Accounting Analysis: Super Kites Ltd and Kite Galore Financials

This assignment provides a comprehensive financial analysis of Super Kites Ltd and Kite Galore, covering various aspects of accounting and financial management. The analysis begins with a memorandum to Harry, recommending the average cost method for inventory costing and includes a detailed Excel worksheet demonstrating this method. Journal entries are prepared for various business transactions, followed by T-accounts to summarize these entries. An adjusted trial balance, income statement, balance sheet, and statement of equity are then constructed. Key financial metrics, such as gross profit percentage and current ratio, are calculated. The assignment further includes a bank reconciliation for Kite Galore, journal entries to address discrepancies, and a T-balance for the bank account. Finally, the assignment discusses internal controls, including the identification of common controls, an explanation of how a scam could have been carried out, and the role of bank reconciliation in internal control. Recommendations for additional internal controls for cash payments are also provided.

Running head: MPA
MPA
Name of the Student:
Name of the University:
Author Note

1MPA
Executive Summary:
The assessment aims in analyzing the best inventory costing method that could be used by the
organization, where average cost method is selected for Super Kites Ltd, as it would provide
appropriate cost of sales for their valuation. The bank reconciliation system has been
analyzed, which highbies different entries that was not listed in the bank account and cash
book, which was creating problems for the organization to determine the actual cash balance.
Further elaboration has been conducted on the internal control conditions of Super Kites Ltd,
which was violated after a scam was found. Hence, improvements in the current internal
control conditions and cash payment has been discussed, which could be sued by Super Kites
Ltd to strengthen their activities and reduce the occurrence of frauds in future.

2MPA
Table of Contents
Question 1:.................................................................................................................................3
i) Preparing a Memo to Harry:...................................................................................................3
ii) Preparing excel worksheet using average-cost method:........................................................3
iii) Preparing journal entries of the business transactions:.........................................................4
iv) Preparing T-accounts for journal entries:.............................................................................6
v) Prepaying adjusted trial balance for 31st October 2019:........................................................8
vi) Preparing income statement, balance sheet and statement of equity:...................................9
vii) Calculating the business gross profit and current ratio of the organisation:.....................10
Question 2:...............................................................................................................................10
i) Preparing the bank reconciliation for Kite Galore as 31 December 2019:...........................10
ii) Preparing the journal entries:...............................................................................................11
iii)Preparing the bank T-Balance for December 2019:............................................................13
Question 3:...............................................................................................................................14
i) Explaining about internal controls and discussing the three common controls:..................14
ii) Explaining how individuals could have carried out the scam:............................................14
iii) Explaining how bank reconciliation act as an internal control:.........................................14
iv) Outlining two other internal controls that should be considered while implementing cash
payments:.................................................................................................................................15
Conclusion and Recommendation:..........................................................................................15
References and Bibliography:..................................................................................................16

3MPA
Question 1:
i) Preparing a Memo to Harry:
Memorandum
Super Kites Ltd
Kites Galore
Subject: Calculating the net cost of kites to the business
The use of average cost of method is the most viable method, which could be used by the
company for detecting the net cost of kites. This method helps in determining the appropriate
costing for each cost and adjusting for the relevant alternation in the cost of sales of the
company (Copacino, 2019). Therefore, the calculations mainly assign specific cost to
inventory items based on the total cost of goods, after which it is divided by the total number
of items in inventory. Thus, the method would allow Kites Galore to detecting the weighted-
average method for deriving the actual cost of their kites (Muller, 2019).
Regards
Financial Controller
ii) Preparing excel worksheet using average-cost method:
Dat
e
Purchases Sales Balance
Unit
s
Price per
unit
Amo
unt Units
Price
per unit
Amo
unt
Unit
s
Price
per unit
Amo
unt
5-
Oct
50.0
0 55.00
2,750.
00
50.0
0 55.00
2,750
.00
12-
Oct 20.00 55.00
1,100
.00
30.0
0 55.00
1,650
.00
25-
Oct
100.
00 49.50
4,950.
00
130.
00 52.25
6,792
.50
27-
Oct
(20.0
0) 49.50
(990.0
0)
110.
00 52.25
5,747
.50
29-
Oct 60.00 52.25
3,135
.00
50.0
0 52.25
2,612
.50

4MPA
Units Price per unit Amount Units Price per unit Amount Units Price per unit Amount
=+O7 50 55 =+D4*E4 =+D4 =+E4 =+J4*K4
=+O24 20 55 =+G5*H5 =+J4-G5 =+K4 =+J5*K5
=+O28 100 49.5 =+D6*E6 =+J5+D6 =+(K5+E6)/2 =+J6*K6
=+O32 -20 49.5 =+D7*E7 =+J6+D7 =+K6 =+J7*K7
=+O36 60 =+K7 =+G8*H8 =+J7-G8 =+K7 =+J8*K8
Date
Purchases Sales Balance
iii) Preparing journal entries of the business transactions:
Date Particulars
Amoun
t
Amoun
t
1-Oct Business bank account…............................Dr 20,000
Owner's Capital 20,000
(Introduced capital in the business)
5-Oct Purchases…..............Dr 2,750
Accounts payable 2,750
Purchased 50 kites from Super Kites Ltd on credit on terms
2/10, n/30
7-Oct Freight charges…..............Dr 110
Accounts payable 110
Delivery cost is still due to Star track freight Ltd
10-
Oct Accounts payable…....................Dr 2,750
Business bank account 2,475
Discount received 275
Paid cheque to Super Kites Ltd and received discount
11-
Oct Accounts payable…....................Dr 110
Business bank account 110
Paid cheque to Star track freight Ltd
12-
Oct Business bank account…............................Dr 2,200
Sales 2,200
Sold goods and received cash
25- Purchases…..............................Dr

5MPA
Oct 4,950
Business bank account 4,950
Purchased goods @49.50 and paid through ETF
27-
Oct Business bank account…............................Dr 990
Purchase return 990
Returned purchase of 20 kites, as they were damaged
29-
Oct Business bank account…............................Dr 6,600
Sales 6,600
Sold goods and received cash
31-
Oct Internet service…..............................Dr 99
Business bank account 99
Paid for the internet service to Telstra
31-
Oct Advertising expense…..............................Dr 550
Business bank account 550
Paid for the advertisement to Hit Radio
31-
Oct Freight charges…..............Dr 440
Accounts payable 440
Pending delivery cost from Australian Post

6MPA
Date Particulars Amount Amount
43739 Business bank account…............................Dr 20000
Owner's Capital =+Q3
(Introduced capital in the business)
=+O3+4 Purchases…..............Dr 2750
Accounts payable =+SUM(Q7:Q7)
Purchased 50 kites from Super Kites Ltd on credit on terms 2/10, n/30
=+O7+2 Freight charges…..............Dr 110
Accounts payable =+SUM(Q11:Q11)
Delivery cost is still due to Star track freight Ltd
=+O11+3 Accounts payable…....................Dr =+Q7
Business bank account =+Q15-R17
Discount received =+Q15*10%
Paid cheque to Super Kites Ltd and received discount
=+O15+1 Accounts payable…....................Dr =+Q11
Business bank account =+Q20
Paid cheque to Star track freight Ltd
=+O20+1 Business bank account…............................Dr =20*110
Sales =+Q24
Sold goods and received cash
=+O24+13 Purchases…..............................Dr =49.5*100
Business bank account =+Q28
Purchased goods @49.50 and paid through ETF
=+O28+2 =+P24 =49.5*20
Purchase return =+Q32
Returned purchase of 20 kites, as they were damaged
=+O32+2 Business bank account…............................Dr =60*110
Sales =+Q36
Sold goods and received cash
=+O36+2 Internet service…..............................Dr 99
Business bank account =+Q40
Paid for the internet service to Telstra
=+O40 Advertising expense…..............................Dr 550
Business bank account =+Q44
Paid for the advertisement to Hit Radio
=+O44 Freight charges…..............Dr 440
Accounts payable =+SUM(Q48:Q48)
Pending delivery cost from Australian Post
iv) Preparing T-accounts for journal entries:
Business Bank Account
Owner's Capital 20,000 Accounts payable 2,475
Sales 2,200 Accounts payable 110
Sales 6,600 Purchases 4,950
Purchase return 990 Internet service 99
Balance c/d 22,156
29,790 29,790
Sales
Balance c/d 8,800 Business Bank Account 2,200
Business Bank Account 6,600
8,800 8,800
Purchase return
Balance c/d 990 Business Bank Account 990
990 990
Internet service
Business Bank Account 99 Balance c/d 99
99 99
Advertising expense

7MPA
Accounts payable 550 Balance c/d 550
550 550
Owner's Capital
Balance c/d 20,000 Business Bank Account 20,000
20,000 20,000
Purchases
Accounts payable 2,750 Balance c/d 7,700
Business Bank Account 4,950
7,700 7,700
Accounts payable
Business Bank Account 2,475 Purchases 2,750
Discount received 275 Freight Charges 110
Business Bank Account 110 Advertising expense 550
Balance c/d 990 Freight Charges 440
3,850 3,850
Freight Charges
Accounts payable 110 Balance c/d 550
Accounts payable 440
550 550
Discount received
Balance c/d 275 Accounts payable 275
275 275

8MPA
Owner's Capital =+Q3 =+U40 =+R16
=+U12 =+X13 =+W3 =+V43
=+U4 =+X14 =+U35 =+V37
=+U17 =+X18 =+U22 =+V23
Balance c/d =+V9-SUM(X3:X6)
=SUM(V3:V8) =SUM(X3:X8)
Balance c/d =+X15 =+U2 =+Q24
=+W13 =+Q36
=SUM(V13:V14) =SUM(X13:X14)
Balance c/d =+X20 =+W14 =+Q32
=SUM(V18:V19) =SUM(X18:X19)
=+W13 =+Q40 Balance c/d =+V24
=SUM(V23) =SUM(X23)
=+U40 =+Q44 Balance c/d =+V28
=SUM(V27:V27) =SUM(X27:X27)
Balance c/d =+X31 =+U2 =+V3
=SUM(V31:V32) =SUM(X31:X32)
=+U40 =+Q7 Balance c/d =+V38
=+U2 =+Q28
=SUM(V36:V37) =SUM(X36:X37)
=+U2 =+X3 =+U35 =+V36
Discount received =+R17 =+U47 =+Q11
=+U41 =+X42 =+U26 =+V27
Balance c/d =+X45-SUM(V41:V43)=+U47 =+V49
=SUM(V41:V44) =SUM(X41:X44)
=+U40 =+X42 Balance c/d =+V50
=+U48 =+Q48
=SUM(V48:V49) =SUM(X48:X49)
Balance c/d =+X54 =+U40 =+V42
=SUM(V53:V53) =SUM(X53:X53)
Owner's Capital
Purchases
Accounts payable
Freight Charges
Discount received
Sales
Purchase return
Internet service
Advertising expense
Business Bank Account
v) Prepaying adjusted trial balance for 31st October 2019:
Trial Balance
Particulars Amount Amount
Business Bank Account 22,156
Inventory 2,475
Owner's Capital 20,000
Accounts payable 990
Sales 8,800
Cost of goods sold 4,235
Internet service 99
Advertising expense 550
Freight Charges 550
Discount received 275
Total 30,065 30,065

9MPA
Particulars Amount Amount
=+U2 =+X7
Inventory =+L8-138
=+U30 =+V31
=+U40 =+V44
=+U12 =+V13
Cost of goods sold =+F12
=+U22 =+X23
=+U26 =+X27
=+U47 =+X48
=+U52 =+V53
Total =SUM(AB4:AB13) =SUM(AC4:AC13)
Trial Balance
vi) Preparing income statement, balance sheet and statement of equity:
Income Statement
Particulars Amount Amount
Sales 8,800
Cost of goods sold (4,235)
Gross profit 4,565
Internet service (99)
Advertising expense (550)
Freight Charges (550)
Discount received 275
Net profit 3,641
Balance Sheet
Particulars Amount Amount
Business Bank Account 22,156
Inventory 2,475
Total assets 24,631
Accounts payable 990
Total liabilities 990
Net assets 23,641
Owner's Capital 20,000
Retained earnings 3,641
Total equity 23,641

10MPA
Particulars Amount Amount
=+AA8 =+AC8
=+AA9 =-AB9
Gross profit =+SUM(AB18:AB19)
=+AA10 =-AB10
=+AA11 =-AB11
=+AA12 =-AB12
=+AA13 =+AC13
Net profit =SUM(AC20:AC24)
Particulars Amount Amount
=+AA4 =+AB4
=+AA5 =+AB5
Total assets =SUM(AC29:AC30)
=+AA7 =+AC7
Total liabilities =+AC33
Net assets =+AC31-AC34
=+AA6 =+AC6
Retained earnings =+AC25
Total equity =+AB37+AB38
Income Statement
Balance Sheet
vii) Calculating the business gross profit and current ratio of the organisation:
Particulars Value
Gross profit (A) 4,565.00
Sales (B) 8,800.00
Gross profit % (A/B) 51.88%
Particulars Value
Current assets (A) 24,631
Current liabilities (B) 990
Current ratio (A/B) 24.88
Particulars Value
=+AA20 =+G13
=+AA18 =+AB18
Gross profit % =+AG3/AG4
Particulars Value
Current assets =+AC31
Current liabilities =+AC33
Current ratio =+AG8/AG9
Question 2:
i) Preparing the bank reconciliation for Kite Galore as 31 December 2019:
Bank Reconciliation 31st December 2019

11MPA
Date Particulars
Amo
unt
Amou
nt Date Particulars
Amo
unt
Amou
nt
Bank statement
balance
$12,08
7.00 Book balance
$12,25
4.00
Add: Add:
12/1/2
019
Loan
application fee
$300.
00
12/21/2
019 Cheque 46
$990.
00
12/5/2
019 Cheque 43
$440.
00
12/23/2
019 Deposit
$54.0
0
12/31/2
019 Interest $6.00
$740.0
0
12/27/2
019 Cheque 47
$220.
00
12/28/2
019 Cheque 48
$495.
00
$1,765.
00
Deduct: Deduct:
12/31/2
019
Outstanding
cheque
$440.
00
12/18/2
019 Cheque 44
$30.0
0
12/18/2
019 Deposit $3.00
12/24/2
019
EFT-Wages Tom
Webb
$600.
00
12/31/2
019
Direct debt-
Telstra internet
$99.0
0
$0.00
12/31/2
019 Monthly bank fee
$20.0
0
$1,192.
00
Adjusted bank
balance
$12,82
7.00
Adjusted book
balance
$12,82
7.00
Date Particulars Amount Amount Date Particulars Amount Amount
Bank statement balance =+M22 Book balance =+D15+G10-D13
Add: Add:
=+I5 =+J5 =+L5 =+I14 =+J14 =+D8-L14
=+I8 =+J8 =+L8 =+I18 =+J18 =+K18-G8
=+I21 =+J21 =+K21
=+SUM(Q6:Q9) =+B11 =+C11 =+D11
=+B12 =+C12 =+D12 =+SUM(U6:U10)
Deduct: Deduct:
43830 Outstanding cheque 440
=+I11 =+J11 =+L11-D6
=+I12 =+J12 =+G6-K12
=+I19 =+J19 =+L19
=+I20 =+J20 =+L20
=+SUM(Q13:Q18) =+I22 =+J22 =+L22 =+SUM(U13:U18)
Adjusted bank balance =+R4+R9-R18 Adjusted book balance =+V4+V10-V18
Bank Reconciliation 31st December 2019
ii) Preparing the journal entries:
Journal Entries
Date Particulars
Amoun
t
Amoun
t
12/31/201
9 Accounts payable…...Dr $440.00