Financial Accounting
SECTION A
QUESTION 1
This assignment requires each student to work on the published financial statements of ASOS PLC for two years from 2020 to 2021.
The figures below are extracted from ASOS 2020 and 2021 annual reports.
|
|
2021
|
2020
|
|
Income statement
|
£m
|
£m
|
|
Sales revenue
|
3,911
|
3,264
|
|
Cost of sales
|
2,134
|
1,716
|
|
Gross profit
|
1,777
|
1,548
|
|
Operating profit (use for PBIT)
|
190
|
151
|
|
Interest paid
|
13
|
10
|
|
|
|
|
|
Balance sheet
|
£m
|
£m
|
|
Non-current assets
|
1,325
|
970
|
|
Current assets
|
1,560
|
1,020
|
|
Inventories
|
807
|
532
|
|
Trade and other receivables
|
58
|
60
|
|
Current assets less inventories
|
753
|
488
|
|
Current liabilities
|
998
|
818
|
|
Trade and other payables
|
956
|
770
|
|
Non-current liabilities
|
1,034
|
810
|
|
Total equity
|
1,034
|
810
|
|
Capital employed
|
2,068
|
1,620
|
You are required:
Write a brief report on the performance of ASOS over the financial periods 2020 to 2021.You should use the financial statements provided above to calculate the required accounting ratios shown below and use any other information relevant for your comments.
Information can be accessed from the annual report and accounts and any other source of evidence that you believe helps to explain the company's performance and position.
Calculate the following ratios. Show all your working out Long term financing ratio
1. 1 Gearing
Working capital Ratios
1. 2 Inventory days
2. 3 Receivable days
3. 4 Payable days Liquidity Ratios
1. 5 Current ratio
2. 6 Acid test Profitability Ratios
1. 7 Return on capital employed
2. 8 Net profit margin
3. 9 Asset turnover Interpretation
Interpret the ratios above by making comparative relevant comments with clear demonstration of understanding applied in context
SECTION B
Question 2
Ana-maria Tial Balance
The following balances were extracted from the accounting records of Ma- maria Plc
Trial Balance as of 31 November 2022
|
Purchases
|
DR
372,000
|
CR
|
|
Trade payables
|
|
10,000
|
|
Salaries and wages
|
54,000
|
|
|
Directors' remuneration
|
10,000
|
|
|
Audit fees
|
3,000
|
|
|
Heat and light
|
30,000
|
|
|
Inventory, 01 April 2021
|
130,000
|
|
|
Debenture Interest
|
27,000
|
|
|
Interim dividend paid
|
120,000
|
|
|
Building at cost
|
500,000
|
|
|
Building - accumulated depreciation 01 Dec 2021
|
|
50,000
|
|
Fixtures and fittings at cost
|
150,000
|
|
|
Fixtures and fittings - accumulated depreciation, 01 Dec 2021
|
|
20,000
|
|
10% Debentures
|
|
220,000
|
|
Ordinary share capital (fully paid)
|
|
800,000
|
|
Trade receivables
|
120,000
|
|
|
Bank
|
260,000
|
|
|
Sales
|
|
940,000
|
|
Share premium account
|
|
150,000
|
|
Retained earnings
|
|
120,000
|
|
Communications expenses
|
20,000
|
|
|
General reserve
|
|
57,000
|
|
Long-term investments
|
571,000
|
|
| |
2,367,000
|
2,367,000 |
The following additional information as of 31 December 2022 should be taken into account:
(i) Inventory was valued at £150,000
(ii) Audit fees of £1000 were outstanding
(iii) Prepaid debenture interest is to be accounted for
(iv) Depreciation is to charge on buildings at 10% on the straight-line basis and on fixtures and fittings at 20% on the reducing balance basis
(v) The directors decided to transfer £70,000 to the general reserve account Required:
Prepare for Ana - Maria Plc:
(a) the statement of profit or loss for the year ended 31 December 2022
(b) the statement of changes in equity for the year ended 31 December 2022
(c) the statement of financial position for the year ended 31 December 2022
Question 3
Elena Ltd, a new business, starts trading in sports shoes on 1st January 2021 and expects to make the following transactions for the 6 months ending 30th June2021:
i. Sales are expected to be 500 units (sports shoes) per month for the 4months from January to April then 300 units per month from May to June.
ii. The selling price will be £60 per unit.
iii. All sales will be cash sales with cash received in the same month the sale takes place.
iv. Payment for Purchases of inventory (sports shoes) will take place on the month after receiving the inventory. Each unit of inventory will cost £40.
v. Wages are expected to be £1000 per month and will be paid in the month in which they are incurred.
vi. Rent will be £2000 per month to be paid quarterly in advance (i.e., the rent payment for January, February and March 2021 will be made on 1st January 2021).
vii. General overheads are expected to cost £1000 per month and will be paid in the month in which they are incurred.
viii. Bought a laptop for the business in April for £1,500
Required
a) Prepare a cash budget for the 6 months from January to June 2021. Show the cash receipts and cash payments the business expects to have each month and the cash balance at the end of each month.
b) Prepare a profit budget for the 6 months ending 30th June 2021.