Introduction to Finance Accounting

Introduction to
Finance Accounting

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
Question 1a).....................................................................................................................................1
(a) Bob’s Trading Account for the year ending 30th April 2019..................................................1
(b) Bob’s Profit and loss Account for the year ending 30th April 2019.......................................1
(c) Bob’s statement of financial position for the year ending 30th April 2019............................1
Question 1b).....................................................................................................................................2
Evaluation of the features of the financial information for the users of the financial statements
with the importance and benefits to users....................................................................................2
Question 2a).....................................................................................................................................3
Ratio Analysis..............................................................................................................................3
Question 2b).....................................................................................................................................5
(a) Bank account balance at the end of every month...................................................................5
(b) Accounts balances at end of the 2 month periods..................................................................6
(c) Trial balance as at 30 April 2018...........................................................................................8
Question 2c).....................................................................................................................................8
(i) Straight Line method at 12.5%..............................................................................................8
(ii) Reducing Balance Method 15%............................................................................................9
iii) Significance and meaning of accounting concepts................................................................9
REFERENCES..............................................................................................................................11

Question 1a)
(a) Bob’s Trading Account for the year ending 30th April 2019
Particulars Amount Particulars Amount
To Opening 4700 By Sales 30000
To Purchases 15700
By closing stocks 4400
To Gross Profit 14000
34400 34400
(b) Bob’s Profit and loss Account for the year ending 30th April 2019
To shop wages 4420 By Gross Profit 14000
To light and heat 260
To Rent 4500
To insurance 120
To Net Profit 4700
14000 14000
(c) Bob’s statement of financial position for the year ending 30th April 2019
ASSETS LIABILITIES
Non Current Assets Non Current Liabilities
Shop Fittings 13000 Borrowings 0
Current Assets Current Liabilities
Bank 610 Creditors 2030
Cash 100
Debtors 120 Owners Capital
Inventory 4400 Capital 15000
Add: Profit 4700
Less : Drawings -3500 16200
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Total Assets 18230 Total Equity & Liabilities 18230
Question 1b)
Evaluation of the features of the financial information for the users of the financial statements
with the importance and benefits to users
Financial statements could be defined as the summary of all the financial transactions and
events carried out during the year. The information provided by the financial statements is used
by different users as per their interest in the company. it enables the users of financial statements
to make informed business decisions about the company analysing the performance and position
of company over the period. The main six features of financial information to users of the
statements are
Relevance – Information could be stated as relevant if it could influence the decision of users.
Financial statements should provide relevant information about the company for making
economic decisions by the users. If the predictive and contemporary values are not provided by
the financial statements the information is not considered to be relevant for decision making.
Financial information should be relevant as different parties are associated with the business who
wants to evaluate internal functioning of company and the performance targets achieved during
the year.
Faithful Representation – Financial information revealed by the statements should represent
actual performance and position of organisation. The concept requires that information provided
gives a true and fair of financial position as well as performance of the organisations. The
information provided should be free from errors and misstatements and should not be falsely
prepared for representing good performance of the company (Weygandt, Kimmel and Kieso,
2019). The feature of completeness requires that every information that is stated in the financial
statements is true and free from errors and mistakes. All the material transactions or events that
are capable of influencing the behaviour of users should be stated in the statements of company.
Comparability – Financial statements are also prepared so that users can make comparisons
between different firms of the industry for analysing the performance and growth of the
organisation. Keeping this thing in mind the feature accounting bodies required the companies to
prepare financial statements on uniform basis. Financial statements are now prepared by the
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