Accounting Skills Assignment: Financial Analysis and Variance Analysis

This accounting assignment comprehensively addresses key accounting principles and practices. It begins with journalizing transactions and posting them to ledger accounts for Phoenix Inc., followed by an analysis of bookkeeping versus accounting. The assignment then delves into preparing income statements and balance sheets for Indus Corp, emphasizing the importance of financial statements for business decision-making. A cash budget is created for ABC Industries, alongside an explanation of zero-based budgeting. The final section focuses on variance analysis, calculating direct material and labor variances, as well as overhead variances, providing a thorough understanding of cost control and performance evaluation. The assignment covers a wide range of accounting concepts, including financial statement preparation, budgeting, and variance analysis.

Running head: ACCOUNTING SKILLS
Accounting Skills
Name of the Student:
Name of the University:
Author’s Note:

1ACCOUNTING SKILLS
Table of Contents
Answer to Question 1:.....................................................................................................................3
Requirement A:............................................................................................................................3
i) Journal Entries:.................................................................................................................3
ii) General Ledger:.............................................................................................................4
Requirement B:............................................................................................................................5
Answer to Question 2:.....................................................................................................................6
Requirement A:............................................................................................................................6
Requirement B:............................................................................................................................7
Answer to Question 3:.....................................................................................................................9
Requirement A:............................................................................................................................9
Requirement B:..........................................................................................................................10
Answer to Question 4:...................................................................................................................11
Requirement A:..........................................................................................................................11
Requirement A.i:....................................................................................................................11
Requirement A.ii:..................................................................................................................13
Requirement A.iii:.................................................................................................................14
Requirement B:..........................................................................................................................14
Answer to Question 5:...................................................................................................................15
Requirement A:..........................................................................................................................15

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Requirement B:..........................................................................................................................15
Answer to Question 6:...................................................................................................................16
Requirement A:..........................................................................................................................16
Requirement B:..........................................................................................................................16
Requirement C:..........................................................................................................................16
Reference.......................................................................................................................................18

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Answer to Question 1:
Requirement A:
i) Journal Entries:
Dr. Cr.
Date Reference Amount Amount
01-10-2016 Cash A/c. Dr. $8,00,000
To, Capital A/c. $8,00,000
02-10-2016 Purchase A/c. Dr. $3,000
To, Cash A/c. $3,000
15-10-2016 Cash A/c. Dr. $25,000
To, Sales A/c. $25,000
18-10-2016 Stationeries A/c. Dr. $4,000
To, Cash A/c. $4,000
23-10-2016 Furniture & Fittings A/c. Dr. $24,000
To, Cash A/c. $24,000
25-10-2016 Electricity Expenses A/c. Dr. $3,000
To, Cash A/c. $3,000
26-10-2016 Salary Expenses A/c. Dr. $18,000
To, Cash A/c. $18,000
28-10-2016 Rent Expenses A/c. Dr. $500
To, Cash A/c. $500
(Stationeries purchased for cash)
(Furniture bought for cash)
(Electricity charges paid with cash)
(Salary expenses paid)
(Rent expense paid)
Particulars
In the books of Phoenix Inc.
Journal Entries
(Caash invested in business by proprietor)
(Goods purchased for cash)
(Goods sold for cash)

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ii) General Ledger:
Dr. Cr.
Date Particulars Ref Amount Date Particulars Ref Amount
01-10-2016 To, Capital A/c. $8,00,000 02-10-2016 By, Purchase A/c. $3,000
15-10-2016 To, Sales A/c. $25,000 18-10-2016 By, Stationeries A/c. $4,000
23-10-2016 By, Furniture & Fittings A/c. $24,000
25-10-2016 By, Electricity Expenses A/c. $3,000
26-10-2016 By, Salary Expenses A/c. $18,000
28-10-2016 By, Rent Expenses A/c. $500
31-10-2016 By, Balance c/d $7,72,500
$8,25,000 $8,25,000
Dr. Cr.
Date Particulars Ref Amount Date Particulars Ref Amount
02-10-2016 To, Cash A/c. $3,000 31-10-2016 By, Balance c/d $3,000
$3,000 $3,000
Dr. Cr.
Date Particulars Ref Amount Date Particulars Ref Amount
18-10-2016 To, Cash A/c. $4,000 31-10-2016 By, Balance c/d $4,000
$4,000 $4,000
Dr. Cr.
Date Particulars Ref Amount Date Particulars Ref Amount
23-10-2016 To, Cash A/c. $24,000 31-10-2016 By, Balance c/d $24,000
$24,000 $24,000
Dr. Cr.
Date Particulars Ref Amount Date Particulars Ref Amount
23-10-2016 To, Cash A/c. $3,000 31-10-2016 By, Balance c/d $3,000
$3,000 $3,000
Dr. Cr.
Date Particulars Ref Amount Date Particulars Ref Amount
23-10-2016 To, Cash A/c. $18,000 31-10-2016 By, Balance c/d $18,000
$18,000 $18,000
Dr. Cr.
Date Particulars Ref Amount Date Particulars Ref Amount
23-10-2016 To, Cash A/c. $500 31-10-2016 By, Balance c/d $500
$500 $500
Dr. Cr.
Date Particulars Ref Amount Date Particulars Ref Amount
31-10-2016 To, Balance c/d $8,00,000 01-10-2016 By, Cash A/c. $8,00,000
$8,00,000 $8,00,000
Dr. Cr.
Date Particulars Ref Amount Date Particulars Ref Amount
31-10-2016 To, Balance c/d $25,000 01-10-2016 By, Cash A/c. $25,000
$25,000 $25,000
Salary Expenses A/c.
Rent Expenses A/c.
Capital A/c.
Sales A/c.
Cash A/c.
Purchase A/c.
Stationeries A/c.
Furniture & Fittings A/c.
Electricity Expenses A/c.

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Requirement B:
Book Keeping is an essential part of the accounting process where in various accounting
transactions are recorded in ledgers accounts. The ledger accounts provide the account balances,
required for the preparation of various financial statements (Sangster 2015). The purpose of
accounting is to summarise financial information and interpretation of the same. Information
which generated in reports and interpreted are done by using accounting information which is
provided in the database of records which is created in book keeping process. The process of
book keeping can be described as the recording of various business transactions during a
particular year as per the accounting guidelines (Edwards 2013). On the other hand, the role of
accounting goes beyond the role of book keeping as they have to classify, summarise and present
the accounting information which is extracted from book keeping records. Thus, it can be said
that the process of book keeping forms a part of the overall accounting process. Therefore, it is
clear that the field of accounting is much wider than the field of Book Keeping.
Book keeping involves recording transactions which the business is involved in during a
particular period in a journal or ledger account (Ijiri 2014). The process of book keeping does not
follow any accounting regulations or standards and does not involve any skills or specialised
knowledge for the same. On the other hand, accounting starts from the point where book keeping
process ends. The transactions are posted into respective accounts as per double entry system and
accounting standards and principles are followed for the purpose of treating various transactions
and bring about presentability of the accounting information. Therefore, book keeping process
forms a part of the accounting process of the business.

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Answer to Question 2:
Requirement A:
Particulars Amount
($'000)
Sales 37,436
Cost of Goods Sold -26,980
GROSS PROFIT 10,456
Selling, General & Administrative Expense -3,624
Research & Development Expense -1,982
NET PROFIT BEFORE INTEREST & TAX 4,850
Interest Expense -450
NET PROFIT BEFORE TAX 4,400
Income Tax Expense -1,100
NET PROFIT FOR THE PERIOD 3,300
In the books of Indus Corp
Income Statement
for the period ended 31st Dec, 2016

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Particulars Amount Amount
($'000) ($'000)
Current Assets:
Cash 4,895
Accounts Receivable 5,714
Inventories 8,517
TOTAL CURRENT ASSETS 19,126
Non-Current Assets:
Plant & Equipment 7,154
Land 981
TOTAL NON-CURRENT ASSETS 8,135
TOTAL ASSETS 27,261
Current Liabilities:
Accounts Payable 7,156
TOTAL CURRENT LIABILITIES 7,156
Non-Current Liabilities:
Long-Term Liability 20,105
TOTAL NON-CURRENT LIABILITIES 20,105
TOTAL LIABILITIES 27,261
Capital:
Retained Earnings -3,300
Add: Net Profit for the period 3,300
TOTAL CAPITAL 0
TOTAL LIABILITIES & CAPITAL 27,261
In the books of Indus Corp
Balance Sheet
as on 31st Dec, 2016
Requirement B:
Financial statements refer to the compilation of different statements, presented in the
companies’ annual reports. Financial statement of an accounting entity mainly comprises of

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income statement, balance sheet and cash flow statement (Carraher and Van Auken 2013). The
primary objective of the financial statement is to disclose the financial performance of the
business during a particular period. Financial statements are the main sources of the information
relating to the financial position of the company and cash flows in a business. Therefore, it is
very valuable for the investors. Financial statements are very useful for the investors in order to
take decisions regarding whether to invest in the company or not (Kraft 2014).
Financial statements are also important to the management of the company as the
information which are presented in the financial statements are used for the purpose of
comparison with previous year’s performance and then decisions regarding improvements can be
made on the basis of the information which are already shown in the annual report of the
business. Moreover, financial statements are essential for obtaining credit from financial
institutions and in the presence of a favourable financial statements, required amount of credit is
easily granted (Ball 2013). Thus, financial statements are used both potential investors,
stakeholders and banking institution to analyse the current performance of the firm and also
check the viability of the business for future. In other words, it can be said that the financial
statements provide the information, required to measure the financial performance of a business
for a particular period.

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Answer to Question 3:
Requirement A:
Particulars April May June TOTAL
Cash flow from Operating Activities:
Cash Sales $23,200 $22,400 $24,000 $69,600
Receipts from Customers $38,400 $34,800 $33,600 $1,06,800
Payment to Suppliers -$38,000 -$33,000 -$35,000 -$1,06,000
Wages Paid -$8,000 -$10,000 -$8,500 -$26,500
Overhead Expenses paid -$11,500 -$9,000 -$9,500 -$30,000
Net Cash Inflow/(Outflow) from
Operating Activities $4,100 $5,200 $4,600 $13,900
Cash flow from Investing Activities:
Payment for Land Purchased -$87,000 -$87,000
Receipts of Dividend Income $8,000 $8,000
Net Cash Inflow/(Outflow) from
Investing Activities -$87,000 $8,000 $0 -$79,000
Cash flow from Financing Activities:
Repayment of Loan -$16,000 -$16,000
Net Cash Inflow/(Outflow) from
Financing Activities $0 -$16,000 $0 -$16,000
Net Increase/Decrease in Cash Flow -$82,900 -$2,800 $4,600 -$81,100
Add: Opening Cash Balance $8,00,000 $7,17,100 $7,14,300 $8,00,000
Closing Cash Balance $7,17,100 $7,14,300 $7,18,900 $7,18,900
In the books of ABC Industries
Cash Budget
For the period from April to June

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Workings:
Particulars January February March April May June
Total Sales $60,000 $62,000 $64,000 $58,000 $56,000 $60,000
40% Cash Sales $24,000 $24,800 $25,600 $23,200 $22,400 $24,000
Cash Receipts from Customers $36,000 $37,200 $38,400 $34,800 $33,600
Purchases $36,000 $38,000 $33,000 $35,000 $39,000 $34,000
Payment to Suppliers $36,000 $38,000 $33,000 $35,000
Wages $9,000 $8,000 $10,000 $8,500 $9,000 $8,000
Payment of Wages $9,000 $8,000 $10,000 $8,500
Selling Overheads $4,000 $5,000 $4,500 $3,500 $4,500 $4,500
Offi ce Overheads $2,000 $1,500 $2,500 $2,000 $1,000 $1,500
Mfg. Overheads $4,000 $3,000 $4,500 $3,500 $4,000 $3,000
Total Overheads $10,000 $9,500 $11,500 $9,000 $9,500 $9,000
Payment of Overheads $10,000 $9,500 $11,500 $9,000 $9,500
Requirement B:
Zero Based Budgeting is a budgeting process, where the expenses are to be acceptable for
each new accounting period. The method requires justification of the costs in order to avoid the
blanket increase the costs of the business and thereby optimizing the costs of the business
(Ekanem 2014). The method not only focuses on the revenues of the but also looks to minimize
the costs which are associated with the business. The purpose of Zero Based Budgeting system is
to put an onus on the managers to justify the expenses and aims to drive the management
towards value driving by optimizing the costs of the business and not just the revenues of the
business (Kelly and Rivenbark 2014). The purpose of following a zero based budgeting practice,
the management of the company aims to reduce the overall spending of the business by
reviewing the areas through which different costs can be cut (Surianti and Dalimunthe 2015).
The method of zero based budgeting practice helps businesses to save funds of the business and

11ACCOUNTING SKILLS
effectively scrutinise the budget, accounting for every costs which the business has incurred for a
year.
Most of the business Zero Budgeting policies in order to prepare a new budget for every
new period so that the additional increase in the cost of the business can be reduced and
optimized.
Answer to Question 4:
Requirement A:
Requirement A.i:
Direct Material Price Variance:
Particulars Amount
Standard Material Cost per kg. $7.50
Actual Material Cost per kg. $13.50
Actual Quantity p.u. (in kg.) 6.75
Total Production (in units) 15000
Direct Material Price Variance -$6,07,500
Remarks Unfavorable