Introduction to Accounting and Finance

INTRODUCTION TO
ACCOUNTING AND
FINANCE

Contents
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
Part A – Terry Joe Plc..............................................................................................................................3
Statement of Income...............................................................................................................................3
Statement of Financial Position...............................................................................................................5
Part B – Kokolet Limited.........................................................................................................................6
(a) Contribution towards covering fixed costs...................................................................................6
(b) Break-even point and margin of safety..............................................................................................7
(c) Profit the company:............................................................................................................................8
(d) Marketing and advertising..................................................................................................................8
(e) Explain the underpinning assumptions attached to the break-even model.........................................9
Part C – Smith Howe Limited...................................................................................................................10
(a) Payback Period, Accounting Rate of Return and Net Present Value of the machine........................10
(b) Explains and analyses the key merits and limitations of the differing investment appraisal
techniques..............................................................................................................................................14
Key benefits and limitations of using various budgets for strategic planning........................................15
CONCLUSION.........................................................................................................................................17
REFERENCES..........................................................................................................................................18

INTRODUCTION
Accounting is a tool of assessing business activities, converting information into reports
and delivering results to decision makers (Shah, 2013). Indeed, the financial statements are the
main documents that communicate with the full perspectives on the financial performance of the
corporation. The primary role of accounting in businesses is also linked to the identification of
fragile business sectors. Business executives must describe business objectives, track progress
and take appropriate measures if the expected action to take is not favorable. Some decisions,
such as purchasing supplies, managing stocks, investing, etc., include financial reporting details.
It helps managers to make better policies enhance the overall company future performance.
The report consist information about analysis of financial position and revenue is
included in this document on the basis of given data in brief. As well as BEP analysis is also
calculated and in further part of project report, payback period, accounting rate of return and net
present value is applied on given value of assets.
MAIN BODY
Part A – Terry Joe Plc
Profit and loss account- A profit and loss statement shows the profits and expenditures of a
corporation over a specified period of time, generally one quarter or a calculated period of a year
(Chiang, Nouri and Samanta, 2014). Those statistics show that the business has made a profit or a
loss over that amount of time.
Statement of Income
Income statement for the year 31st December 2018
Sales revenues (604800+154800) £7,59,600.00
Less: cost of sale (291600 + 64800) -£3,56,400.00
£4,03,200.00
Less operating expenses
Rent paid £1,35,000.00

taxation £8,280.00
Depreciation on delivery Van £11,000.00
Wages (140400+2610) £1,43,010.00
Electricity bills (6840+2430) £9,270.00
van running expenses £40,320.00
Bed debt expenses £1,800.00 -£3,48,680.00
Profit/loss £54,520.00
Cash a/c
To cash from equity £2,16,000.00 By rent paid £1,35,000.00
Cash sales £1,54,800.00 Tax £8,280.00
Received form debtors £5,25,600.00 wages £1,40,400.00
Electricity £6,840.00
Inventory £46,800.00
Payment to trade payables £4,71,600.00
Van running expenses £40,320.00
closing cash balance £47,160.00
£8,96,400.00 £8,96,400.00
Balance sheet- In corporate finance, a balance sheet or a statement of financial situation or a
conclusion of financial situation is an overview of the financial scales of an entity or an
institution, whether this is a sole sole trader, a partnership, a company, a private limited company
or another organization, such as a government body or a non-profit corporation (Power, 2012).