Introduction to Accounting and Finance

INTRODUCTION TO
ACCOUNTING AND FINANCE

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
INTRODUTION..............................................................................................................................1
PART A...........................................................................................................................................1
a. Statement of Income for the year ended 31st December 2019................................................1
b. Statement of Financial Position for the year ended 31st December 2019................................3
PART B...........................................................................................................................................5
a. Contribution of the microwave towards covering the fixed costs...........................................5
b. Breakeven point and the margin of safety in the terms of both the units of the microwaves
and the revenues on selling the microwaves for 40.....................................................................5
c. Profits made by Parksmead Limited if produced and selling 60000 of the microwaves.........6
d. Analysing the new strategy of Parksmead limited increasing the sales units by 15% and
sales price by 8% for making advertisement expenses of 135000..............................................7
e. Explanation underpinning the assumptions attached with break even models including its
implementation for the business..................................................................................................8
PART C...........................................................................................................................................9
a. Calculating Payback period, Accounting rate of return and Net Present Value of machine
and recommendations for purchase of machine..........................................................................9
b. Report analysing and explaining merits and demerits of different investment appraisal
techniques..................................................................................................................................11
c. Report identifying and explaining key benefits and limitations of using budget as the tool
for strategic planning.................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUTION
Financial accounting refers to process of preparing the financial statements which
companies uses for showing or presenting the financial position and performance of the firm to
outside parties or users of the financial statements. Financial accounting keeps track record of the
financial transactions. It involves recording, summarising and presenting in financial reports
which includes income statement, balance sheet and the cash flow statement. Financial
statements are produced on set scheduled basis(Loughran and McDonald, 2016). Financial
accounting helps the management to take informed decisions regarding the performance of
business and to take necessary measures for improving the performance of company. The report
is based over making concepts and techniques of financial accounting which involves the
business to take important decisions after analysing the current performance. Report also
includes concepts of management accounting such as break even, margin of safety and
investment appraisal techniques that helps the business to management in analysing proposed
strategies and investments.
PART A
a.Statement of Income for the year ended 31st December 2019.
Statement of Income Statement
Sales
Cash 154800
Credit 604800 759600
Cost of Sales
Cash 64800
Credit 291600 356400
Gross profit 403200
Expenses
Rent 135000
less : Prepaid rent 27000 108000
Rates 8280
less : Prepaid rates 1350 6930
Depreciation van 11000
Wages 140400
1

Add ; Outstanding Wages 2610 143010
Electricity Bills 6840
Van Expenses 40320
Total Expenses 316100
Net Profit 87100
Workings
Rent
Annual Rent 108000
Rent Paid 135000
Prepaid Rent -27000
Rate
Jan - March 2019 2880
April - December 5400 * (9/12)
4050
Total rates for the year 6930
Prepaid 5400-4050
Jan - March 2020 1350
Van
Cost of van 72000
Useful Life 6
Residual value 6000
Depreciation
(72000-
6000)/6
11000
Trade Receivables
Sales 604800
Cash Collections 525600
Bad Debts 1800
Tr Receivables at year
end 77400
Trade Payables
2