Accounting for Business: Financial Statement Analysis Assignment

This accounting assignment solution covers various aspects of accounting for business, including multiple-choice questions in Section A and problem-solving in Section B. Section A tests understanding of fundamental accounting concepts such as partnerships, financial statements, cost accounting, and budgeting. Section B presents a statement of financial position and income statement for Sky Travel Plc, followed by questions on operating budgetary control, master budgets, annual budgets, rolling budgets, fixed budgets, and flexible budgets. The solution provides detailed answers and explanations for each question, making it a valuable resource for students studying accounting principles and financial statement analysis.

ACCOUNTING FOR
BUSINESS

Table of Contents
Table of Contents.............................................................................................................................2
SECTION A.....................................................................................................................................3
Question 1...................................................................................................................................3
Question 2...................................................................................................................................3
Question 3...................................................................................................................................3
Question 4...................................................................................................................................3
Question 5...................................................................................................................................3
Question 6...................................................................................................................................3
Question 7...................................................................................................................................3
Question 8...................................................................................................................................3
Question 9...................................................................................................................................3
Question 10.................................................................................................................................3
Question 11.................................................................................................................................3
Question 12.................................................................................................................................3
Question 13.................................................................................................................................4
Question 14.................................................................................................................................4
Question 15.................................................................................................................................4
Question 16.................................................................................................................................4
Question 17.................................................................................................................................4
Question 18.................................................................................................................................4
Question 19.................................................................................................................................4
Question 20.................................................................................................................................4
Question 21.................................................................................................................................4
Question 22.................................................................................................................................4
Question 23.................................................................................................................................4
Question 24.................................................................................................................................4
Question 25.................................................................................................................................4
SECTION B.....................................................................................................................................5
Question B2................................................................................................................................6

SECTION A
Question 1
c. Accounting
Question 2
b. Each partner is liable under the law for the action of his or her partner.
Question 3
d. assist management in controlling the business and making decisions.
Question 4
c. An organization and its owner are separate entities for accounting purpose.
Question 5
d. Financial
Question 6
c. partners are subject to a special partnership tax on their share of profits.
Question 7
b. Profit increases, cash decreases
Question 8
b. Bonus issue of shares
Question 9
a. liquid
Question 10
b. some non- current assets were sold for cash
Question 11
a. Cash inflows less cash outflows’
Question 12
b. Repayment of loan

Question 13
b.Raw material cost
Question 14
d.All of the above
Question 15
b.Direct material, direct labour and manufacturing overhead
Question 16
c.Raw material
Question 17
a. Estimated overhead cost divided by estimated allocation base.
Question 18
b. Material requisition forms
Question 19
a. Salaries of teaching staff
Question 20
c. Machine hours
Question 21
b. Absorb overheads on the basis of labour hours/costs
Question 22
c. Actual activity multiplied by actual overhead rate
Question 23
b. Actual overhead cost
Question 24
d. Both b) and c) above
Question 25
c. Companies are not legally required to produce financial accounting information

SECTION B
a) Statement of Financial position of Sky Travel Plc
Statement of Financial Position for the year ending 31st December 2019.
ASSETS
Non Current Assets
Buildings 12000
Company Vehicles 5500
Fixtures & Fittings 2500
20000
Current Assets
Cash at Bank 1500
Cash in hand 25
Accounts Receivable 250
Inventory 2500
4275
TOTAL 24275
EQUITY & LIABILITIES
Owners equity 3700
less: Drawing 0
Add: Profits 19075 22775
Retained Earnings 250
Liabilities
Non Current Liabilities
Long Term Loan 500
Current Liabilities
Accounts Payable 750
Total Liabilities 1250
TOTAL 24275

b) Income Statement of Sky Travel Plc
Income Statement for the year ending 31st December 2019.
Particulars Amount
Revenues 75000
Cost of Sales
Opening Stock 1000
Purchases 50000
Closing Stock 2500 48500
Gross Profits 26500
Operating Expenses
Rent 500
Rates 250
Bad debts 100
Vehicle Depreciation 50
Fixture & fitting depreciation 25
Wages & salaries 5500
Vehicle expenses 250 6675
Operating profit 19825
Administrative Expenses 500
Marketing Expenses 250 750
Net profit 19075
Question B2
1 ) Advantages and disadvantages of operating budgetary control.

Operating budget contains the revenues and the operating expenses of the company. it is
related with running day to day operations of the business. Though this budget is useful but there
are many of the drawbacks of using the operating budget. Operting budgets are prepared by the
management at the beginning of the year.
Advantages
 It helps in efficiently planning the future operations of the business.
 Operating budget helps the management allocating the resources for meeting the
operating expenses of business.
 It is a simple and easy budget to implement in the organisation.
Disadvantages
 It is very difficult to make projection about daily operations of business.
 The budget is based on assumptions, variation could affect the the other budgets.
 The variations in operating budgets are generally higher compared with other budgets.
2. Explaining
a) Master Budget
Master budget is the m ain budget of the organisation. It is prepared by aggregating all
the lower level budget that are produced by different functional areas. Mast budget contains the
budget for all the functional department and organisation as whole. Master budget is prepared at
the beginning of the year. a master budget also contains details of the projected income statement
balance sheet and financial plans.
b) Annual Budget
Annual budget is the budget that is prepared by the organisation that contains the plan for
capital expenditures for the fiscal year. preparation of annual budget involve balancing income
or revenues of the organisation with the expenses. it contains the spending plan to be followed
for the whole year.
c) Rolling Budget
In this incremental budgeting method, budgets are prepared by subtracting or adding
certain percentage in the budget for last year on basis of the actual figures for the last year for
ascertaining budget for the current year. It is updated continually for adding the new budget
period immediately after the budgeting period is finished.
d) Fixed Budget

It is defined as budget that do not flex or change for the decreases or increases in the
volume such as sales, quantity such other things. Once the budget is authorised by the Board of
directors not changes could be made in the budget afterwards even when there is scope of
change. It is also called static budget. These budgets are prepared for the operation that does not
have major changes once they are prepared.
e) Flexible Budget
Flexible budget could be described as the budget that flexes or adjust with the activity or
volume. The budget is more sophisticated & useful as compared with the static budget. The
budget allows the management to make necessary changes as required even after the budgets
have een authorised by senior executives. It enables the company to remove the variations and
make necessary adjustments.