formula View:

12
ACCOUNTING SYSTEMS AND PROCESSES
Question 7:
Normal View:

13
ACCOUNTING SYSTEMS AND PROCESSES
Particulars
Average
Cost FIFO LIFO
Beginning Inventory $3,420 $3,420 $3,420
Net Purchases $7,790 $7,790 $7,790
Cost of Goods Available $11,210 $11,210 $11,210
Ending Inventory $7,583 $8,075 $7,250
Cost of Goods Sold $3,627 $3,135 $3,960
Calculation of Gross Profit:-
Particulars
Average
Cost FIFO LIFO
Sales Revenue $25,000 $25,000 $25,000
Less: Cost of Goods Sold $3,627 $3,135 $3,960
GROSS PROFIT $21,373 $21,865 $21,040
Calculation of Gross Profit:-
Formula View:

14
ACCOUNTING SYSTEMS AND PROCESSES
Particulars Average Cost FIFO LIFO
Sales Revenue 25000 =B6 =C6
Less: Cost of Goods Sold 3627 3135 3960
GROSS PROFIT =B6-B7 =C6-C7 =D6-D7
Particulars Average Cost FIFO LIFO
Beginning Inventory 3420 3420 3420
Net Purchases 7790 7790 7790
Cost of Goods Available =B17+B18 =C17+C18 =D17+D18
Ending Inventory 7583 8075 7250
Cost of Goods Sold =B19-B20 =C19-C20 =D19-D20
Calculation of Gross Profit:-
Calculation of Gross Profit:-
Workings:

15
ACCOUNTING SYSTEMS AND PROCESSES

16
ACCOUNTING SYSTEMS AND PROCESSES
Revised data:

17
ACCOUNTING SYSTEMS AND PROCESSES
Workings:

18
ACCOUNTING SYSTEMS AND PROCESSES
Question 8:
Original Data:
Normal View:

19
ACCOUNTING SYSTEMS AND PROCESSES
Date Particulars Amount
30/4 Bank Balance as per Pass Book $19,670
Add:
Deposit in Transit $1,543
EFT Insurance Payment $300
Book Error Cheque 1419 $340
NSF Cheque from Customer $1,700
Bank Service Charge $40 $3,923
$23,593
Less:
Outstanding Cheques 2462
EFT Rent Receipt 600
Note Receivable $1,500
$4,562
30/04 Cash Account Balance as of 30th April $19,031
Bank Reconcilaition Statement
As on 30th April
Formula View:
Date Particulars Amount
30/4 Bank Balance as per Pass Book 19670
Add:
Deposit in Transit 1543
EFT Insurance Payment 300
Book Error Cheque 1419 340
NSF Cheque from Customer 1700
Bank Service Charge 40 =SUM(D8:D12)
=E6+E12
Less:
Outstanding Cheques =1532+700+230
EFT Rent Receipt 600
Note Receivable 1500
=SUM(D15:D18)
30/04 =IF(E20>0,"Cash Account Balance as of 30th April","Bank Overdraft Balance as of 30th April") =E13-E18
Bank Reconcilaition Statement
As on 30th April
Revised data:

20
ACCOUNTING SYSTEMS AND PROCESSES
Question 9:

21
ACCOUNTING SYSTEMS AND PROCESSES
Question 10:
Bad debts can be calculated with the help of two methods that is allowance method and written
off method.
Allowance method-
Written off method-

22
ACCOUNTING SYSTEMS AND PROCESSES
Question 11
An investor is required to ascertain the financial performance of organization before
taking investment decisions. Account or trade receivable is one of the component of current
assets and it shows a clear picture of liquidity position of organization. The ability of
organization to meet its short-term obligations is analyzed and evaluated using the balance of
trade receivable. Solvency and liquidity position of organization is analyzed by sing analytical
procedures such as evaluation of trade receivable account (Kużdowicz et al. 2014).

23
ACCOUNTING SYSTEMS AND PROCESSES
Question 12:
Question 13:
Wesfarmers group business
Providing stakeholder with satisfactory return is one of the primary objective of
Wesfarmers group. It is one of the largest retail organization having shareholders base of worth
530000. It has a diversified business in areas having industrial division such as chemical,
fertilizers, and coal and safety products. Other areas in which the business is engaged involves
supermarket, liquor, convenience and stores, department stores and home improvements.
Statement of comprehensive income
Statement of comprehensive income provides users with information on foreign currency
translation reserve, cash flow hedge reserves and retained earnings. Values of retained earnings
involves tax effect and re measurement. There has been reduction in total amount of
comprehensive income of group financial year 2016 at $ 329 from $ 2248 in year 2015. Balance
of cash flow reserve in year 2015 stood at $ 177 and there were no cash reserves in year 2016.

24
ACCOUNTING SYSTEMS AND PROCESSES
Commenting on several items of group
Earnings per share- The earning per share of organization as decline significantly in
year 2016 and the value of basic and diluted earning per share remains same. Value of earning
per share relating to both dilute and basic earnings per share is same at 36.2 as against 216.1 in
year 2015. Calculation of diluted and basic EPS involves variances that is attributable to
substance options.
Dividend- Payment of dividend is one of the key component of return to shareholders
and there has been considerable reduction in dividend payment in recent years. The dividend
policy of organization seeks to grow the dividends overtime. For financial year, total value of
dividend paid to shareholders in year 2016 stood at $ 40783 as compared to $ 40402 in year
2015.
Risk and mitigation- One of the focus of organization is to monitor and manage the
risks associated with activities of group. Organization is committed to identify and gain the
needs for minim zing the risks related with business activities. Wesfarmers group has a risk
management framework that intends to manage and monitor the business risks.
Return on equity- an organization obtains return on equity by dividing net income of
organization by total value of shareholder’s equity. Return on average shareholder’s equity as
increased from 9.8 in year 2015 as against 9.6 in year 2016. Decrease in figure is indicative of
fact that organization has not been sufficiently generating return to their shareholders.
Corporate governance- Wesfarmers complies with international standard of corporate
governance. Framework of corporate governance standard is committed towards fulfilling
responsibilities and obligations of corporate governance and providing satisfactory shareholder

25
ACCOUNTING SYSTEMS AND PROCESSES
return. Practice of corporate governance imbibes fostering a compliance culture that
accountability, ethical behaviors and corporate and personal entity.
Sustainability- Organization intends to serve the communities and thereby leading to
long-term value creation. Sustainability of organization is ensured by involvement of long-term
possible management. Several issues that leads to sustainable performance directly impact
financial outcome of organization.
Balance sheet- The balance sheet of organization comprise of items such as total assets,
total liabilities that involves current and non-current assets and liabilities. Total value of current
assets recorded at $ 9684 and total value of current liabilities stood at $ 10424.
Income statement- A detailed picture of revenue, earning before and taxes and revenue
is provided by income statement of organization. There has been increase in revenue generated
by organization to $ 65981 in year 2016 as compared to $ 62447 in year 2015. Profits
attributable to parent company members has declined considerably in recent year.
Working capital ratio calculation:
Working capital ratio indicates the liquidity position of organization that is calculated by
dividing current assets by current liabilities. Delivering satisfactory return to shareholders is
provided by making improvement in working capital efficiency. Vale of current liabilities and
current assets for year 2016 is $ 10424 and $ 9684. Working capital ratio stood at 0.93.
Particular Amount
Current liabilities $ 10424
Current assets $ 9684

26
ACCOUNTING SYSTEMS AND PROCESSES
Working capital ratio 0.93
Net profit after tax:
Particulars
Amount ($
m)
Net profit after tax
2016 2353
2015 2440
2014 2689
2013 2,261
2012 2126
Net profit after
tax 2016 2015 2014 2013 2012
0
500
1000
1500
2000
2500
3000
2353 2440
2689
2261 2126
Amount ($ m)
Amount ($ m)

27
ACCOUNTING SYSTEMS AND PROCESSES
2353; 20%
2440; 21%
2689; 23%
2261; 19%
2126; 18%
Amount ($ m)
Net profit after tax
2016
2015
2014
2013
2012
Recommendation to Vikram:
Wesfarmers has experienced increase in net profit margin and is in a stable condition
over the years. Profit of organization has increased and therefore , it is recommended to Vikarm
to invest his $ 50000. This is so because over the long run, there will be sufficient generation of
profits.

28
ACCOUNTING SYSTEMS AND PROCESSES
References and Bibliography:
Averinà, O. I., Kolesnik, N. F., & Makarova, L. M. (2016). The Integration of the Accounting
System for Implementing World Class Manufacturing (WCM) Principles. European
Research Studies, 19, 53.
Azad, R., Azad, R., Azad, K., & Akbari, F. (2016). The Effect of Cost Accounting System
Inventory on Increasing the Profitability of Products. Journal of Industrial and Intelligent
Information Vol, 4(1).
Greef, A., Healy, J., Reinhold, D., Gall, M., Swaminathan, M., & Schulz, R. (2017). U.S. Patent
No. 9,754,319. Washington, DC: U.S. Patent and Trademark Office.
Jia, S. M., & Sun, Y. (2015). Information quality analysis of computerized accounting system.
Information Management and Management Engineering, 94, 293.
Kużdowicz, P., Kużdowicz, D., & Saniuk, A. (2015). Modeling the accounting system in ERP
software. In Carpathian Logistics Congress-CLC (pp. 1-10).
Lata, P., & Ussahawanitchakit, P. (2015). Management accounting system effectiveness and goal
achievement: evidence from automotive businesses in Thailand. The Business &
Management Review, 7(1), 322.
Swanson, Z. L. (2014). Hyperbolic browser for ERP accounting system pedagogy and
curriculum management. Global Perspectives on Accounting Education, 11, 25.

29
ACCOUNTING SYSTEMS AND PROCESSES
Zhang, J., & Xu, L. (2015). Embodied carbon budget accounting system for calculating carbon
footprint of large hydropower project. Journal of Cleaner Production, 96, 444-451.