Scenario
You have applied for a job in the accounting department of a department store.
Task 1 of 2 Q&A (ACs 1.1, 1.2 & 1.3)
Instructions
As part of the application form, you are to answer the following questions:
- Explain the aims and purpose of financial and management accounting to
- Who are the various users of accounting information and what information would these users require?
- Describe the role of the International Accounting Standards Board (IASB) and the Standards Advisory Council (SAC)
Delivery and Submission
- 1x answer to all the above questions
- Indicative word count 600 words
Task 2 of 2 Accounting Test (ACs 2.1, 2.2, 2.3, 2.4, 3.1, 3.2, 3.3, 4.1 & 4.2)
After successfully being called in for an interview. You have been asked a problem to solve to test your ability in basic accounting.
Problem 1 – (AC2.1, 2.2. 2.3 & 2.4)
Jack Uzi, wholesale toys online, operates out of his office in his parents’ apartment, with 0 inventory. Every toy he sells is first purchased then re-sold, but only after the order comes through. You need to help him out with his bookkeeping. The following transactions occurred in October:
- Paid £500 for lease of computer equipment in advance for November
- Cash Sales of £4,847. (for stuffed animal)
- Cash sales of £4,486 (for Educational Toys)
- Cash sales of £4,702 (for Video Games)
- Cash Sales of £1,827 (for Pretend-play toys)
- Purchase of office supplies on account from Bing's Office Supply, £416.
- Withdrawal by owner (Jack Uzi) of £1,600.
- Payment on account (Bing's), £390.
- Payment of wages with cash, £2,500.
- Payment for cleaning services with cash, £74
- Payment to purchase stuffed animal, £4,044
- Payment to purchase Educational Toys, £3,547
- Payment to purchase Video Games, £4,169
- Payment to purchase Pretend-play toys, £1,382
Further, he has account balances for the beginning of October as follows:
| Cash | £ 2,000 | Accounts Payable, Bing's Office Supply Hut | £ 75 |
| Office Supplies | £ 75 | Jack Uzi, Capital | £ 2000 |
Instructions
- Prepare books of original entries (Sales journal, purchase journal, cash journal)
- Prepare the general ledger
- Jack checked his bank balance and he noticed that his actual cash balance was £20 less due to overdraft fees, make the necessary adjustments
- Prepare a trial balance for October 31 2017
- Prepare a cash Flow Statement for October 31, 2017
- Prepare an Income Statement for the period ending October 31, 2017
- Prepare a Balance Sheet for October 31, 2017
Problem 2 (ACs3.1, 3.2 & 3.3)
WoodyTrain has the following income statement (turn page)
WoodyTrain
Income Statement
2017
INCOME
Sales £ 31,442.00
Cost of Goods
| Beginning Inventory value | £ 8,010.00 |
| Manufacturing cost
Less Ending Inventory value |
£ 19,159.00 |
| £ 8,793.00 |
| Cost of Goods Sold | £ 18,376.00 | |
| Gross Profit | £ 13,066.00 | |
| Non-Operating Income | ||
| Interest Income | £ 600.00 | |
| Total Non-Operating Income | £ 600.00 | |
| Total INCOME | £ 13,666.00 | |
| EXPENSES
Operating Expenses |
||
| Accounting and Legal | £ | 1,107.00 |
| Advertising | £ | 900.00 |
| Depreciation | £ | 1,202.00 |
| Insurance | £ | 1,041.00 |
| Maintenance and Repairs | £ | 923.00 |
| Office Supplies | £ | 325.00 |
| Rent | £ | 1,268.00 |
| Salaries and Wages | £ | 925.00 |
| Telephone & Broadband | £ | 118.00 |
| Utilities | £ | 565.00 |
| Web Hosting and Domains | £ | 165.00 |
| Total Operating Expenses | £ 8,539.00 | |
| Non-Recurring Expenses | ||
| Furniture and Equipment | £ 1,052.00 | |
| Total Non-Recurring Expenses | £ 1,052.00 | |
| Total EXPENSES | £ 9,591.00 | |
| Net Income Before Taxes | £ 4,075.00 | |
| Income Tax Expense | £ 815.00 | |
| NET INCOME | £3,260.00 | |
WoodyTrain
Statement of financial position at 31 Dec 2017
Assets
Current
Cash £ 1,704.00
| Inventory of Office Supplies
Inventory (Raw Materials, Work In |
£ 120.00 | |
| Progress, Finished Goods) | £ 8,793.00 | £ 10,617.00 |
Non-current assets
Office Equipment £ 3,785.00
Less: Accumulated depreciation £ 1,202.00 £ 2,583.00
£ 13,200.00
Equity
Owner Capital £ 6,000.00
Profits/loss £ 3,260.00
£ 9,260.00
Liabilities
Current
Liabilities Short-term loan
Non- Current Liabilities
£ 1,940.00
Long-term loans £ 2,000.00
Total Liabilities + Equity £ 13,200.00
Instructions
- Using the usual ratio categories (Liquidity ratios, Solvency ratios and Profitability ratios), classify the following ratios
- Current Ratio
- Acid-Test Ratio
- Debt-Equity Ratio
- Profit Margin
- Return on Owners' Equity
- Calculate the following ratios
- Debt-Equity Ratio
- Profit Margin
- Return on Owners' Equity
- Based on the information provided and your ratio, how would you describe the financial performances of WoodyTrain?
Summative Delivery
- Completion of tasks 1 and 2
- Indicative word count 3000 words
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