Financial Accounting Assignment: Analyzing Epic's Financials

This document presents a comprehensive solution to a financial accounting assignment. The assignment focuses on the fictional company 'Epic' and includes detailed journal entries, sales and purchase day books, cash receipts and payments books, and a trial balance. It progresses to constructing an income statement and a statement of financial position, providing a complete overview of Epic's financial performance and position. The solution demonstrates the application of accounting principles, including the calculation of cost of goods sold, gross profit, and net profit, as well as the classification of assets, liabilities, and equity. The analysis covers the period ending September 30, 2018, and the solution provides a clear demonstration of the accounting cycle and the preparation of financial statements.

INTRODUCTION TO
FINANCIAL
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
QUESTION 1..............................................................................................................................3
QUESTION 2..............................................................................................................................8
QUESTION 3..............................................................................................................................8
CONCLUSION................................................................................................................................8

INTRODUCTION
MAIN BODY
QUESTION 1
Journal Entries in the book of Epic are enumerated below:
Particulars Amount (in £) Amount (in £)
Rent a/c Dr
To cash
10120
10120
Bank a/c Dr
To loan a/c
15000
15000
Equipment a/c Dr
To Cash a/c
15000
15000
Wages a/c Dr
To cash
3000
3000
Wages a/c Dr
To outstanding wages
a/c
1200
1200
Prepaid rent a/c Dr
To Rent a/c
800
800
Depreciation a/c Dr
To Equipment a/c
12000
12000
Ledgers of Epic ‘
Sales day book
Date Customer Invoice No. Amount
Opening balance 289400
01-Sep Rita plc 1 1000

02-Sep Vera plc 2 1500
03-Sep Godwin Plc 3 1200
04-Sep Sush Plc 4 2000
05-Sep Gem Plc 5 1800
06-Sep Cash 6 750
07-Sep Cash 7 550
08-Sep Cash 8 1250
10-Sep Sush Plc 4 1400
15-Sep Gem Plc 5 1000
20 Sep Discount allowed 3 400
TOTAL 296650
Sales Returns Day Book
Date Customer Invoice No. Amount
Opening balance 1400
08-Sep Rita plc 1 200
12-Sep Vera plc 2 100
Total 1700
Purchase Day Book
Date Customer Invoice No. Amount
Opening balance 143300
01-Sep Dyna Plc 9 850
02-Sep PUG Plc 10 900
03-Sep ABC plc 11 1050
04-Sep XYZ plc 12 600
05-Sep M&S Plc 13 770
06-Sep Cash 14 1200
07-Sep Cash 15 350
08-Sep Cash 16 480
13-Sep ABC plc 11 950
15-Sep XYZ plc 12 520
20 Sep. Discount received 13 150
Total 147880
Purchase return day book

Date Customer Invoice No. Amount
Opening balance 7600
15-Sep Dyna Plc 9 200
20-Sep PUG Plc 10 400
Total 8200
Cash receipts book
Cash receipt account
Date Customer Invoice No. Amount
Loan 15000
06-Sep Cash 6 750
07-Sep Cash 7 550
08-Sep Cash 8 1250
Cash payments book
cash payment account
Date Customer Invoice No. Amount
rent 10120
Equipment purchased 15000
wages 3000
Doubtful debts 168
30-Sep Depreciation 12000
06-Sep Cash 14 1200
07-Sep Cash 15 350
08-Sep Cash 16 480
Trial balance of Epic at 30 September 2018
Particulars Debit (in £) Credit (in £)
Sales 296650
Purchase 147880
Carriage inwards 1700
Returns outwards 8200
Wages 55400

Rent 44620
Electricity 26100
Inventory 57000
Loans 15000
Trade receivables 52600
Allowances for receivables 600
Trade payables 34430
Equipment’s 205000
Depreciation on equipment’s 61000
Bank 42000
Drawing 15000
Capital 196400
Income statement of Epic at 30 September 2018
Particulars Details Amount
Sales revenue 296680
Less: COGS 148980
Opening inventory 51600
Add: Purchase 147880
Less: carriage inwards 1700
Add: Return outwards 8200
Less: Closing stock 57000
Gross Profit 147700
Operating expenses
Wages expenses 3000
Rent expenses 10120
Electricity expenses 26100
Depreciation on equipment 12000
Total operating expenses 51220

Total Profit 96480
Epic’s Statement of financial position at 30 September 2018
Particulars Amount (in £) Amount (in £)
Assets
Current assets
Inventory
Opening inventory 51600
Add: Purchase 147880
Less: carriage inwards 1700
Add: Return outwards 8200
Less: Closing stock 57000 148980
Trade receivables 52600
Less: Allowances for trade
receivables
600 52000
Bank 42000
Total current assets 242980
Non-current assets
Equipment 205000
Less: Depreciation 61000 144000
Total non-current assets 144000
Total Assets 386980
Liabilities
Current liabilities
Trade payables 34430
Total current liabilities 34430
Non-current liabilities
Loans 15000
Long term loan 190580

Total long-term liabilities 205580
Shareholders’ equity
Capital 196400
Less: Drawings 15000 181400
Total Liabilities and shareholders’
equity
386980
QUESTION 2
QUESTION 3
CONCLUSION