Financial Accounting: Analysis of ASOS PLC and Ovid Venture Balance Sheet and Income Statement

This article provides an analysis of ASOS PLC and Ovid Venture's balance sheet and income statement, with a focus on financial accounting. It covers topics such as ratios, liquidity, gearing, prepaid expenditures, accrued revenue, and more.

Financial accounting

Contents
Contents...........................................................................................................................................2
SECTION A.....................................................................................................................................1
SECTION B.....................................................................................................................................3
Question 2....................................................................................................................................5
REFERENCES................................................................................................................................7

SECTION A
particulars 31-08-2021 31-08-
2020
31-08-2019 31-08-2018
Ratios ideal ratio
return on capital
employed
twice the current
interest rate
9.39 12.52 6.99 22
stock turnover 5 to 10 4.85 6.13 5.09 5
debtor
collection(days)
within 30 days 3.88 2.36 2.54 2
creditor payment
(days)
standard 0/90 36.81 39.5 _ 1
current ratio 2;1 1.56 1.19 0.81
liquidity ratio greater than 1 0.75 0.57 0.11 0
gearing ratio between 25 % to 50% 85.13 42.86 20.88 2
Accountancy findings are book value which details a corporation's fiscal position at a
specific position in time or during a given amount of time, as well as statistics on activities and
processes. These are a collection of monetary indicators derived from the monetary statements of
a company. Finance results are the objectives which we all strive to achieve in order to minimise
fiscal hazards. Monetary effectiveness reveals important details regarding the organisation, like
the stated goal and purpose, principles, and ambitions (Alziyadat and Ahmed, 2019). Finance
statements are papers which contain finance transactions. Fiscal summaries are used by the
company to assess and analyse accountancy information which offers finance condition
improvements. Throughout the study phase, shareholders learn about the corporate background
and how to cope with its occurrences.
Revenue percentages are used to assess a corporation's financial performance at different
expense categories, such as total, operational, and aggregate revenue percentages. A few of the
margins are price of products delivered, taxation, and operating costs. The current ratio that
indicates a firm's flexibility is a composite of current resources divided by its current obligations.

Current obligations and resources are obligations and investments that have been utilised and
repaid in less than one year.
They are frequently used to evaluate a company's flexibility and current obligations
by preparing financial items listed. The current ratio is calculated by dividing current assets by
current liabilities. Whenever it comes to revenue and availability, the bigger the flexibility, the
lower the revenue, and the smaller the flexibility, the higher the benefit. A prudent financial
director must be aware of the responsibilities of flexibility and competitiveness. He must be
opposed to tracking the corporation's present holdings in order to maximise cost effectiveness
(Chen, Tan and Fang, 2018).
The ASOS PLC Report
As a result of its success, ASOS PLC is in a strong fiscal stance, with a gearing ratio of
25 to 50 percent. Gearing metrics are accounting statistics which are useful in assessing the
owner's liabilities and the firm's acquired funds. Due to the gearing proportions, this firm's
performance could be measured by its capital rather than its liabilities. They are capable of
analysing and interpreting data over the previous 4 years. It demonstrates that by 2021, the
percentage has risen to 50%, demonstrating an upward tendency. At any and all circumstances,
the liquidity ratios must be larger higher than 1. Lenders and shareholders could achieve an
accountancy liquidity proportion of 2 or 3 if they work together.
A greater liquidity proportion indicates that perhaps the business has a considerable
margin of safety. The firm's liquidity ratios have already been improving over time, suggesting
that it will be in a great spot in future years than it had previously in past decades. When
examining the interests and repayments utilized to repay during 90 days, the organisation have
obtained comparable findings in the very identical creditor repayment days as the ideal one is 90
days (Commerford, Hatfield and Houston, 2018).
The optimum current ratio is 2:1; the corporation could not sustain this equilibrium for 4
years, indicating that it is inadequate to cover current obligations. Debt collecting is the process
of a collecting service or corporation attempting to recoup past-due payments from debtors. A
debt investigator can contact customers if one have not made your mortgage or credit cards
instalments and are severely behind. The recovery of liabilities within prescribed time frames
demonstrates the firm's outstanding performance; the collecting term is 30 days, and ASOS PLC
recovers all commitments within that time frame.

Inventory turnover refers to how much material is consumed or traded in a given period
of time each year. It has been employed to see if a company has enough goods in terms of how
much it delivers. The firm's inventory turnover demonstrates that it is maintaining and retaining
shares, with the exception of 2021, whenever it falls underneath the necessary threshold. In the 4
years when the firm operates below the predicted limitation, the optimum inventory ratio is 5 to
10. Two times the prevailing mortgage rate is the best yield on capital employed proportion. The
amount of capital employed by a business in its revenue generating system is referred to as
capital utilised. The aggregate value of all resources owned by the firm. In commerce,
investment is typically utilised to engage in long-term development wherein optimum
proportions are not continuous. The corporation proceeds to depict the ideal ratio increasing and
falling, which even at instances could be incompatible (Fan and Chatterjee, 2018).
SECTION B
Ovid Venture Balance Sheet As of December 31, 2021
ASSETS $ $
Current Assets
Bank 1500
prepaid Insurance 400
41,3
Accounts receivable 50
18,0
Inventory 00
6125
Total Current Assets 0
Property, Plant, and Equipment
80,
fixture and Fittings 000
600
accumulated depreciation 00
25, 20,0
motor vehicles 000 00
371
accumulated depreciation 5
21,2
total property plant and equipment 85
102,
TOTAL ASSETS 535

LIABILITIES & stockholders’ Equity
8,90
accounts payable 0
electricity expenses payable 250
non-current liabilities
long-term bank loan 2200
11,3
TOTAL LIABILITIES 50
stakeholder’s equity
20,0
common stock 00
71, 71,1
retained earnings 185 85
91,1
total stockholders’ equity 85
Ovid Venture Income statement For the year ended December 31, 2021
$
Sales
Less; expense
Cost of goods sold audit and accountancy 156,00
Salaries and wages expense 21,000
Depreciation expense 22,365
Delivery expense 8,500
Electricity expense 3,050
Insurance expense 1,300
Advertising office expense
Rent expense 7,500
Interest expense
222,01
Total expense
net income/loss
cost of goods calculation
opening stock + purchases - closing stock
14,000+160,000-18,000=156,000

Question 2
1
a. Prepaid expenditures are those which have been compensated upfront. On the financial
statements, they are considered and reported as investments. After the quantity is entered
as expense, respective qualities are indicated. Prepayments are subtracted from
expenditures while generating a profit and loss statement. A prepaid expenditure is a
financial statement investment that is added to the resources.
b. Accrued expenditure, often referred as current obligations, is a type of accountancy
expenditure that is utilized and recorded. In the financial statements, the accumulated
expenditure is represented as a current obligation. The cost of the product is recognised
as an expenditure in the profit and loss statement.
c. Prepaid revenue is the funds that are received from a customer prior to making a
transaction. Prepaid earnings are especially popular in businesses which require advance
for customized products production. Prepaid revenue is recognized as a burden and is
reported as a current liability on the vendor's financial statements. If the products or
activities are supplied, the obligation is cancelled, and the amount is reported as revenue
in the profit and loss account (Kovalenko, 2019).
d. Accrued revenue is revenue which has been generated through the provision of a
commodity or product although have not actually being reimbursed in currency.
Consumers owing payment to the business for the items or activities they bought, and
accumulating earnings are reflected as arrears on the financial statements. In the profit
and loss statement, the accrued earnings are recorded as profits. Trade receivables are
subtracted from the financial statements.
2
a. Depreciated expense is the worth of a permanent investment minus all amortization
which has been documented towards it. The depreciation value, in a more financial
aspect, is the entire quantity of assets "spent up" in a specified timeframe, including a
financial calendar. Depreciation is a non-cash item which is included to the statements of
working capital with other expenditures in the operational operations.
b. Whenever a capital investment or non-current investment is liquidated, a number of
bookkeeping calculations and statements should be completed. The property would be

disposed for the amount that is approximately its carrying worth most of the moment,
leading in an income statement on disposition which should be reported. Non-current
investments are sold and the proceeds are reported in summary of financial position.
During the similar occasion, the gain on the transaction is stated in the running activities
portion as a decrease from net earnings (Suykens, De Rynck and Verschuere, 2019).
c. Inventories are the term employed in accountancy to describe commodities like goods,
natural resources, and finished goods. Stock is viewed as a rise in the summary of
financial position whenever it displays an adverse quantity, and it depicts the money
expenditure which the company has indeed been associated with buying more things than
it has supplied.

REFERENCES
Books and journals
Alziyadat, N. and Ahmed, H., 2019. Ethical decision‐making in Islamic financial institutions in
light of Maqasid Al‐Sharia: A conceptual framework. Thunderbird international
business review. 61(5). pp.707-718.
Chen, B., Tan, Z. and Fang, W., 2018, November. Blockchain-based implementation for
financial product management. In 2018 28th International Telecommunication
Networks and Applications Conference (ITNAC) (pp. 1-3). IEEE.
Commerford, B.P., Hatfield, R.C. and Houston, R.W., 2018. The effect of real earnings
management on auditor scrutiny of management's other financial reporting decisions.
The accounting review, 93(5), pp.145-163.
Fan, L. and Chatterjee, S., 2018. Application of situational stimuli for examining the
effectiveness of financial education: A behavioral finance perspective. Journal of
Behavioral and Experimental Finance. 17. pp.68-75.
Kovalenko, A., 2019. Determinants of personnel policy in the process of management of
financial and economic security of business entities. Вісник Черкаського
національного університету імені Богдана Хмельницького. Серія Економічні
науки, (3), pp.70-77.
Suykens, B., De Rynck, F. and Verschuere, B., 2019. Nonprofit organizations in between the
nonprofit and market spheres: Shifting goals, governance and management?. Nonprofit
Management and Leadership, 29(4), pp.623-636.