Introduction to Accounting and Finance

Introduction to Accounting and
Finance
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Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
1. Income statement of Racca Limited.....................................................................................3
2. Financial statement of Racca Limited..................................................................................3
PART B...........................................................................................................................................3
A) Calculation of contribution...............................................................................................3
B) Calculation of breakeven point and margin of safety if each electric kettle is sold for
£13 3
C) Calculation of the profit Stockstone Ltd. makes if it produces and sells 48,000 electric
kettles at £13 per kettle................................................................................................................3
D) Best strategy for Stockstone Ltd.......................................................................................3
E) Explanation of the underpinning assumptions attached to the break-even model
including analysing whether the model can successfully be utilised by a range of differing
businesses....................................................................................................................................3
PART C...........................................................................................................................................3
1. Calculation of the Payback Period, the Accounting Rate of Return, and the Net Present
Value of the machine, and provides recommendations as to whether Rockham Plc should buy
the machine..................................................................................................................................3
2. Explanation of the key merits and limitations of the differing investment appraisal
techniques....................................................................................................................................3
3. Explanation of advantages and disadvantages of using budget as tool of strategic planning
3
CONCLUSION................................................................................................................................3
REFRENCES...................................................................................................................................3
INTRODUCTION
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INTRODUCTION
Account and finance theses two are part of business organization. Without theses mangers not
able to run business operation in effective way. This report is formulated to define importance of
financial and accounts by solving numerical case study. In includes the preparation of financial
report through which help in identifying the importance of systematic recording of transaction. In
the second part usefulness of BEP business organization decision making is define in effective
way. This report also includes the importance of budget as a tool of strategic planning.
PART A
1. Income statement of Racca Limited
Income statement is a part of financial report which describes the income and expenditure
statement of the organization. Manager prepares this statement in order to recognize their net
profit from operating activities and identifying the effect of tax and depreciation of income earn
by business activities. Income statement also useful in measuring the performance and
calculating profitability ratio of the Racca Limited
Provisional Profit and Loss statement for the Period ended 31st
Dec 2019
Particular
Note
No 31st December2019
Sales 633,000
Closing Stock 228,000
Total Revenue 861,000
Expenses:
Inventories 525,000
Wages 119,175
Rent 90,000
Depreciation 9,600
Electricity 7,725
Bad debt 1,500
Van Expenses 33,600
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Total Expenses 786,600
Profit before tax (III - IV) 74,400
Tax expense: 5,775.00
Profit for the year (V - VI) 68,625
2. Financial statement of Racca Limited
Balance Sheet as at 31st December 2019
Note
No 31st December2019
I. EQUITY AND LIABILITIES
(1) Shareholders' Funds
(a) Share Capital 180,000
(b) Reserves and Surplus 68,625
(2) Non-Current Liabilities
(a) Long-term borrowings 0
(3) Current Liabilities
(a) Short-term borrowings 0
(b) Trade payables 393,000
(c) Other current liabilities 0
(d) Short Term Provision 0
Total 641,625
II. ASSETS
(1) Non-current assets
(a) Fixed assets
(i) Tangible assets 50,400
(ii) Capital Work - in - Progress
(b) Deferred tax Assets (Net)
(c) Long-term loans and advances
(d) Other non-current assets
(2) Current assets
(a) Inventories 228,000
(b) Trade receivables 436,500
(c) Cash and Bank Balance 90,000
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