Introduction to Financial Project

INTRODUCTION TO
FINANCIAL PROJECT
1

Table of Contents
MAIN BODY..................................................................................................................................3
Question 1a)....................................................................................................................................3
(a) Trading Account for the year ending 30th April 2019.......................................................3
(b) Profit and loss account for the year ending 30th April 2019.............................................3
(c) Financial position as on 30th April 2019...........................................................................3
Question 1b)....................................................................................................................................4
Six main features for users of financial statements and importance and benefits to users....4
Question 2a)....................................................................................................................................6
Ratio Analysis........................................................................................................................6
Question 2b)....................................................................................................................................9
(a) Bank account balancing at the end of each month............................................................9
(b) Accounts balances at the end of two month periods.........................................................9
(c) Trial balance as at 30 April 2018....................................................................................11
Question 2c)..................................................................................................................................11
(i) Straight Line method at 12.5%.......................................................................................11
(ii) Reducing Balance Method 15%.....................................................................................12
(iii) Meaning and significance of the accounting concepts..................................................13
REFERENCES..............................................................................................................................15
2

MAIN BODY
Question 1a)
(a) Trading Account for the year ending 30th April 2019
Particulars
Amount in
£ Amount in £
Sales 30000
Opening stock 4700
Purchases 15700
20400
Less: Clsoing stock 4400
Cost of goods sold 16000
Gross profit 14000
(b) Profit and loss account for the year ending 30th April 2019
Profit and Loss Account for the year ended 30 April 2019
Particulars
Amount in
£ Amount in £
Gross profit 14000
Less: expenses:
Shop wages 4420
Light and heat 260
Rent 4500
Insurance 120
9300
Net profit 4700
(c) Financial position as on 30th April 2019
Statement of Position as at 30 April 2019
Particulars
Amount in
£ Amount in £
Fixed Assets
Shop fittings 13000
Current Assets
Stock 4400
Debtors 120
Bank 610
Cash 100 5230
Total assets 18230
3

Capital
Opening capital 15000
Add: profit 4700
Less: Drawings 3500 16200
Current Liabilities
Creditors 2030
Total liabilities 18230
Question 1b)
Six main features for users of financial statements and importance and benefits to users
The financial statements are the statement which provides for the information relating to the
profitability of the company to the interested users. This is very much essential for the
companies to provide all the clear and correct information within the financial statements. This
is essential because of the fact that if the information will not provide for the proper information
to the users of the financial statements. The major feature of financial statement of the company
to the users of information is as follows-
 Proper information relating to profitability of company- this feature of the financial
statement of the company state that the financial statement suggests the profits or the loss
which the company is being earning from the daily business. This is major feature as this
is very essential for the management of the business and the goodwill of the business.
The major reason underlying this fact is that when the proper information will be
displayed relating to the investment of the company and how much the company is
earning the profits (Pelekh, Khocha and Holovchak, 2020). This information is helpful
for the investors to a great extent. The investors are the user of the financial information
and this will assist the investor in analysing the profitability of the company before
investing in the company. This is essential for the investor to assess the pat records that
how much the company has paid to the investors in earlier time and how they will pay in
the future.
 Reliability- this is another major feature of the financial statements being prepared by the
company. This is majorly because of the reason that if the financial statements will not
be good and relevant then the information being provided by the company must be
4