Introduction to Accounting and Finance Assessment

Introduction to Accounting and
Finance Assessment
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Contents
INTRODUCTION...........................................................................................................................3
PART-A: RACCA LIMITED..........................................................................................................3
a. Profit and Loss Statement...................................................................................................3
b. Statement of Balance Sheet................................................................................................7
PART-B: RECKTURK PLC.........................................................................................................12
a. Determining contribution per electric kettle made towards covering fixed costs when selling
price is £13:..........................................................................................................................12
b. Calculating Break-even Point and Margin of Safety when selling price is £13:..............12
c. Ascertaining Company Profit when Unit Production is 48,000 electric kettles at £13 per
unit........................................................................................................................................13
d. Assessing strategy for Stock stone Ltd Plc.......................................................................13
e. Identification of Underpinning Assumptions in Break-even Model................................14
PART-C: ROCKHAM PLC..........................................................................................................15
a. Recommendation of acceptance or rejection of Capital Budgeting Projects using Investment
Appraisal techniques............................................................................................................15
b. Report on key merits and limitations of various investment appraising techniques........17
c. Report on identification of key merits and demerits of using Budgets as a strategy planning
tool........................................................................................................................................19
CONCLUSION..............................................................................................................................20
REFERENCES..............................................................................................................................21
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INTRODUCTION
Accounting Process and Finance both these concepts are extremely interrelated yet
diverse fields. Concept of accounting is primarily associated with recognizing purchases and can
be assessed monetarily. While the Finance concept involves presentation in form of
different reports to the firm ’s stakeholders. These two components ensure that all the financial
transactions of corporation are properly recorded and communicated effectively to the business's
stakeholders. These allow both the acquisition and distribution of different financial resources
on part of managing personnel who really are accountable for making informed decisions
about same in an acceptable way (Ainsworth and Deines, 2019).
This study seeks to give a comprehensive account of the basic models, principles and
methods used throughout financial accounting as well as management accounting. For this
object, it highlights concept of preparation of company's financial statement such as P&L or
income statements, Statement of financial position, contribution calculation, Margin of
Safety, break-even level as in revenue and units. Further, various investment appraisal methods
used in decisions relating to the capital budgeting are evaluated along with advantages and
drawbacks of budget as strategic planning tool.
PART-A: RACCA LIMITED
a. Profit and Loss Statement
To assess whether or not entity can expand or step in direction that aligns its goal and targets, an
entity seeks to assess the net profits gained for a particular time-span. An organisation’s Income
Statement is formed for this purpose, as well as aims to report company profits after paying for
taxes, debt, depreciation, as well as other expenditures (Shawver and Miller, 2017). This
gives Management and stakeholders of certain company, like Racca Ltd, a summary of
organisation’s profitability. organisation's profitability. This can be seen as follows:
Statement of Income for the year ended December 31, 2018
Particulars £ Particulars £
To Opening Stock - By Revenue3 633000
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To Purchases1 525000 By Closing Stock4 228000
To Wages2 119175
To Gross Profit (Balancing figure) 216825
Total 861000 Total 861000
To Electricity Bill Payments5 7725 By Gross Profit b/d 216825
To Van Running Expenses 33600
To Irrecoverable Debts 1500
To Rent paid to owner6 90000
To Rates7 5775
To Depreciation on Van 9600
To Net Profit for the year 68625
Total 216825 Total 216825
Working Notes:
1. Purchases:
Particulars £
Credit Purchases 486000
Cash Purchases incurred 39000
Total Purchases made during the year 525000
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2.Wages:
Particulars £
Total Wages paid during the year 117000
Add: Wages owed for the last week of the year 2175
Total Wage Expenses 119175
3. Revenue for the year ended December 31,
2018:
Particulars £
Credit Sales 504000
Cash Sales 129000
Total Sales made during the year 633000
4. Determining Closing Stock Value:
Particulars £
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Stock available as on 01.01.2018 -
Add: Total Purchases made during the year1 525000
Less: Cost of Goods Sold 297000
Stock available as on 31.12.2018 228000
5. Electrical Bills Payments:
Particulars £
Bills paid during the year 5700
Add: Wages owed for the quarter as on
31.12.2018 2025
Total Wage Expenses 7725
6. Rent paid:
Particulars £
Total Rent paid to the owner of the premise 112500
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