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Business Finance

   

Added on  2020-07-22

11 Pages3735 Words420 Views
Business finance

Table of ContentsINTRODUCTION...........................................................................................................................1TASK...............................................................................................................................................11. Income statement and balance sheet.......................................................................................12. Calculation of appropriate ratios.............................................................................................23. Report to Lisa and John...........................................................................................................34. Explanation of the difference between Profit and cash...........................................................55. Accounting conventions and their impact on statements........................................................6CONCLUSION................................................................................................................................8REFERENCES ...............................................................................................................................9

INTRODUCTIONIn the business there are various financial matters which are required to be taken intoconsideration and for that financial statements shall be prepared (Ayyagari, Demirgüç-Kunt andMaksimovic, 2010). All of the things in relation to it will be included in the business finance. Inthis report also Lisa and John have started a new business and in that there are various issueswhich are faced by them so information will be provided to them in relation to it. Also incomestatement and balance sheet will be made for them by which they will be able to take theimportant decisions in the business.TASK1. Income statement and balance sheet.Income statement is the representation of the incomes and expenses which have beenmade by the business in any particular year and by that the net profit which has been earned bythem will be calculated (Ballwieser and et. al., 2012). Below is presented the same in respect ofFashion locker which is run by Lisa and John. Income statement for year ending 30th April 2015Particulars Amount Incomes:Sales : cash 77826Credit 31247109073Total incomes109073Expenses:Cost of goods sold (0+66638-15175)51463Interest on loan1500O/s electricity expense133Depreciation on van 1700Shop rent (2000*12)24000Insurance expense4132Other expenses2463Rates bill3000Electricity expense (255+390+410+385)1440Bad debts8501

Total expenses90681Net profit 18392Balance sheet is the statement in which the assets and the liabilities of the business arerepresented in the tabular manner. In this the assets will be equal to the liabilities and by this theposition of the business will be determined. The same is provided below:Balance sheet as on 30th April 2015Particulars Amount AssetsVan (17000-1700)15300Debtors (7459-850)6609Inventory 15175Petty cash 854Total assets 37938Liabilities and equityBank loan 7500Bank overdraft 4668Creditors 8245O/s expenses133Owner's capital:Capital 25000Add: Net profit 18392Less: Drawings 2600017392Total equities and liabilities379382. Calculation of appropriate ratios.In the business there are various ratios which are calculated by the help of which variousinterpretations can be drawn (Berger and Black, 2011). They will help the owner to know aboutthe position of the business and then on the basis of that they will be able to make the bestdecisions by which the effectiveness and efficiency of it will be improved. Some of thecommonly used ratios are calculated below:1.Current ratio = Current Assets / Current liabilities2

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