LSBM005 Introduction to Accounting Assignment - Bloomsbury Institute, London, UK

Learning Outcomes for the item of assessment - This item of assessment covers the following learning outcomes.

Understand the role of accounting in business.

Demonstrate use of double entry book keeping accounting system.

Prepare trial balance.

Prepare and analyse final accounts for a sole-trader taking into account appropriate format.

Develop the key skills of: Communication (C01) and the Processing of numerical data.

Assessment Details - Task

Question 1 -

Discuss the two branches of accounting, financial accounting and management accounting. Identify the user groups of each branch of accounting and give examples of the questions each user group might ask and expect the accounting information provided by the relevant branch of accounting to answer.

Question 2 - Sole Trader Financial Statements

Philip is a sole trader who manufactures and sells a single product. In his first month of trading, January 2019, he records the following transactions:

01 January Philip started business and invested £10,000, which he deposited into a business bank account.

02 January Purchased a machine to use in the production of goods for £5,100 and paid by bank transfer.

03 January Bought raw materials from ABC Ltd to use in the production of goods for £1,750 on credit.

03 January Bought stationery for £95 and paid using the company debit card.

05 January Paid £550 by bank transfer for January rent and £360 by bank transfer for annual business insurance for the period 01/01/2019 to 31/12/2019.

08 January Sold finished goods to customers for £2,100, the customers paid cash. The cost of goods sold was £1,500.

12 January Bought raw materials from ABC Ltd to use in the production of goods for £2,900 on credit.

15 January Sold finished goods to customers for £1,330 the customers paid cash. The cost of goods sold was £950.

16 January Sold finished goods on credit to a retail customer for £2,660. The cost of goods sold was £1,900.

18 January Bought raw materials from ABC Ltd to use in the production of goods for £3,500 on credit.

19 January Paid ABC Ltd £4,650 by bank transfer.

23 January Sold goods to a retail customer for £3,680 on credit and sold further goods to customers for £800 for cash. The cost of goods sold was £3,200.

26 January Philip withdrew £2,000 cash from the business for personal use.

28 January Paid £550 by bank transfer for February rent.

31 January Received £2,660 by bank transfer for credit sales.

Additional information:

A telephone bill dated 05/02/18 for £35 for the period 01/01/2019 to 31/01/2019 was received in February.

Depreciation is charged at a rate of 20% per annum on the cost of all non-current assets starting in the month of purchase.

Required -

(a) Prepare a trial balance.

(b) Prepare an income statement.

(c) Prepare a statement of financial position.

(d) Prepare a cash statement.

Question 3 - Financial Statements Analysis

The following information relates to Dunstan Limited for the two years to 31 December 2017 and 2018 respectively:

Income Statement for the years ending 31 December:

Statement of financial position as at 31 December:

Required -

(a) Calculate the following accounting ratios for the two years 2017 and 2018 respectively:

(i) Gross profit margin

(ii) Net profit margin

(iii) Current ratio

(iv) Quick ratio

(v) Trade receivable days

(vi) Trade payable days

(vii) Inventory turnover days

Note: For all ratio calculations use year-end figures and not averages.

(b) Compare and contrast the company's performance for the years 2017 and 2018.