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(B124 EMA)Prepare the income statement for Ayla King

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The Open University

   

Accounting (B124 EMA)

   

Added on  2023-05-03

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In this assignment report we will discuss about income statement  below are the summaries point:-

  • Financial information should be appropriate for comparison between different accounting periods.
  • Similar accounting practices/policies should be used consistently.
  • E.g. using different inventory valuation methods (LIFO vs FIFO) can lead to changes in financial performance analysis over time.
  • Financial information should be presented clearly and be easily understandable.
  • Complex financial statements can undermine the reliability of financial statements.
  • E.g. Enron Corporation had complex financial statements that were not understandable, leading to its collapse.
  • The accounting equation (Assets = Liabilities + Equity) forms the basis for the balance sheet and income statement.
  • Income statement links to balance sheet (and vice versa) through various aspects such as depreciation on assets, net profit, and inventory.
  • Profit impacts the accounting equation by affecting assets, liabilities, and equity.

(B124 EMA)Prepare the income statement for Ayla King

   

The Open University

   

Accounting (B124 EMA)

   Added on 2023-05-03

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Module: B124 EMA
Tutor:
Name:
PI:
Due Date:
(B124 EMA)Prepare the income statement for Ayla King_1
Question 1:
a) Prepare the income statement for Ayla King for the period ended 31 December 2020.
Remember to clearly show all your workings.
b) Prepare the balance sheet for Ayla King as at 31 December 2020. Remember to
clearly show all your workings.
Ayla King
Income statement for the year ending 31 December 2020
£ £
Sales Revenue 999,000
Cost of Sales
Opening Inventory 267,000
Purchases 540,500
807,500
Less: closing inventory (222,200)
COGS (585,300)
Gross profit 413,700
Income from repairs 8,000
421,700
Less: other expenses
Depreciation on Motor Vehicles (W1) 9,600
Depreciation on Equipment (W2) 6,600
Rent (W4) 32,500
Heat and lightening 5,320
Advertising (W8) 28,400
Wages 62,000
Motor expenses 9,900
Discounts allowed 6,250
Irrecoverable receivables 7,800
Decrease allowance for receivables (W3) (2,282)
Interest expense (W6) 3,000
169,088
Net profit for the year 252,612
Ayla King
(B124 EMA)Prepare the income statement for Ayla King_2
Balance sheet as 31 December 2020
Assets £ £ £
Non-current Cost Acc depn NBV
Motor Vehicle 60,000 21,600 38,400
Equipment 66,000 19,800 46,200
126,000 41,400 84,600
Current Assets:
Inventory 222,200
Prepayments 7,000
Receivables 89,232
Bank 44,000
Total current assets 362,432
Total assets 447,032
Capital and Liabilities
Capital
Opening Capital 80,000
Profit for year 252,612
332,612
Less: Drawings 50,000
Total capital 282,612
Liabilities:
Non-current:
Bank Loan 50,000
Current Liabilities:
VAT liability 23,000
Payables 87,500
Accruals 3,920
114,420
Total liabilities 164,420
Closing capital and liabilities 447,032
Workings:
W1) (60,000 – 12,000) x 20% = £ 9,600
W2) (66000 x 10%) = £ 6,600
W3) Receivables as per TB 100,750
Less: Irrecoverable receivables (7,800)
Net receivables 92,950
Less: allowance for receivables to be (4%) 89,232
(B124 EMA)Prepare the income statement for Ayla King_3

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