Introduction to Accounting and Finance

Introduction to Accounting
and Finance

Table of Contents
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
Statement of Income...............................................................................................................1
PART B............................................................................................................................................4
a) Contribution........................................................................................................................4
b) Break even point and margin of safety..............................................................................4
c) Calculate profit...................................................................................................................5
d) New sales price..................................................................................................................5
e) Assumption of break event model......................................................................................6
PART C ...........................................................................................................................................7
a) Pay back period, ARR and NPV........................................................................................7
b) Investment appraisal technique........................................................................................10
c) Benefits and limitations using budget as strategic planning............................................12
CONCLUSION..............................................................................................................................13
REFRENCES.................................................................................................................................14

INTRODUCTION
Accounting and finance deals with managing money for each each business organisation
both the terms are used for different purposes. As accounting deals more with what is performed
in past on the other hand finance is about making good predictions for future transactions
(Aggarwal and Goodell, 2014). Each business organisation needs to manage its accounting and
finances to calculate how well business is performing and earning through its operations.
Through accounting business financial statements are prepared that helps in assessing true and
fair financial position of business. When businesses uses all the accounting standards and
guidelines defined in the law it helps in estimating financial requirements of a business that
needs to be managed through effective financial planning. Business organisation to make
financial decisions needs to know regarding how well business is performing and accounting
provides with the required information. In this project with using accounting and financing
concept profitability statements and balance sheet of a business organisation will be prepared.
Together with this financial tools, cost statements and investment decision will be made using
different concepts of accounting and financing.
PART A
Income statement is one of the main financial statement that is prepared by each business
organisation to reflect the financial performance of business over a specific period of time.
Income statement of an organisation includes all its revenues and leads to subtraction of all the
expenses form income to estimate profits for that period. It helps to calculate all the operating
and non-operating income and expenses of Terry Joe Plc and helps to provide a representation of
the companies current performance to investors. Through income statement financial position of
business is reported and helps managers of Terry Joe Plc to judge performance of business
towards its objectives (Ahmed and Duellman, 2013).
Income Statement of the Terry Joe Plc
for the year end 31 December 2018
Statement of Income
Income statement for the year 31st December 2018
Sales revenues (604800+154800) £7,59,600.00
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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
Interpretation: Terry Joe plc earn about 54520 in the year 2018. To calculate the total
sales of the company take credit and cash sales which is 604000 & 154800. After that less the
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