University Finance Report: Managing Financial Resources and Decisions

This finance report comprehensively addresses financial resource management, encompassing various key aspects. It begins with the preparation and analysis of a cash budget, crucial for evaluating liquidity. The report then delves into calculating selling prices, profit margins, and the impact of markups on profitability. Investment decisions are analyzed using Net Present Value (NPV) and payback period calculations, offering insights into the viability of different investment options. The report also examines financial statements, including balance sheets and income statements, comparing their formats for different business organizations. Furthermore, it assesses the information needs of various financial statement users and interprets financial data using relevant ratios, such as profitability and gearing ratios. Finally, the report explores diverse sources of finance available to businesses, evaluating their implications and identifying the most appropriate funding options. It also discusses the cost of finance, its impact on financial statements, and the importance of financial planning.

Managing Financial
Resource and Decisions

TABLE OF CONTENTS
Introduction......................................................................................................................................4
Task 1...............................................................................................................................................4
(a) Preparing the Cash Budget (3.1):...........................................................................................4
(b) Cash budget analysis (3.1):....................................................................................................5
Task 2 ..............................................................................................................................................5
(a) [I] Calculating selling price per unit (3.2)..............................................................................5
(a) [ii] Total profit on the sale of 300 units (3.2).........................................................................6
(b) [I] Calculating cost and selling price with a markup of 40% (3.2)........................................6
(b) [ii] total profit earned on selling of additional 100 units (3.2)...............................................6
Task 3...............................................................................................................................................7
(a). Analysis of budgets and making appropriate decision (3.3).................................................7
(b). Recommendation (3.3)..........................................................................................................9
Task 4...............................................................................................................................................9
(a). Main financial statements and Comparing the formats of financial statements for the
different types of business organization (4.1 and 4.2 )................................................................9
(b) Assessing the information needs of different users of financial
statements (2.3).........................................................................................................................15
(c). Interpretation of the financial statements using appropriate ratios & comparisons (4.3). . .15
Task 5.............................................................................................................................................17
5a [i] Different sources of finance available for business (1.1):................................................17
5a (ii) Assessment the implication of different sources of finance and most appropriate source
of finance for business (1.2 and 1.3)..........................................................................................18
5a (iii) Explanation the cost of sources of finance (2.1)............................................................19
5a (IV) Impact of sources of finance on financial statements of business (2.4)........................20
5a (v) the importance of financial planning (2.2)......................................................................21
Conclusion.....................................................................................................................................23
Reference.......................................................................................................................................24

INTRODUCTION
Appropriateness of the format of financial statements depends on for which purpose it is
developed (Bose and Horgren, 2010).
The main purpose of this assignment is to develop the knowledge of finance in the
application area considering the different cases. If the requirement is to know the assets and
liabilities of a business then balance sheet is appropriate whereas an income statement reports on
income and expenses.
To get the information of day to day cash flow of the organization, cash flow statement
would be the best source of such information. Business is becoming complicated day by day. For
carrying out the operation in the most efficient way, accounting, reporting, finance and
regulations are needed to be understood firstly. That is why the assignment consists of all types
of problems & exercises.
TASK 1
(a) Preparing the Cash Budget (3.1):
Cash budget is very vital for evaluation liquidity also to determine of inflows and out flows of
funds. For the purpose of cash budget of an organization of six months period is analysis on the
table below:
Months
details
First
month
Second
month
Third
month
Fourth
month
Fifth
month
Sixth
month
Opening
balance (840,000) (440,000) 0 680,000 1,480,000
Income
from sales 600,000 600.000 840,000 840,000 840.000
Total cash
inflow -240,000 160,000 840,000 1,520,000 2,320,000
Rent 10,000 10,000 10,000 10,000 10,000 10,000
Plant and
machinery 580,000
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Initial
investment 250,000 160,000 120,000 120,000
Operating
cost 30,000 30,000 30,000 30,000 30,000
Total of
cash
outflow 840,000 200,000 160,000 160,000 40,000 40,000
Cash
balance at
end (840,000) (440,000) 0 680,000 1,480.000 2,280,000
(b) Cash budget analysis (3.1):
From the above cash budget so far has prepared based on the forecast information given,
it can be easily derived that there will always be cash deficit in the 1st 6 (Six) months. It is a very
alarming situation. The manager who is responsible for this cost allocation, budgeting and
forecasting, should prepare another forecast which will definitely have a huge amount to be
concerned in receipts. Another problem may be the opening balance being absent. I hope logical
projections will be made with corrections.
TASK 2
(a) [I] calculating selling price per unit (3.2)
Given that,
Variable cost per unit £ 40
Fixed cost per unit 20
Total per unit cost £ 60
(+) Markup 40% 24
Selling price per unit £ 84
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(a) [ii] Total profit on the sale of 300 units (3.2)
‘Unit X’, Northampton
Total profit earned when 300 units of products are produced:
Particulars Amount Amount
Selling price (£ 84 × 300) £25,200
Less: Production costs
Variable cost (£ 40× 300) £12,000
Fixed cost (£ 20× 300) 6,000
Total cost (18,000)
Profit £7,200
(b) [I] Calculating cost and selling price with a markup of 40% (3.2)
Given that,
Variable cost per unit £ 40
Fixed cost per unit 00
Total per unit cost £ 40
(+) Markup 40% 16
Selling price per unit £ 56
(b) [ii] total profit earned on selling of additional 100 units (3.2)
‘Unit X’, Northampton
Total profit earned when additional 100 units along with the first 300 units of products are
produced:
Particulars Amount Amount
Selling price{(£ 84 × 300) + (£ 56× 100)} £30,800
Less: Production costs
Variable cost (£ 40 × 400) £16,000
Fixed cost (£ 20 × 300) 6,000
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Total cost (22,000)
Profit £8,800
TASK 3
(a). Analysis of budgets and making appropriate decision (3.3)
Net present value calculations: Is effective way for processing investment assessment for
approximate of cash inflows and outflows at a reduced price as regard to inflation rate of the
economy so that money value technique can be measures in order to evaluate current value of
future cash flow (Drake and Fabozzi, 2012). .
Formula-
NPV = R ×, 1 − (1 + i)-n, − Initial Investment.
Table 2: NPV Investment for A
Yr Cash Inflow for
Option A (£) (R) D.F at 12%
(one) Present
Value(£)
1st yr 24,000 0.892 21,408
2rd yr 24,000 0.797 19,128
3rd yr 24,000 0.711 17,064
4th yr 24,000 0.6355 15,252
The Total of Present
Value 72,852
Less: Initial Investment 75,000
N/P/ Value -2,148
Table 3: NPV Investment for option B
Yr Cash Inflow for
Option B(£) D.F at 12% Present
Value(£)
1st yr 25,000 0.892 22,300
2nd yr 25,000 0.797 19,925
3rd yr 25,000 0.711 17,775
4th yr 25,000 0.6355 15,887.5
The total of Present Value 75,887.5
Less: Initial Investment 80,000
N/P/ Value -4,112.5
Table 4: NPV Investment for option C
Yr Cash Inflow for
Option C (£) D.F at 12% Present
Value(£)
1st Yr 36,000 0.892 32,112
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2nd Yr 36,000 0.797 28,692
3rd Yr 36,000 0.711 25,596
4th Yr 36,000 0.6355 22,878
Total of Present Value 109,278
Less: Initial Investment 95,000
N/P/Value 14,278
Payback period calculation: This process is to determine the time as regard the full amount of
investment will be recovered (Barth, 2006). For this reason, management can estimate
performances of various kinds of projects or investment plan for the organization and chose the
best option to recover the total amount invested in a short period of time.
P/B period = a + B/C
Number of years in which total inflow is less then initial investment for option A
The amount of cash inflow which belongs to same group cumulative cash flow that is similar but
less than initial investment for potion B
Total cumulative cash inflow for option C
P/B period = A+B/C
(b)Table 5: Calculation for P/B period
Yr
Cash
Inflow of
Option A
(£)
Cumulativ
e cash
inflow
Cash
Inflow of
Option B
(£)
Cumulativ
e cash
inflow
Cash
Inflow of
Option C
(£)
Cumul
ative
cash
inflow
1st Yr 24,000 24,000 25,000 25,000
36,000 36,000
2nd Yr 24,000 48,000 25,000 50,000
36,000 72,000
3rd Yr 24,000 72,000 25,000 75,000
36,000 108,000
4th Yr 24,000 96,000 25,000 100,000
36,000 144,000
Initial
Investment 75,000 80,000
100,000
P/b period
3.25 yr 3.25 yr 2.37 yr
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(b). Recommendation (3.3)
From above analysis management is require to accept C option for the assessment of net present
value of various plan which show that NPV of Project C is higher as contrast to other plan The
study of payback period decide that project will recover the total investment in less time as
contrast to other projects. So, data collected by both viewpoints obviously indicate that
management should accept Project C for growth (Ittelson, 2009).
TASK 4
(a). Main financial statements and Comparing the formats of financial statements for the
different types of business organization (4.1 and 4.2 )
There are various types of financial statements which are used to keep the records of financial
activities done by the business, which also helps managers and stakeholders to understand how
business is doing. The vital financial statement as follow: Balance sheet: Is the source that supplies vital information about all assets and liabilities
of the organization. Which study the current financial position of activities of the
business. Which is use by all firms’ big and small organization? Which reflect the vital
information requires such loan as well as share capital of the organization for a specific
period (Narayanan and Nanda, 2004). Income statement: Is a statement which is use by various kinds of organization. Which
assist the management understand position such as profit and the reduction of total
income from expense in an accounting period. Which is very effectual way to analyze
income and expense of the organization?
 Cash flow statement: This is utilizing by big organization as it contains specific
information concerning every cash arrangement. This application explains the outflow
and inflow funds. This information assists in order to control liquidity position of the
organization. This explain position of cash transaction also income statement also shows
non cash application (Anthony, 2011).
Appropriateness of the format of financial statements depends on which purpose it is developed.
For example, if the requirement is to know the assets and liabilities of a business then balance
sheet is appropriate whereas an income statement reports on income and expenses.
To get the information of day to day cash flow of the organization, cash flow statement would be
the best source of such information (Smith & Brigham, 2007).
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The main purpose of the financial statement is to represent financial information regarding
financial position, performance and changes in financial position of a business organization in
front of a wide range of users so that they can take the appropriate decision in future for the
betterment of that organization (Smith & Brigham, 2007). On the other hand, statement of retain
earnings helps to determine the equity issues more specifically.
Comparing the formats of financial statements for the different types of business organization
 Sole trader: In this type of businesses only one person controls and manages different
business operation. The size of organization is also very small so as owner of business
develops financial statement in order to keep normal records of business transaction in
the form of income statement with reference to single entry system of accounting for
finding out profit, position and other relevant information.
9
Illustration 1: Balance sheet for sole trader
CHANGE THIS REDO

 Partnership: In this type of organization, two or more individuals are operating different
business operations as per the distinct business objectives. Therefore, both partners have
to follow all the rules and regulations associated with partnership while making different
accounting statements. In this regards, partners are mainly prepared two types of final
accounts that balance sheet and income statements in order to assess current profitability
of company and financial position of company.
10
Sales 200000
Expenses 178000
Net income 22000
Sara king Ray lee Total
Salary allowance 8400 6000
Interest allowance
Sara king (28,000*10%) 2800 2400
Ray lee (24,000*10%) 5200
Total interest 19600
Total salary and interest 11200 8400
Remaining income 2,400
Sara king (2,400*50%) 1200
Ray lee (2,400*50%) 12000
Total remainder 2400
Total division 12400 9600 22000
All values in £
14400
Illustration 2: Income statement of partnership

 Company: It is termed as a largest form of the business in which several individuals
acting as owner and manager of organization. In large organization, a team of top
managers is responsible in order to provide appropriate information about the financial
performance and growth rate of company to its various stakeholders that include
shareholders, government, investors, lenders, public, suppliers etc. Therefore, this type of
organization has to develop all kinds of statement such as income statement, balance
sheet and cash flow statement as per the international accounting standards.
11
Illustration 3: Balance sheet for partnership

12
Illustration 4: Company balance sheet CHANGE THIS REDO

13

CHANDE THIS REDO
To large extent financial statements of all these firms are similar to each other. There is a
slight change in these financial statements because there is a difference in the size of these
business firms. Hence, it can be said that there a slight difference in the financial statements of
these firms.
(b) Assessing the information needs of different users of financial statements (2.3)
In order to meet distinct requirement of stakeholders, company offers wide range of
information so as these stakeholders are able to take appropriate management decisions that can
be explained as follows. Managerial group: It is the team of top managers which is responsible for offering wide
range of accurate information associated with the financial performance as well as market
position of organization to all other stakeholders. This managerial group requires wide
range of information for making appropriate strategic decision as per the long term
growth and expansion objectives (Bose and Horgren, 2010). It also helps managers in
order to carry out an appropriate comparison of information. Stockholders: It includes those Individuals and institutions who have invested money
within business entity. Therefore, appropriate financial information helps them in order to
take appropriate about investment and disinvestment. By considering different kinds of
financial data, risk and return on investment is also evaluated. This information supports
for development of an appropriate dividend policy of company. Creditors: It includes those parties who are working as supplier of raw materials and
various other elements to the enterprise. With the help of financial data, creditors are able
to assess current financial position of company. It plays a very significant role for taking
appropriate decisions associated with continuous supply of material on credit basis. Buyers: The primary objective of buyers to assess information about pricing policy of the
business entity, quality of products and services along with different features of the
commodities so as they can take buying decisions and comparing performance of the
business with reference to other organizations (Drake and Fabozzi, 2012). Government and society: It includes different departments of the government that are
associated taxation, environment protection and management, economic department etc.
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All these departments are able to appropriate decision related to taxation rates, fiscal
policies and monetary policy as per the financial data of different companies.
 Employee: The success of an organization is greatly depending on the efficiency of
employees which is directly influenced by relationship between employee and
management. Therefore, employee must be provided appropriate information related to
financial, business mission and goals along with growth and profitability of businesses so
as they can easily manage their operations as per the business goals of company. In
addition to that public authorities require information about remuneration policies of
company and other rules.
(c). Interpretation of the financial statements using appropriate ratios & comparisons (4.3)
Table 6: Calculation of ratios
Whole seller Takeaway
Liquidity Ratios
Current Assets 251000000 5070000
Current Liabilities 1950000 2950000
Current Ratio = Current Assets / current Liabilities 1.29 1.72
Quick Assets 90000 2700000
Current Liabilities 1950000 2950000
Quick ratio= Quick Assets/ Current liabilities 0.05 0.92
Profitability Ratios
Gross profit 10400 12430
Net Sales 4087000 2654000
Gross Profit Ratio = Gross Profit/ Net sales x100 25% 47%
Net Profit 5850 2950
Net Sales 4087000 2654000
Net Profit Ratio= Net Profit/ Net Sales x 100 14% 11%
Gearing ratio
Total Long term Debt 2000000 317000000
Total Equity 3000000 5500000
Gearing Ratio = Non – Current Liabilities / Share
Capital + Reserves + Non – Current Liabilities x
100 0.67 0.58
15

As per the above table, it can be stated that gross profit and net profit percentage has been
addressed as most effective tools in order to examine the earning capability of the entity. As per
the profitability ratios shown in able, it has addressed that Wholesaler has kept gross profit less
than takeaway but net profit ratio of Wholesaler is high in comparison of than takeaway. It
determines that the management of Wholesaler has managed and controlled different business
expenditures in an effective manner. Furthermore, gearing ratio is also identified as a great tool
to assess the long term solvency of the entity. This ratio of both the organizations is almost same.
In addition to that it can be concluded that both companies have managed enough capital in order
to meet long term obligations.
In addition to that Current and quick ratios are termed as liquidity ratio that are applied to
assess the short term ability of company to pay current liabilities. In this context, both ratios
related that indicates liquidity position of firm such as current and quick ratios of takeaway are
higher than whole seller. Therefore, it can be stated that Takeaway has appropriate resources to
meet short term obligation or requirement of funds. Therefore, it can be stated that both
companies have sound financial position.
TASK 5
5a [i] Different sources of finance available for business (1.1):
Fiscal resources are vital for maintaining constant growth for short and long project
expansions. Whitbread as a global hotel organization which control its business activities in
various countries. Whitbread require capital for day to day expenditure. Sales from revenue: Whitbread organization acquires funds by selling products and
services in order to increase the working capital. With the help of revenue, organization
can make payment to employee as salary and other expenditure. The managers of
Whitbread make efforts to increase its sales that increase revenue and satisfy short term
requirement of funds (Joshi, Al-Mudhaki and Bremser, 2003). Bank loans: this is very familiar way to augment funds for organization which is used by
any organization. In this, manager of Whitbread gets funds for short and long term period
loans either they are secured or unsecured. Business entity meets its regular requirement
of funds through working capital facility provided by banks and other financial
institutions (Porter and Norton, 2009).
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 Sales of fixed assets: For Whitbread to acquire new assets such as land and other
properties, organization has to sell its old assets in order to raise cash. For this reason the
management of the organization buys value high-yielding assets for the replacement of
the old assets. This is very vital ideal to raise funds for the organization (Joshi, Al-
Mudhaki and Bremser, 2003). Share capital: This is a process whereby organization requires funds, by so doing
management can sale ownership and share of the organization in share market. This
system is commonly used by big business firms in the major investment projects in order
for future expansion projects. (Bourne, Franco and Wilkes, 2003). Borrowings from public authority: this is a low cost medium to raise funds. In order for
the growth of the organization, public authorities give subsidies to business entity such as
acquisition of land, interest rates etc. as regards to this process the, management can
raise funds for low interest rates.
 Issue of debentures: It is alike to borrowings from bank, this system allow organization
to acquire financial resource such as loan by general public. Management need to pay
interest on time without any delay to debenture holders (Kierulff and Petersen, 2009).
5a (ii) Assessment the implication of different sources of finance and most appropriate source of
finance for business (1.2 and 1.3)
Selection of fiscal resources is very important part of financial decisions that influences
business decisions and earnings of firm. Implications of different sources of finance are
determined in details: Revenue from sales: This method is useful when business entity is generating huge
revenue for various business operations. The management of Whitbread cannot develop
future expansion and investment projects on the basis of revenue because organization
can make prediction regarding future cash flow. Share capital: In this, business entity can obtain large amount of funds from public. In
addition, company will pay dividend when organization has efficient amount of profit. It
has some negative consequences in form of high cost of public issue if shortfall of funds
identified in issue of shares Firm has to loss control over ownership that reduces ability
of organization in order to take big decisions (Cole-Ingait, 2014).
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 Bank loans: The administration of Whitbread raises funds with bank loans by signing
some legal documents. With the help of the bank loans, company can save some profit
because it provides tax cover. Organization has to pay interest and principle amount
within predetermined time period. Delays in payment create negative impact on financial
record of firm. Sales of fixed assets: It is very effective method to meet short and long terms
requirement of funds (McLaney, 2006). Sometime organization sold its assets in lower
price as compared to market price that will reduce financial capabilities. Debentures: With the help of debenture, company can raise its capital in lesser
expenditure as compared with institutional loans. It will enhance liabilities of firm and
management has to pay interest when organization faces losses.
Appropriate finance for a business project (1.3)
There are many sources of finance and each of them has some positive and negative points.
In case of equity firm real owners shareholding get diluted if shares are issued. However, finance
cost remains in control of the firm because it is not necessary to pay dividend every year. In same
way, in case of debt it is necessary to pay interest to the banks on time. This source of finance is
also secured by assets of company. Thus, it is very important to select an appropriate source of
finance for the firms. For the present business requirement, business entity needs to consider both
sources of finance such as share capital and bank loan. This is because if entire amount will be
financed by using equity then management has to reduce their control on business decisions. On
other hand, if entire finance requirement will be fulfilled by using bank loan then finance cost of
the firm will not be adjustable in nature that will increase the burden of interest. Hence, finance
of project by using both equity and debt will be good for an organization. It plays important role
in order to control cost of finance along with strategic decisions of management.
5a (iii) Explanation the cost of sources of finance (2.1)
The sources of finance can be defined as source of funds for various kinds of activities of
the organization. Business entity gets various kinds of funds such as working capital, long term
loan and share capital. These sources collect funds from various other sources. For example:
Banks uses deposits of people in lending of funds. The management of Whitbread has to pay
different kinds of expenditures on various sources of funds acquisition. The cost occurs on
acquisition of different resources are mentioned under this:
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 Expenditures on bank borrowings: In the process of raising funds from bank,
management of Whitbread has to pay many types of charges and other expenditures. It
includes processing fee levied by the bank and other legal documentation charges. The
management has to pay interest to financial institutions within scheduled time period
(Irwin and Scott, 2010). Issue of share capital: It includes many kinds of expenses that are encountered by
management in form of underwriting commission, share market charges and other legal
obligation. All this expenses enhance cost of funds that influence profitability of funds
and cost of final project.
 Cost of borrowings from public: It consists of expense made by the Whitbread in the
process of getting money from public i involves charges paid by organisation in form of
bank from the person who get the fund. Organization has to satisfy some legal formalities
that will increase cost of borrowings (Cotriss, 2009). .
5a (IV) Impact of sources of finance on financial statements of business (2.4)
Financial resources are creating huge impact on on different accounting statements.
Therefore, implication of different kinds of financial resources is determined out below: Impact of share capital funding: If the management of Whitbread wants to increase their
funds through equity share capital this it will have effect on value of two type of
accounting statements. Share capital is going to increase the value of liability side of
balance sheet in the form of capital. On the other hand, it will also enhance assets side
that is addressed as cash, bank balance, assets etc. In addition to that payment of
dividends is recorded in income statements of company as an expenditure (Tauringana
and Afrifa, 2013) Impact of loans: Raising funds from long and short term borrowing make two kinds of
outcome on financial statements. Manager finds some addition in value of debt capital in
the assets side of balance sheet. It also has impact on amount of expense in the profit and
loss statements that reduces overall profitability of company (Irwin and Scott, 2010).
 Effects of sale of fixed assets: Sometimes, manager of Whitbread generates funds by
selling the fixed assets of company that include building, equipment etc. then business
entity will found reduction in assets side of balance sheet. In contrary, it also increases
19

cash or bank balance of the balance sheet. Sometimes, it is also recorded in income
statements when organization finds some profit and loss (Barth, 2006).
5a (v) the importance of financial planning (2.2)
Financial planning is a vital part of strategic planning of Whitbread. Which have huge
impact on the utilization of funds and increases expenditures of Whitbread organization? So,
good financial planning is very vital for the success of business operations. The vitality of fiscal
planning is as follows: Allocating resources effectively: Financial planning helps managers of Whitbread, Is
suitable for business requirement and priorities that will meet objectives of firm. So
managers of Hotel organization allocate funds between different activities of the business
operations that will influence profitability of the organization. Successful fiscal planning
will minimize the possibility of wastage of funds. This also assist management decide
various situation as regard to profitability of the organization (Irwin and Scott, 2010). Collection of information regarding financial capabilities of business: It estimates
present financial capacity as the value of share capital, market value of shares and present
value of assets as well as borrowing capacity of the organization with the help of various
accounting statements. This information play a vital role in generating short and long
business projects in order to achieve profitability as well as vision of the organization
(McLaney, 2006). Reduction of expenses: planning effectively the manager of Whitbread will able to
analyze the cost of acquisition require funds from different sources. Manager of
Whitbread can assess profitability and outcome on expense from various kinds of
monetary resources. This system and information assist top management in creation of
future plan that give assurance to management in process of implementation of cost
reduction approach. This shows reliable results in terms of increment in profit amount
(Vance, 2002). Market sustainability in bad conditions: viable fiscal arrangement reassures the success
of different types of organizational plans that manage flow capital and maintain
profitability of business operations. Right management of distinct kinds of resource
facilitates management of Whitbread in order to overcome in bad market situations.
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 Cash flow improvement: Monetary planning play a vital role for assisting management
of Whitbread to boost liquidity position of the business entity. Also this will help
manager of Hotel Company to development future strategies as well as choosing the right
resources that will gives assurance to the organization as regard to liquidity position of
the industry. As long with the smooth running of the business operations (Porter and
Norton, 2009). Building of understanding: As regard to fiscal planning it will builds good relations
around the organization of Whitbread, this can also of many kind of financial
organizations. The manager can use this to facilitate various type of financial information
such as profit, expenses and cost of future projects, the aim is also to build good
understanding and trust among parts for a period of time (Joshi, Al-Mudhaki and
Bremser, 2003). .
 Big plan for funding: As regard to fiscal planning arrangement the requirement and
necessity of the expansion of projects, therefore is vital to prepares various type of
investment planning in order to achieve profitability and success for period of time for
the extension of strategies. With this system in place, management can decide sources
and needs of money for various business operations as regard to big projects of
Whitbread.
CONCLUSION
Business is becoming complicated day by day. For carrying out the operation in the most
efficient way, accounting, reporting, finance and regulations are needed to be understood firstly.
That is why the assignment consists of all types of problems & exercises. Appropriateness of the
format of financial statements depends on which purpose it is developed for (Bose and Horgren,
2010). The main purpose of this assignment is to develop the knowledge of finance in the
application accounting information, considering different scenario. If the requirement is to know
the assets and liabilities of a business then balance sheet is appropriate whereas an income
statement reports on income and expenses. To get the information of day to day cash flow of the
organization, cash flow statement would be the best source of such information.
21

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