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Project Report: Principles of Accounting

   

Added on  2020-03-16

16 Pages4152 Words45 Views
Running Head: Principles of accounting 1Project report: Principles of accounting

Principles of accounting 2ContentsIntroduction.......................................................................................................................3Company performance......................................................................................................3Transaction in the company..............................................................................................3Ratio analysis....................................................................................................................4Conclusion........................................................................................................................5References.........................................................................................................................7Appendix...........................................................................................................................8

Principles of accounting 3Introduction:This report has been prepared to investigate the numbers of the Violet Chan’s consultancy Pty ltd. Before preparing this report, the activities and transaction of the company has been evaluated and for that preparation of journal entries, ledger account, trail balance, profit and loss account, balance sheet and calculation of ratio analysis has been done. This report depict that the performance of the company is not impressive and the company is required to manage and maintain various expenses and required to make change into the assets, equity and debt level to enhance the profitability, liquidity and debt position of the company. In this report, the comparative study has also been done to found and analyzethe changes into financial performance of the company from last year. Company performance:According to the last year’s balance sheet of the company, it has been analyzed that the performance of the company was bit better than current year as the company was able to make at least the profit. But according to the current situation of the company, the company has faced the situation of net loss. The current scenario of capital structure and the debt equity, debt assets and equity ratio was almost similar as last year (Assessment, 2013). No extra changes have been done by the company to manage and change the level of the company, according to the performance of the company, it has been analyzed that the company is required to make various changes into its activities and performance to manage the profits. Owner is investing various capitals into the company but this amount is not used by the company in a proper manner and that is why the excess problems are faced by the company. Further, the level of the total assets, debt and equity has been analyzed and it has been found that the level of total assets has been enhanced whereas the level of debt has been reduced and the level of total equity of the company has also been enhanced from financial year 2015 in financial year 2016. The average performance of the company expresses that thecompany has not managed a good level of equity (Whittington, 2008). The company is suggested to reduce the level of total assets to maintain the business in a good manner.Transaction in the company:Various transaction of the company has been studied in the month of June. The main transaction was contributing more money into the account which was not required by the company. The owner has contributed $ 17,000 more into the capital of the company. Further,

Principles of accounting 4a new computer has also been bought by the company on credit and the payment has not beenmade by the company (Lee, 2006). Company has paid various monthly expenses in cash suchas salary, wages, rent, advertisement, telephone bill etc. Company has bought furniture on credit basis and later on the entire amount has been paid by the company to its creditors. Company has also depreciated the old and new furniture and the old and new computer according to the SLM depreciation method (assumption). Thus through these analysis, it has been found that the company has not made any special transaction to manage the level of equity, assets, debt of the company. And company has also not made any extra effort to enhance the revenue of the company, only $ 200 has been spent by the company on advertisement. According to the evaluation of all of these, it has been found that the average performance of the company expresses that the company has not managed a good level of equity (Glasson, Therivel & Chadwick, 2013). The company is suggested to reduce the level of total assets to maintain the business in a good manner.Ratio analysis:Ratio analysis study has been performed over the Violet Chan’s consultancy Pty ltd. The study of ratio analysis of the company depict that the return on assets of the company is -2.29% which depict that the performance of the company is not well and the company is facing various losses in the market (Dye & Sunder, 2001). Through this analysis, it has been found that the net profit of the company is $ -1146 and the total assets of the company is $ 50,054. Further, it has been investigated that the current ratio of the company is 9.72:1 which depict that the current assets of the company is 9.72 times more than the current liabilities of the company. The current ratio of the company depict that the liquidity position of the company has been worst and it express that the company is required to reduce the level of current assets of the company to manage the liquidity position of the company. The current assets of the company are $ 40,854 and the current liabilities of the company are $ 4,200 which express that the company must reduce the level of the current assets of the company (Laux & Leuz, 2009)..Further, the assets turnover ratio of the company has been analyzed and it has been found that the ratio of the company is 0.1208 which express that the total sales are 0.12 times of the total assets of the company. The total sales of the company are $ 6,050 and the total assets of the company are $ 50,054. According to this analysis, it is suggested top the

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