COURSE CODE: ACC117/106/100

DECLARATION FORM OF GROUP ASSIGNMENT

Name of group leader and members: Student ID:

NURUL ANIS SOFEA BINTI ABD MALIK 2022869404

NOR IZZATI FIRZANAH BINTI MOHAMED ZAIN 2022488982

NUR HIDAYATI HUSAN BINTI AZIZAN 2022623288

IFFAH BATRYISIA BINTI MUHAMMAD ELIAS 2022886432

ATHIRAH BATRISYIA BINTI RUZI 2022621026

Group:

DECLARATION: We declare that the assignment here submitted is original and no part of this
assignment has been copied from other person's work except when due acknowledgement is
made in the text and all members of the group have read and checked all parts of the piece of
work, irrespective of whether they are contributed by individual members or all members as a
group, here submitted are original except for source material explicitly acknowledged.

Signature of group leader: Submission Date: 29th January 2023

DISCLAIMER: A lecturer has a right not to mark this assignment if the above declaration has not
been signed. If the above declaration is found to be false, no mark will be rewarded for this
assignment.
 ACC117 GROUP PROJECT 2
(SEMESTER OCT 2022-FEB 2023)

PREPARED BY:
NAME STUDENT ID

NURUL ANIS SOFEA BINTI ABD MALIK 2022869404

NOR IZZATI FIRZANAH BINTI MOHAMED ZAIN 2022488982

NUR HIDAYATI HUSAN BINTI AZIZAN 2022623288

IFFAH BATRYISIA BINTI MUHAMMAD ELIAS 2022886432

ATHIRAH BATRISYIA BINTI RUZI 2022621026

GROUP:

PREPARED FOR:
MADAM SURYANI BINTI ABDUL RAMAN

DEADLINE OF SUBMISSION:
29 JANUARY 2023

2
 INTRODUCTION TO FINANCIAL ACCOUNTING /
INTRODUCTION TO FINANCIALACCOUNTING AND REPORTING / ACCOUNTING
(ACC117 / ACC106 / ACC100)

INTRODUCTION

GROUP PROJECT 2 (15%)

COURSE LEARNING OUTCOME:
This assignment is design to enhance students’ teamwork through analysing financial
statements using simple financial ratios for sole proprietorship business (C4).

INSTRUCTIONS TO ALL STUDENTS:

1. Form a group with a maximum of 4 members.

2. Answer all questions.

3. Submit the answers in a proper report format including the declaration and cover page
with the details required. Only the group leader needs to submit the assignment on
behalf of the group.

4. If the answers found similar or the same with the other group(s), a penalty will be
imposed on all groups involved.

5. The deadline for submission is on 29 January 2023.

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QUESTION
Study the following financial statements for two very similar enterprises owned by Puan
Khairiah that are located in the city center of Perak and then answer the questions which
follow.
Statement of Profit or Loss for the year ended 31 December 20x9

FARMASI TAPAH FARMASI SERI ISKANDAR

RM RM RM RM
‘000 ‘000 ‘000 ‘000
Sales 2,880 5,320
Less: cost of sales (2,240) (3,664)
Gross profit 640 1,656

Less: expenses
Depreciation (35) (184)
Other expenses (509) (1,108)
Net profit 96 364

Statement of Financial Position as at 31 December 20x9

FARMASI FARMASI SERI

TAPAH ISKANDAR
RM RM
’000 ’000
Non-current assets
Shophouse at carrying value 72 320
Office equipment at carrying value 34 244
106 564

Current assets
Inventory 224 316
Accounts receivable 422 191
Prepaid expenses 2 -
Bank 6 36
760 1,107

Financed by:
Owner’s equity
Opening balance 334 460
Add: Net profit 96 364
Less: Drawings (112) (118)
318 706

Non-current liabilities 50 153

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 Current liabilities
Accounts payable 380 245
Accrued expenses 2 -
Short-term loan 10 3
760 1,107

Additional information:
1. 10% of the sales were cash sales.
2. The net purchase incurred during the year were RM2,080,000 and RM3,700,000 for
Farmasi Tapah and Farmasi Seri Iskandar respectively.
3. Assume a year has 365 days.

Required:
a. Compute the following ratios for both businesses:

i. Current ratio
ii. Quick ratio
iii. Inventory turnover ratio
iv. Accounts receivable collection period
v. Gross profit margin
vi. Net profit margin
(30 arks)

b. Based on your above answer in (a):

i. Interpret each of the accounting ratios for both businesses.

(12 marks)

ii. State which business has difficulty in paying its short-term obligations
without using its inventory and give ONE (1) impact on business when it has
liquidity ratio less than 1.
(2 marks)

c. Identify which business seems to be the most efficient in using its capital to generate the

profit. Justify your opinion.

(6 marks)

(Total: 50 marks)

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 a. Compute the following ratios for both businesses :

Farmasi Tapah

Ratios Farmasi Tapah

i. Current ratio
654,000
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕𝒔 =
392,000
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
= 1.67 : 1

ii. Quick ratio

654,000 − 224,000 − 21,000
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕𝒔 − 𝒊𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 − 𝒑𝒓𝒆𝒑𝒂𝒚𝒎𝒆𝒏𝒕 =
392,000
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
428,000
=
392,000

= 1.09 : 1

iii. Inventory turnover ratio

224,000 + 2,080,000 − 334,000
𝒄𝒐𝒔𝒕 𝒐𝒇 𝒔𝒂𝒍𝒆𝒔 =
(224,000 + 334,000)/2
𝒂𝒗𝒆𝒓𝒂𝒈𝒆 𝒊𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒊𝒆𝒔
1,970,000
=
279,000

= 7 times

iv. Accounts receivable collection period

422,000
= 2,592,000 × 365 days
𝒂𝒄𝒄𝒐𝒖𝒏𝒕 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆𝒔
× 𝟑𝟔𝟓 𝒅𝒂𝒚𝒔
𝒄𝒓𝒆𝒅𝒊𝒕 𝒔𝒂𝒍𝒆𝒔 (𝒏𝒆𝒕) = 59 days

v. Gross profit margin

640,000
𝒈𝒓𝒐𝒔𝒔 𝒑𝒓𝒐𝒇𝒊𝒕 = × 100
× 𝟏𝟎𝟎 2,880,000
𝒔𝒂𝒍𝒆𝒔 (𝒏𝒆𝒕)
= 22.22%

vi. Net Profit Margin

96,000
𝒏𝒆𝒕 𝒑𝒓𝒐𝒇𝒊𝒕 = × 100
× 𝟏𝟎𝟎 2,880,000
𝒔𝒂𝒍𝒆𝒔 (𝒏𝒆𝒕)
= 3.33%

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 Farmasi Seri Iskandar

Ratios Farmasi Seri Iskandar

i. Current ratio
543,000
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕𝒔 248,000
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
= 2.19 : 1
ii. Quick ratio
543,000 − 316,000 − 0
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕𝒔 − 𝒊𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 − 𝒑𝒓𝒆𝒑𝒂𝒚𝒎𝒆𝒏𝒕 248,000
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
227,000
248,000

= 0.92 : 1

iii. Inventory turnover ratio

316,000 + 3,700,000 − 460,000
𝒄𝒐𝒔𝒕 𝒐𝒇 𝒔𝒂𝒍𝒆𝒔 (316,000 + 460,000)/2
𝒂𝒗𝒆𝒓𝒂𝒈𝒆 𝒊𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒊𝒆𝒔
3,556,000
388,000

= 9 times

iv. Accounts receivable collection period

191,000
× 365 days
𝒂𝒄𝒄𝒐𝒖𝒏𝒕 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆𝒔 4,788,000
× 𝟑𝟔𝟓 𝒅𝒂𝒚𝒔
𝒄𝒓𝒆𝒅𝒊𝒕 𝒔𝒂𝒍𝒆𝒔 (𝒏𝒆𝒕)
= 15 days

v. Gross profit margin

1,656,000
𝒈𝒓𝒐𝒔𝒔 𝒑𝒓𝒐𝒇𝒊𝒕 × 100
× 𝟏𝟎𝟎 5,320,000
𝒔𝒂𝒍𝒆𝒔 (𝒏𝒆𝒕)
= 31.13%

vi. Net Profit Margin

364,000
𝒏𝒆𝒕 𝒑𝒓𝒐𝒇𝒊𝒕 × 100
× 𝟏𝟎𝟎 5,320,000
𝒔𝒂𝒍𝒆𝒔 (𝒏𝒆𝒕)
= 6.84%

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 b.
i. Interpret each pf the accounting ratios for both businesses.

Interpret Farmasi Tapah Farmasi Seri Iskandar

Current ratio The current ratio is 1.67 : 1, this The current ratio is 2.19: 1, this
means Farmasi Tapah has means Farmasi Seri Iskandar has
RM1.67 of current assets to repay RM0.92 of current assets to repay
that RM1 of liabilities. that RM1 of liabilities.

Quick ratio Farmasi Tapah has RM1.09 to Farmasi Seri Iskandar has RM0.92
repay RM1 of its current liabilities less to repay RM1 of its current
using its liquid assets. liabilities using its liquid assets.

Inventory Farmasi Tapah replenishes its Farmasi Seri Iskandar replenishes its
turnover ratio stock approximately 7 times a stock approximately 9 times a year.
year.

Accounts Accounts receivable collection Accounts receivable collection period

receivable period of 59.43 means Farmasi of 14.56 means Farmasi Seri
collection Tapah took approximately 59 days Iskandar took approximately 15 days
period to collect payment of debt from its to collect payment of debt from its
accounts receivable during the accounts receivable during the
year. year.

Gross profit Farmasi Tapah generate gross Farmasi Seri Iskandar generate
margin profit of RM22.22 for every RM100 gross profit of RM31.13 for every
of sales before paid any RM100 of sales before paid any
expenses. expenses.

Net Profit After the expenses were paid, After the expenses were paid,
Margin Farmasi Tapah will generated a Farmasi Seri Iskandar will generated
net profit of RM 3.33 for every a net profit of RM6.84 for every
RM100 of sale. RM100 of sale.

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 ii. State which business has difficulty in paying its short-term obligations
without using its inventory and give ONE (1) impact on business when it
has liquidity ratio less than 1.

Farmasi Seri Iskandar.

If the liquidity ratio less than 1, the business will struggle with paying its
current debts and the business could imminently face bankruptcy.

c. Identify which business seems to be the most efficient in using its capital to
generate the profit. Justify your opinion.
Farmasi Seri Iskandar.

It indicates that the efficiency ratios of Farmasi Seri Iskandar as seen from
inventory turnover ratio and average collection period has surpass than Farmasi
Tapah. The inventory turnover ratio which is 9 times and average collection period
which is 15 days shows that Farmasi Seri Iskandar sells stock more quickly and
settles debts from its debtors faster, compared to Farmasi Tapah which only
succeeds in selling its stock 7 times a year and takes 59 days longer to collect
debts.