University Accounting Module: Financial Statement Analysis Homework

This accounting assignment presents a comprehensive analysis of business transactions, financial statements, and ratio analysis. Part A meticulously analyzes business transactions, providing detailed debit and credit entries for various financial activities. Part B constructs an income statement, balance sheet, and statement of changes in equity, along with a statement of cash flows, offering a complete financial overview. Part C delves into ratio analysis, calculating and interpreting profitability (net margin), asset efficiency (asset turnover), and liquidity (current) ratios to assess the financial health of a company. Finally, Part D provides a business report that analyzes the calculated ratios, discusses the differences in net results, and references relevant academic sources. The assignment offers a practical application of accounting principles, including the use of financial ratios, and provides a detailed analysis of a company's financial position.

Running head: ACCOUNTING
Accounting
Name of the Student:
Name of the University:
Author Note

1ACCOUNTING
Table of Contents
Part A: Business Transactions....................................................................................................2
1. Analyse business transactions:...............................................................................................2
2. Worksheet:.............................................................................................................................3
Part B: Financial Statement........................................................................................................4
Part C: Ratio Analysis................................................................................................................6
Part D: Business Report.............................................................................................................7
Analysing the ratio:....................................................................................................................7
Analysing the difference in net results:......................................................................................8
References and Bibliography:....................................................................................................9

2ACCOUNTING
Part A: Business Transactions
1. Analyse business transactions:
Date Particulars Debit Credit
01-12-2019 Accrued wages 500
Bank 500
(paid accrued wages)
02-12-2019 Software 155
Bank 155
(purchased software)
03-12-2019 Advertisement 253
Cash 253
(paid for radio advertisement)
06-12-2019 Cash 5,600
Accounts receivable 5,600
(received cash from outstanding invoice)
07-12-2019 Office supplies 170
Cash 170
(purchased office supplies)
08-12-2019 No entry
10-12-2019 No entry
11-12-2019 Cash 4,000
Capital 4,000
(capital contributed by the four partners)
11-12-2019 Office supplies 152
Accounts payable 152
(purchased office supplies on account)
13-12-2019 Accounts payable 340
Cash 340
(paid outstanding bill to internet provider)
15-12-2019 Cash 2,786
Sales revenue 2,786

3ACCOUNTING
(cash sales for consulting work)
18-12-2019 Bank Loan 2,500
Interest expense 500
Cash 3,000
23-12-2019 Cash 2,800
Accounts receivable 2,800
(received cash from outstanding invoice)
24-12-2019 Accounts payable 220
Cash 220
(paid advertising expense)
28-12-2019 Computer equipment 9,400
Cash 6,000
Bank 3,400
(purchased computer equipment with cash and bank loan)
29-12-2019 Wages expense 5,200
Cash 5,200
(paid cash for wages)
30-12-2019 Cash 3,896
Sales revenue 3,896
(cash sales for consulting work)
31-12-2019 Rent 525
Prepaid rent 3,150
Cash 3,675
2. Worksheet:
Accounting Worksheet
Particulars
Trial
balance Adjustments
Income
Statement
Balance
Sheet
Debi
t
Cred
it
Debi
t Credit Debit Credit
Debi
t
Cred
it
Bank
12,20
0
19,08
2 19,513
11,76
9
Accounts
receivable 8,975 8,400 575
Office equipment

4ACCOUNTING
3,215 3,215
Computer
equipment 4,300 9,400
13,70
0
Prepaid rent 3,150 3,150
Accounts payable 8,945 560 152 8,537
Accrued wages 1,500 500 1,000
Bank loan
13,30
0 2,500 3,400
14,20
0
Capital 9,070 4,000
13,07
0
Sales revenue
26,08
7 6,682 32,769
Advertising 8,312 253 8,565
Software 3,800 155 3,955
Supplies 1,100 322 1,422
Wages 6,700 5,200
11,90
0
Information
technology 2,800 2,800
Rent 7,500 525 8,025
Interest expense 500 500
58,90
2
58,90
2
42,14
7 42,147
37,16
7 32,769
32,40
9
36,80
7
Net Loss
-
4,398
-
4,398
32,40
9
32,40
9
Part B: Financial Statement
Income Statement
Particulars Amount Amount
Sales revenue 32,769

5ACCOUNTING
Expenses
Advertising 8,565
Software 3,955
Supplies 1,422
Wages 11,900
Information
technology 2,800
Rent 8,025
Interest expense 500
Total expenses 37,167 37167
Net Loss -4,398
Balance Sheet
Particulars Amount Amount
Bank 11,769
Accounts receivable 575
Current assets 12,344
Office equipment 3,215
Computer equipment 13,700
Prepaid rent 3,150
Non-current assets 20,065
Total assets 32,409
Accounts payable 8,537
Accrued wages 1,000
Current liabilities 9,537
Bank loan 14,200
Non-current liabilities 14,200
Total liabilities 23,737
Net assets 8,672
Capital 13,070
Retained earnings -4,398
Total equity 8,672
Statement of changes in equity
Particulars Amount Amount
Opening balance 9,070
New Capital 4,000
Net loss -4,398
Ending balance 8,672
Statement of cash flows

6ACCOUNTING
Particulars Amount Amount
Net income -4,398
Accounts receivable 8,400
Accounts payable 560
Cash flow from operating activities 4,562
Computer equipment -6,000
Cash flow from investing activities -6,000
Bank loan -2,500
Bank loan 3,400
900
Cash balance -431
Opening balance 12,200
Closing balance 11,769
Part C: Ratio Analysis
Profitability Value
Sales revenue (A) 32,769
Net Income (B) -4,398
Net margin ratio (B/A) -4,398/32,769
Net margin ratio (B/A) -13.42%
Asset efficiency Value
Sales revenue (A) 32,769
Total assets (B) 32,409
Asset turnover ratio (A/B) 32,769/32,409
Asset turnover ratio (A/B) 1.01
Liquidity Value
Current assets (A) 12,344
Current liabilities (B) 9,537
Current assets (A/B) 12,344/9,537
Current assets (A/B) 1.29

7ACCOUNTING
Part D: Business Report
Analysing the ratio:
The financial ratios that have been calculated in Part C directly provides insight on the
overall financial conditions of Keogh Partners. The financial issues mainly comprises of
different sections such as profitability asset efficiency and liquidity. Profitability ratio directly
comprises of net profit margin whereas asset turnover ratio is used to describe the acid
efficiency condition and current ratio is used to understand the company's liquidity ratio.
Moreover, with the help of financial ratios investors are able to understand the current
financial position of an organisation and understand its future growth conditions (Liang et al.
2016).
The calculation indicated that the net profit margin of the organization is negative
13.42%. The negative value of net profit margin is due to the overall loss that was generated
during the month of December. The high level of expenses incurred during the month lead to
the loss of -4,398. Furthermore, operations for the past 6 months have been included in the
overall analysis, which directly indicates about loss the making trend of Keogh Partners.
The asset turnover ratio is at the levels of 1.01, which states that the overall asset is
sufficient to provide adequate levels of revenue for the organization. However, improvements
can be incurred to generate additional revenues by improving the operational capability of the
company (Kanapickiene & Grundiene, 2015).
The liquidity ratio mainly comprises of the current ratio, which is at the levels of 1.29.
The analysis has directly indicated that the company does not have any kind of inventory
system, which makes the current assets most stable, as the company could adequately
supported short term liabilities by not hampering its non-current assets.

8ACCOUNTING
Analysing the difference in net results:
The difference in the overall net results is due to the financial statement requirements,
where the values would change due to the use of net assets that would be generated by
subtracting the total assets and total liabilities. The financial statement directly requires to
match the net assets and total equity of the organisation to determine whether all the relevant
entries are appropriate. Thus, the financial statement provides appropriate information
regarding the current position of Keogh Partners for the period of December 2019.

9ACCOUNTING
References and Bibliography:
Abdul-Baki, Z., Uthman, A. B., & Sannia, M. (2014). Financial ratios as performance
measure: A comparison of IFRS and Nigerian GAAP. Accounting and Management
Information Systems, 13(1), 82.
Adam, M. H. M. (2014). Evaluating the Financial Performance of Banks using financial
ratios-A case study of Erbil Bank for Investment and Finance. European Journal of
Accounting Auditing and Finance Research, 2(6), 162-177.
Arkan, T. (2016). The importance of financial ratios in predicting stock price trends: A case
study in emerging markets. Finanse, Rynki Finansowe, Ubezpieczenia, 79(1), 13-26.
Elhaj, M. A. A., Muhamed, N. A., & Ramli, N. M. (2015). The influence of corporate
governance, financial ratios, and Sukuk structure on Sukuk rating. Procedia
Economics and Finance, 31, 62-74.
Kanapickienė, R., & Grundienė, Ž. (2015). The model of fraud detection in financial
statements by means of financial ratios. Procedia: social and behavioral sciences,
321-327.
Liang, D., Lu, C. C., Tsai, C. F., & Shih, G. A. (2016). Financial ratios and corporate
governance indicators in bankruptcy prediction: A comprehensive study. European
Journal of Operational Research, 252(2), 561-572.
Birt J., Chalmers K., Maloney S., Brooks A., Oliver J., (2017) Accounting business reporting
for decision making (eBook and Hardcopy), 6th edition