BBA 2004

BUSINESS ACCOUNTING AND FINANCIAL MANAGEMENT

CHUANG WAN YIK

202389

SEPTERMBER 2015
CONTAT

TITLE PAGA
Task 1 5-7

J plc supplies and fits car typres, exhaust pipes and other components. The

components .The company has branches throughout the country .Roughly

60 per cent of sales are for cash (retail sales). The remainder are credit sales

made to car hire companies and large organizations with fleets of company

is keen to expand in this area .There is, however, considerable competition.

Branch managers are responsible for obtaining business customers and have

some discretion over terms of trade and discounts.

The company’s computerized accounting system has recently produced the

following report for the manager of the Eastown branch for the six months

ended 30 September 20x5 :

Eastown Average for Branch all

branches
Return on capital 22% 16%

employed
Gross profit 38% 45%
Selling and promotion 9% 6%

cost/sales
Wages / sales 19% 14%
Debtors 63 days 52 day

`turnover(based on

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 credit sales only )
Stock turnover 37 days 49 days
The Eastown branch manager has only recently been appointed and is

unsure whether his branch appears well manager .He has asked for your

advice .You are required to compare the performance of the Eastown

branch with the average for all branches .Suggest reasons for the

differences you identify.

Task 2 8-11

You are presented with the following information relating to the following

information relating to Messiter plc

Year to 31 December     2011 2012

  $0 $0
Income statement  
Turnover ,all on credit terms 1,300 1,400
Cost of sales 650 770
Gross Profits 650 630
Profit before taxation 115 130
   
Balance sheet at 31

December:  
Non-current assets at cost 850 850
Less Accumulated

depreciation 510 595

Net book value 340 255
Inventory at cost 105 135
Trade account receivables     142 190
Required:

(a) Using the historical cost financial statements and stating the formulae

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you use, calculate the following accounting ratios for both 2011 and 2012:

(i) Gross profit percentage;

(ii) Net profit percentage;

(iii)Inventory turnover, stared in day;

(iv)Trade account receivable collection period, stated in days; an

(v) Non-current assets turnover.

(b) Using the following additional information:

(i) Restate the turnover for 2011and 2012 incorporating the following

average retail price indices:

Year to 31.12.2011 85

Year to 31.12.2012 111

(ii) Calculate the additional depreciation charge required to finance the

replacement of non-current assets at their replacement cost. The company’s

depreciation policy is to provide 10% per annum on original cost, assuming

no residual cost The replacement cost of not current assets at 31 December

was as follow:

2011 $1,140 millions

2012 $1,200 millions

(iii) Based upon these two inflation adjustments, why may it be misleading

to compare a company’s result for one year with that of another without

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adjusting for changes in general (RPI) or specific inflation?
Summary 12

Reference 13

Coursework 14-16

Task 1

J plc supplies and fits car types, exhaust pipes and other components. The

components .The company has branches throughout the country .Roughly 60 per cent of

sales are for cash (retail sales). The remainder are credit sales made to car hire

companies and large organizations with fleets of company is keen to expand in this

area .There is, however, considerable competition. Branch managers are responsible for

obtaining business customers and have some discretion over terms of trade and

discounts.

The company’s computerized accounting system has recently produced the following

report for the manager of the Eastown branch for the six months ended 30 September

20x5 :

Eastown Average for Branch all

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 branches
Return on capital 22% 16%

employed
Gross profit 38% 45%
Selling and promotion 9% 6%

cost/sales
Wages / sales 19% 14%
Debtors 63 days 52 day

turnover(based on

credit sales only )

Stock turnover 37 days 49 days
The Eastown branch manager has only recently been appointed and is unsure whether

his branch appears well manager .He has asked for your advice .You are required to

compare the performance of the Eastown branch with the average for all branches

.Suggest reasons for the differences you identify.Or more is the ratio between the

provided view there are a lot of show proves Eastown branch belonging to the

appropriate management. Return on capital employed (roce) is Eastown branch has a

good performance compared to other branches, which proves that it manages very well.

It earn 6% of the profits (22% - 16%) ROCE is likely to grow because Improve the top

line (i.e. increase operating profit) without a corresponding increase in capital

employed, or Maintain operating profit but reduce the value of capital employed. Gross

profit is 7% lower than the total balance of the whole (38% vs. 45%), which implies that

Eastown no better in this respect than any other branch management. Decrease is

business's eventual goal is to raise its profit margins. However, decreasing the gross

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profit margin temporarily may be beneficial in the long run. A business may decrease its

gross profit margin by lowering the cost of the goods it sells or by using higher quality,

and thus more expensive, materials to make the goods. Lower prices attract new

customers, which may eventually raise profit margins. Likewise, higher quality goods

retain customers, which also can raise profit margins in the future. Selling and

promotion cost / sales: eastown branch spend 50% more than any other branch (9% -

6%) in the marketing aspect, however, which may indicate poor management. Increased

be crease the power of promotional pricing and Leveraging Point-of-Purchase

(POP) Displays . wages and sales is eastoen spent no more than 35.7% of other branch

in terms of salary (19% vs14%), the reason why this situation are possible because the

management unit when. Increase turned out to be because the demand of goods

Increased demands and cost of living increase because employees work overtime.

Accounts receivable turnover is Eastown let his customers 21 percent more than any

other branch of the time to pay the debt (63day vs. 52 day) which also shows bad

management. The increase is due to strong competition and did not talk to creditors

recover their money. Inventory turnover is the management of the goods is faster than

any other branch of the 24% (37 days vs. 49 days) this represents the company's

management to well in terms of operating funds. Management Quick reason is to ask a

lot of marketing and a lot of exhibitions. In conclusion, these ratios show the high cost,

low-profit situation appeared in E ah stow you, if compared to the other branch, which

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is also displayed poor management, it may be because of the environment caused by

branch columns surrounding environment as a competitor too strong, do price war

between, plus staff training unit is sufficient. so the situation has led to more than

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Task 2

You are presented with the following information relating to the following information

relating to Messiter plc

Year to 31 December     2011 2012

  $0 $0
Income statement  
Turnover ,all on credit terms 1,300 1,400
Cost of sales 650 770
Gross Profits 650 630
Profit before taxation 115 130
   
Balance sheet at 31

December:  
Non-current assets at cost 850 850
Less Accumulated

depreciation 510 595

Net book value 340 255
Inventory at cost 105 135
Trade account receivables     142 190
Required:

(a) Using the historical cost financial statements and stating the formulae you use,

calculate the following accounting ratios for both 2011 and 2012: (i) Gross profit

percentage;

(ii) Net profit percentage;

(iii)Inventory turnover, stared in day;

(iv)Trade account receivable collection period, stated in days; an

(v) Non-current assets turnover.

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(b) Using the following additional information:

(i) Restate the turnover for 2011and 2012 incorporating the following average retail

price indices:

Year to 31.12.2011 85

Year to 31.12.2012 111

(ii) Calculate the additional depreciation charge required to finance the replacement of

non-current assets at their replacement cost. The company’s depreciation policy is to

provide 10% per annum on original cost, assuming no residual cost The replacement

cost of not current assets at 31 December was as follow:

2011 $1,140 millions

2012 $1,200 millions

(iii) Based upon these two inflation adjustments, why may it be misleading to compare a

company’s result for one year with that of another without adjusting for changes in

general (RPI) or specific inflation?

(a)

Historical cost 2011 2012

1. Gross profit percentage 650/1300 x 100 630/1400 x

Gross profit = 50% = 45%

×100
Revenue
2. Net Profit percentage 115 / 1300 x 100 130/1400 x 100

Profit before tax / Revenue x 100 = 8.8% = 9.3%

3. Inventory turnover 105/650 x 360 135/770 x 365

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Inventory / cost of sales x 365 = 59 days = 64 days
4. Trade accounts receivable collection 142/ 1300 x 365 190/1400 x 365

period = 40 days = 50 days

Accounts receivable / turnover x 365

5. Non-current assets revenue 1300/340 1400 / 255

Revenue / Non-current assets at net book = 3.8 time = 5.5 time

value

b)

1) Revenue ( million) 2011 2012

Historical cost 1300 x 111/ 85 1400 x 111 / 111

= 1698 = 1400

2) Additional adjustment 2011 2012

for depreciation
Replacement cost (10%) 114 120
Less Historical cost 85 85

depreciation
Additional depreciation 29 35

3. Additional adjustment for depreciation does not create intelligence to compare

historical cost turnover in 2011 and 2012.In real term it has fallen from 1698 to 1400.

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This is because their work has some adjustments, resulting in a depreciation value is not

the same, because the company has to adjust the in the interior of the machine in

addition the company to buy out the lowest price, so in 2012 the depreciated value will

drop from 1698 until 1400. And in 2012 the isolation had to increase his capital does

not move, so will the depreciated value will be radically reduced.

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Summary

Business degree programs comprise essential secretarial courses matrimonial

specializations in secretarial and student know how to choose to most important in

accounting. Such programs are nearly everyone often available at the associate's

through master's degree levels, and they can be ended online or at a traditional college

or university grounds. An associate's degree can lead to entry-level work as an

accounting or bookkeeping clerk, while a bachelor's or master's degree in accounting

can lead to an accountant or auditor job. There are combined bachelors and master's

programs in accounting at some schools, and these often assist with Certified Public

Accountant (CPA) exam training. Both associate's and bachelor's programs usually

cover the foundations of financial and managerial accounting, intermediate accounting

and income taxation; however, bachelor's program students also learn about auditing

and other advanced topics that might include international accounting, accounting

information systems and forensic accounting. Graduate students usually study many of

these topics at the advanced level and might concentrate in an area like taxation or

auditing. Programs of all levels often include general business courses, such as business

law, finance and money.

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Reference

http://study.com/articles/Business_Accounting_Summary_of_Coursework.html

http://highered.mheducation.com/sites/0072396881/student_view0/chapter1/chapter_su

mmary.html

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Coursework

Name: Chuang Wan Yik

Student I.D: 202389

No. IC: 950314-01-5432

1. Please describe the characteristics of useful information.

From the various reports which have appeared since 1975 the following characteristics

have been noted.

1 Relevance. This is regarded as one of the two main qualities. The information

supplied should be that which will satisfy the needs of its users.

2 Reliability. This is regarded as the other main quality. Obviously, if such information

is also subject to an independent check, such as that of the auditor, this will

considerably enhance the reliance people can place on the information.

3 Objectivity. Information which is free from bias will increase the reliance people

place on it. It is, therefore, essential that the information is prepared as objectively as

possible. Management may often tend to give a better picture of its own performance

than is warranted, and is therefore subjective. It is the auditor's task to counter this view,

and to ensure objectivity in the financial statements.

4 Ability to be understood. Information is not much use to a recipient if it is presented

in such a manner that no one can understand it. This is not necessarily the same as

simplicity.

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5. Comparability. Recipients of financial statements will want to compare them both

with previous financial statements of that company and with the results of other

companies. Without comparability the financial statements would be of little use.

6.Realism. This can be largely covered by the fact that financial statements should show

a `true and fair' view. It has also been contended that financial statements should not

give a sense of absolute precision when such precision cannot exist.

7.Consistencies. This is one of the basic concepts, but it is not to be followed slavishly

if new and improved accounting techniques indicate a change in methods.

8. Timeliness. Up-to-date information is of more use to recipients than outdated news.

9 Economy of presentation. Too much detail can obscure the important factors in

financial statements and cause difficulties in understanding them.

10 Completeness. A rounded picture of the company's activities is needed.

2. Please describe conflict between shareholders’ interests and social considerations.

Obviously, an organization has to come to a compromise about how far it should look

after the interests of its shareholders and how far it should bother about social

considerations. For instance, a company could treat its employees so well in terms of

pay, pensions and welfare that the extra costs would mean very low profits or even

losses. On the other hand, there must be instances where, no matter what the effects on

profits, the expenses just have to be incurred. If the company has a chemical plant

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which could easily explode, causing widespread destruction and danger to people, then

there cannot be any justification for not spending the money either to keep the plant safe

or to demolish it. The full severity of the law must bear down on transgressors of the

law in such cases of willful neglect. All the facts of the particular case must be brought

into account. Let us look at a typical case where the answer may seem obvious, but

perhaps there may be other factors which may make the answer not so obvious.

Workers in underdeveloped countries are usually paid far lower wages than those in the

developed countries. What happens if a large multinational company pays its workers in

a given country three or four times as much as home-based companies? Immediately

everyone wants to work for the multinational company, which can afford high wages,

and leave the home-based companies which cannot. Is that sensible? What chance is

there for the development of the country's own home-based industries if the outside

companies constantly take all the best brains and most able people?

In such a case it would probably make more sense for the multinational company to pay

wages more in keeping with the particular economy, and to help that country in other

ways such as by improving the health care generally for all, better education for all,

Social and so on. Obviously, a topic such as this will engender discussions and

arguments for some considerable time.

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