Financial Accounting: Income Statement, Balance Sheet and CFS Report

This financial accounting assignment provides a comprehensive analysis of financial statements, including the preparation of an income statement for the year ended December 31, 2020, and a balance sheet as of the same date. The income statement details sales revenue, cost of goods sold, gross profit, operating expenses, and net profit. The balance sheet outlines assets, including delivery vans, shop fittings, closing stock, and trade receivables, against liabilities such as capital, trade payables, and bank overdraft. Additionally, the assignment includes a cash flow statement, categorizing activities into operating, investing, and financing, along with explanations of added back and deducted values from the cash flow statement, such as depreciation and changes in current assets. The report concludes with relevant references.

Financial Accounting
ASSESSMENT

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
B. Explaination of added back and deducted values from CFS:......................................................5
CONCLUSION ...............................................................................................................................5
REFERENCES................................................................................................................................7

TASK
Question 1:
A. Income Statement for the year ended 31 December 2020
Particulars Amount(£)
Sales Revenue 164000
Less : Cost of goods sold -101600
Drawings 500
Gross Profit 62900
Less: Operating expenses:
 Discount allowed 920
 Rent & rates 8000
 Heating & lighting 4500
 Salaries & wages 37000
 Carriage outward 1500
 Motor Running Cost 720
 Depreciation on Delivery van 2250
 Dep. On shop fitting 1700 -56590
Operating income 6310
Add: Discount received 500
Income before taxation 6810
Less: tax 0
Net Profit £6810
Working Note:
 Cost of Goods Sold: Opening stock + purchase – closing stock
= 6000 + 100000 - 4400 = 101600

 Rent & Rates = 9300 – 1300 ( prepaid expenses) = 8000
 Motor running cost = 630 + 90 = 720
 Depreciation:
→ delivery van = 9000 * 25% = 2250
→ shop fitting = 8500 * 20% = 1700
B. Balance Sheet as at 31 December 2020:
Liabilities Amount(£) Assets Amount(£)
Capital 30000 Delivery Van 9000
Add: Net profit 6810 Less: Acc. Dep. -3500
Less: Drawings -14000 Less: Depreciation -2250 3250
Less: Personal use -500 22310 Shop fitting 8500
Trade Paybles 5000 Less: acc. Dep. -1500
Bank overdraft 1200 Less: Depreciation -1700 5300
Oustanding
expenses
90 Closing stock 4400
Prepaid expenses 1300
Trade receivables 13000
Cash in hand 1350
Total Liability £28600 Total Assets £28600
Question 2:
A. Prepare Cash Flow Statement.
 Non – current assets = £125,000
 Generate from Operating Activities = £11,000
 Payout for Dividends = £18,000
 Opening Balance ( cash)= £15,000
 Borrowings = £90,000

Particulars Amount
 Operating Activities:
Net Cash flow from operating activities (A) 11000
 Investing Activities:
Non – current assets -125000
Net cash flow from Investing activities (B) -125000
 Financing activities:
Dividends Paid -18000
Borrowings 90000
Net Cash flow from Financing Activities (C) 72000
→ Net Cash flow (A+B+C) -42000
Opening balance of cash and cash equivalents 15000
Closing Balance of Cash -27000
B. Explaination of added back and deducted values from CFS:
a. Depreciation: This value has been added in the operating activity critera. It will showing the
impact on Taxation valuation.
b. Disposal of current assets: It is also included or add back in the net profit of Elena ltd. It
will come under the performa of cash generated from operating activity.
c. Increase in inventories: It will directly deducted in the current assets heading under
operating activity. It will affected the CFS generously.

REFERENCES
Books and Journals
Teshome, G., Sera, L. and Dachito, A., 2021. Determinants of income inequality among urban
households in Ethiopia: a case of Nekemte Town. SN Business & Economics.1(11).
pp.1-21.
Xiong, F., Zheng, Y., An, Z. and Xu, S., 2021. Does internal information quality impact
corporate cash holdings? Evidence from China.Accounting & Finance.61.pp.2151-
2171.