Introduction to Accounting and Finance

INTRODUCTION TO
ACCOUNTING AND FINANCE

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART- A..........................................................................................................................................1
Statement of income for the year ended 31st December 2019....................................................1
Statement of financial position as at 31st December 2019..........................................................1
Part B – Stockstone Limited ...........................................................................................................4
a) Contribution of each electric kettle towards covering the fixed costs.....................................4
b) Break-even point and margin of safety in terms of both units and revenue if each electric
kettle is sold for £13.....................................................................................................................5
c) Profit Stockstone Ltd. makes if it produces and sells 48,000 electric kettles at £13 per kettle
......................................................................................................................................................6
....................................................................................................................................................6
d) Analysing the new strategy of Stockstone Ltd increasing the sales units by 17% and sales
price by 9% for making advertisement expenses of 45000.........................................................6
e) Explanation underpinning the assumptions attached with break even models including its
implementation for the business..................................................................................................7
PART- C..........................................................................................................................................8
a) Calculation are as shown as below:.........................................................................................8
b) Describing the merits and limitation of differing investment appraisal techniques..............10
c) Key benefits and limitations of using budgets as a tool for strategic planning.....................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Financial accounting refers to the preparation of the financial statement which helps in
conveying the financial position and performance of the business which are further used by the
interested parties or stakeholders in undertaking the business decisions. Financial accounting
provides assistance to businesses in undertaking the informed decisions based upon the
company’s performance. This report is based on creation of the financial statements by using the
concepts and techniques of financial accounting and in addition, it also involves the techniques
of management accounting like BEP, margin of safety and the investment appraisal techniques
which helps the businesses in formulating better strategies.
PART- A
Statement of income for the year ended 31st December 2019
Particulars
Sales (504000 + 129000) 633000
- Cost of sales (297000)
Purchases 525000
- Closing inventory 228000
Gross profit 336000
- Rent (90000)
- Tax (5775)
- Depreciation (9600)
- Wages (119175)
- Electricity bills (7725)
- Van running expenses (33600)
- Bad debt (1500)
Net profit 68625
1

Statement of financial position as at 31st December 2019
Particulars Amount
Assets
Fixed assets
Delivery Van ( Cost – Depreciation) 50400
Current assets
Prepaid rent 22500
Advance tax 1125
Trade receivables 64500
Inventory 228000
Total assets 366525
Liabilities
Shareholder's equity
Capital 180000
+ Profit 68625
Current liabilities
Outstanding wages 2175
Outstanding electricity bills 2025
Trade payables 93000
Bank overdraft 20700
Total liabilities 366525
Working Note:-
1) Capital has been introduced in the business when it has started on the 1st January, 2019
through depositing in the bank account. The journal entry passed is:-
2