Financial Accounting Assignment Solution: Detailed Analysis & Advice

This financial accounting assignment solution analyzes a personal financial scenario, detailing cash inflows and outflows, debt positions, and investment strategies. It includes a cash flow statement, outlining receipts and payments, and calculates the year-end cash balance. The solution also assesses the student's debt, including student loans, car loans, and credit card balances. Furthermore, it provides financial advice, such as utilizing interest-free credit periods, managing credit card usage to avoid penalties, and prioritizing debt repayment based on interest rates. The assignment also suggests strategies for investment and creating a contingency fund, along with recommendations for reducing expenses through alternative transportation and housing options. Overall, the solution offers a comprehensive approach to personal financial management.

FINANCIAL ACCOUNTING 1
FINANCIAL
ACCOUNTING

FINANCIAL ACCOUNTING 2
1 Receipts Remarks
Salary Received 45,000
Cash Received from Sale of
Motorcycle 1,000
Cash Received from Sale of
Computer 100
A 46,100
Payments
Rent & Utilities Paid 16,600
Car Expenses paid 4,800
Food, recreation &
entertainment paid 6,000
Investments made 5,500
Purchase of New Computer -
Assumed to have purchased
through Credit Card
Interest Expenses Paid 1,400
Repayment of Student Loan 5,000
Opening (15,000) - Closing
(10,000)
Repayment of Car Loan 5,000
Car Price (20,000) - Year end Car
Loan (15,000)
Repayment of Line of Credit 1,300
Opening (2,500) - Closing
(1,200)
Repayment of Credit Card
Bills -
Opening (1,000) + Purchases
(1,500) - Closing (2,500)
B 45,600

FINANCIAL ACCOUNTING 3
Net Cash Generated During
the Year
C=A
-B 500
Add: Cash Account Balance
at the beginnig of the year D 500
Cash Account Balance at the
end of the year C+D 1,000
2 Year end Debt Position
Student Loan 10,000
Car Loan 15,000
Credit Card 2,500
Line of Credit 1,200
A 28,700
Year end Cash &
Investment Position
Investments 5,500
Cash Account Balance 1,000
B 6,500
Net Debt Position A-B 22,200
Advice:

FINANCIAL ACCOUNTING 4
To utilise interest-free credit period by making payments for utilities, food, recreation, car
expenses etc. by Credit Card. However, the credit card bills should be paid in full by the due
date in order to avoid any late penalty or the interest charges.
Credit Card also provides some cash back schemes and other reward schemes which can be
availed. The cash backs could be used to pay off the bills of the succeeding months. This
would go on to reduce the cash outflow.
Minimum amount should be utilised against line of credit as it carries interest.
Cash balance should be kept at minimum level and regular investment to be made in interest /
dividend generating instruments to avoid idling of funds. Income from such investments
could be used for the purposes of meeting the other expenses.
Contingency Fund to be created which can be easily redeemed in the event of need.
After retaining the contingency fund step-up payment can be done to repay the Outstanding
Car & Student loan in the order of higher to lower interest rates to reduce interest burden and
high debt levels.
Transport could be done through public transport so that the car expenses could be avoided.
These expenses could be utilised somewhere else. Also, car-pooling could be done in order to
reduce the car expenses.
Efforts should be made to minimise the rent and the utilities expense. This could be done by
going for a house in a locality which offers houses at cheaper rates.