Introduction to Accounting: Explaining Financial Statements, Formulating Income Statement, Evaluating Financial Aspects of Grenco Plc

This project explains financial statements, income statement, and evaluating financial aspects of Grenco Plc. It covers balance sheet, cash flow statement, and more. The project also includes a comparative analysis of Grenco Plc's financial performance in the last two years.

Introduction to Accounting

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Explaining Financial statements..................................................................................................3
Formulating the income statement...............................................................................................4
Evaluating financial aspects of Grenco Plc.................................................................................6
CONCLUSION................................................................................................................................8
REFERENCES...............................................................................................................................9s

INTRODUCTION
Accounting is the process of recording financial transactions pertaining to a business for
management of the accounting process that includes summarization, analysation and reporting.
In this project the Grenco plc is the grocery retail is the chosen organization in the given case
study for which the accounting financial statements have been shown. This project will explain
the three different financial statements and also provide the information that is being linked to
one another. This project will also prepare financial statements and compare the performance of
the organization in different years. In this project the financial aspects of the organization will be
differentiated.
MAIN BODY
Explaining Financial statements
Balance Sheet :
Balance sheet is refers to the financial statement which reports the company's assets,
liabilities and shareholders equity in the given time (Huo and et.al., 2018). This is also
considered to be the factor which influences the rates of return for the investors that evaluates the
company's capital structure. Balance sheet is considered to be the one which provides the
snapshot of what the company looks like in terms of its assets and liabilities. This information is
very important for the shareholders to consider before making any kinds of investment in the
organization. Balance sheet is also considered to be very useful for the important financial
statements for the conduction of the fundamental analysis for the calculation of the financial
ratios.
This is the financial statement which is the key towards the reporting and evaluation of
the business (Balance Sheet, 2020). This is also considered to be the operations which allows the
business in the management of the equation which is related to the sum of liabilities which brings
shareholders equity. It can also be considered to be the management of the organizational
operations. This is helpful for the business in providing the fundamental analysis of the balance
sheets for the calculation of the financial ratios.
Income Statement :
Income statement is the financial statement which shows that company income and
expenditure which shows that the company is making profit or loss in a give period (Ihrig and
et.al., 2018). This is considered as the statement which helps in accounting standards and

methods of business which allows the business and its financial health. This is also known as the
statement which provides the business with operations and the financial result of income and
earnings statement. In accounts the income statement for the business for owners decide whether
for they can generation profit by increasing revenue. It is also considered to be the business costs
for showing effectiveness in the strategies for the beginning of the financial period.
Financial statements are considered to be the future expenses for being paid unexpected
problems for development of the business owners and performance (Safta, Sabău and Muntean,
2021). In this financial statement the future expenses of the company are not considered and this
is the reason why it cannot predict the future performance of the organization. This financial
statement is also known for the planning investing and also the overview of the business which
helps the financial institution for analysing the documents for the creation of the business which
is worth the business loan.
Cash flow statement :
Financial statement is also considered to be the providing the aggregate data regarding
the cash inflows which is regarding ongoing operations of the business (Borodin and et.al.,
2019). It is the factor which impacts the external investment of the company which is related to
cash outflows which is made for the paying the business activities and investments during the
given period. The focus of the business also needs to be on the investors which are the ones that
are able to analyse the transaction and predict the future performances of the organization. Cash
flow statement is known for the contribution it makes for the success of the business and is also
considered to be the statement which helps to understand the flow of cash.
Cash flow statement is known to be very intuitive for all the financial statement because
it follows the cash made by the business for the operations, investment and financing (Chen and
et.al., 2019). The sum of these three segment are considered to be the factor which helps in the
management of the organizational growth. The cash an organization are the key towards the
daily operational expenses and income of the organization.
Formulating the income statement
Income statement is one of the significant part of financial reporting that allows the company to
receive number of benefits (Penman, 2019). It is helpful in receiving the ability to classify the
income & expenses so that clear picture can be formulated. There are different kinds of the
benefits which can be obtained by organization through preparing income statement in turn

achieving relevant insights to make judgment so that accurate decision-making can become
possible. It aids in getting the information about the expenses incurred for the particular period
and income earned in that duration. This is helpful in gaining the relevant strategy for improving
the overall performance by eliminating irrelevant components in turn higher profitability and
sustainability can be obtained. It provides assistance in meeting the overall objective of
enterprise to enhance its stability in sector via reducing cost of goods sold though avoiding the
irrelevant aspects so that higher profitability can be derived.
Particulars Amount £m Amount £m
Sales Revenue 395000
Less: COGS
Cost of Sales 323800
Wages 35000 358800
Gross profitability 36200
Less: Indirect expenses
Rent 5500
Telephone expense 1220
Van running costs 200
motor expense 180
Lightening and Heating
expense 4000
General Expense 6000 17100
Net profitability 19100
On the basis of above calculation it can be interpreted that business is deriving
profitability by conducting the different types of the expenses which is enabling the organization
to receive distinct ability to coordinate with changing circumstances. There are various
objectives of enterprise that are required to be accomplished by firm through following relevant
approach in turn greater effectiveness to uplift overall position in industry. Income statement aids

in meeting the proper ability to achieve higher significant level of profit margin. The set of
expenses which are basically executed by the firm to enhance its ability to achieve gain includes
both direct and indirect expenses in turn meeting overall performance to build strong position.
On the basis of above calculation it can be interpreted that there are distinct form of expenses
which are executed by the particular business such as rent, telephone expenditure, van running
and other expenses. This is articulating that profitability has been earned by execution of distinct
type of actions which is allowing getting appropriate strategy to stabilize its practices.
There are various form of the benefits which can be derived by the particular
organization through formulating income statement. In addition to this, it is helpful in making
significant decision by considering all the crucial and non irrelevant aspects in turn better
capability to boost financial condition. Formulated income statement provides detailed of the
revenue and expenditure incurred for the particular duration in turn achieving ability to make
sound decision. This all can permit the firm to achieve better functioning via following crucial
factors.
Evaluating financial aspects of Grenco Plc
Comparative analysis provides assistance in achieving the ability to compare the financial
aspects of organization of two years. There are different kinds of objectives that are required to
be followed in order to achieve the profitability (Aini, Anoesyirwan and Ana, 2020). This can be
properly exerted by evaluating and comparing the performance of two years in turn better
functioning can be derived. Grenco Plc can become able to evaluate lacking areas through
applying comparative analysis in turn capability to implement appropriate action can become
possible.
Financial position 2015 2016
Change in
absolute
value
(change in
% )
Net Fixed Assets 23000 25800 2800 12.17%
Current assets
Stock 5100 7900 2800 54.90%

debtor 5900 5400 -500 -8.47%
bank 3500 -3500 -100.00%
Current Liabilities
Trade creditors 5000 5200 200 4.00%
Represented by:
Capital Account balance at 1
may 25000 29400 4400 17.60%
Net profit 16000 19100 3100 19.38%
Additional capital introduced 5000 5000 100.00%
Less drawings -8500 -19600 11100 -130.59%
From the evaluation of above table formulated it can be interpreted that in the current
year such as 2016 the performance of organization has improved as compared to the previous
period 2015. On the basis of the comparison it can be articulated that Grenco Plc possess the
different assets and liabilities which are permitting the organization to perform smoothly.
Current assets refers to the ability of business to conduct operational activities with
maintaining relevant liquidity and sustainability. This includes stock, debtors and bank which
can allow the organization to overcome the short term liabilities such as trade creditors that is
perverting in firm. Inventory is inclining in the current period as compare to the previous which
can be helpful in achieving greater amount ability to meet the market demand which serves as
competitive edge. This is upward moving by 54.90% percentage that aids in meeting the overall
objective of gaining competitiveness. Debtor has declined in the year 2016 by 500 as compared
to the previous period which is reflecting that liquidity position ha been boosted. There is overall
decrease debtor by -8.47% which is presenting good credibility position and credit policy to
mange its payment collection activity. Bank balance of the specified organization is has been
declined b 100% which is required to be improved as it is presetting that there is liquidation
which can adversely hampering performance of business.

Current liability of the organization presents debt obtained by firm for less than one year
(Erfani and Vasigh, 2018). The particular business possessing trade creditors which is increased
by 4% are required to paid earlier in respect to have higher functioning in effective pattern. In the
year 2016 there is inclination of 200 in trade credibility which is showing that business has
inclined its creditors payments as compared to base year. On the basis of this, it can be
articulated that comparative analysis is helpful in deriving the information regarding change in
absolute value so that reliable insights to make proper decision.
Capital account balance is considered to be the factor which influences the decision-
making of the organization. This shows the total investment which is made by the investors in
the business. This is considered to be the factor which influences the total risk factor of the
organization. In this organization 17.60% of the growth was noticed in the capital account which
was able to record the transactions in the organization that affected the growth of the business
and was able to analyse the essential factors which influences the management in bring resources
for growth purpose.
Net profit of this organization also increased by 9.38% which is considered to be 2%
increase in the comparison to the increase in the total capital invested this is the factor which
explains that the business will experiences a growth in the operations (Nor, Hudaya and
Novriyandana, 2019). The additional capital introduced in this organization was 5000 in 2016
which was more than it was in the last year as the business was able to notice a hope of increase
in the management practices. In addition to that the drawing in 2016 was also high in comparison
to 2016 as this was the stage in which the business. This shows that despite being profitable the
business was not able to manage the growth of the organization.
CONCLUSION
With the help of this project it can be concluded that Grenco plc is the grocery retail
company which needs to improve its efficiency in order to be more financially viable. In this
project the explanation of the different financial statement has been able explain the different
factors which influences the growth of the organization. The calculation of the income statement
and balance sheet of this organization will allow the business to understand the value of h
organizational operations. The comparison of this organization financial statement for the last
two years shows the areas in which it has improved and also the areas in which it needs to work
on.

REFERENCES
Books and Journals
Aini, Q., Anoesyirwan, A. and Ana, Y., 2020. Effect of Cloud Accounting as income statement
on Accountant Performance. Aptisi Transactions On Management (ATM). 4(1). pp.13-
21.
Borodin, A., and et.al., 2019. The impact of the publication of non-financial statements on the
financial performance of companies with the identification of interpectoral features.
Chen, Y.J., and et.al., 2019. Fraud detection for financial statements of business groups.
International Journal of Accounting Information Systems. 32. pp.1-23.
Erfani, G.R. and Vasigh, B., 2018. The impact of the global financial crisis on profitability of the
banking industry: a comparative analysis. Economies. 6(4). p.66.
Huo, T., and et.al., 2018. China's energy consumption in the building sector: A Statistical
Yearbook-Energy Balance Sheet based splitting method. Journal of cleaner production.
185. pp.665-679.
Ihrig, J., and et.al., 2018. Expectations about the federal reserve's balance sheet and the term
structure of interest rates. 53rd issue (March 2018) of the International Journal of
Central Banking.
Nor, W., Hudaya, M. and Novriyandana, R., 2019. Financial statements disclosure on Indonesian
local government websites: A quest of its determinant (s). Asian Journal of Accounting
Research.
Penman, S.H., 2019. Accounting for intangible assets: There is also an income statement.
Abacus. 45(3). pp.358-371.
Safta, I.L., Sabău, A.I. and Muntean, N., 2021. Bibliometric analysis of the literature on
measuring techniques for manipulating financial statements. Risks. 9(7). p.123.
Online
Balance Sheet, 2020[Online]. Available through:
<https://corporatefinanceinstitute.com/resources/knowledge/accounting/balance-sheet/>