Essay on Accounting Test Questions

Submitted By sohaibnayyar
Words: 5983
Pages: 24
Open Document
SECTION A
Question A1 is COMPULSORY Question A1

Below are extracts from the financial statements of a listed company which operates a chain of bakery and sandwich retail outlets in the United Kingdom.

Income statements | 2009
£’000 | 2008
£’000 | Revenue | 658,186 | 628,198 | Cost of sales | (252,284) | (241,939) | Gross profit | 405,902 | 386,259 | Distribution costs | (321,686) | (309,735) | Administrative expenses | (35,783) | (35,944) | Other income | - | 8,033 | Operating profit | 48,433 | 48,613 | Interest receivable and similar income | 346 | 857 | Profit before taxation | 48,779 | 49,470 | Taxation | (14,405) | (15,375) | Profit for the year | 34,374 | 34,095 |

Balance sheets | 2009
£’000 | 2008
£’000 | Non-current assets | | | Intangible assets | 579 | 686 | Property, plant and equipment | 211,155 | 210,455 | | | | Current assets | | | Inventories | 11,886 | 12,152 | Trade and other receivables | 21,206 | 22,698 | | | | Cash and cash equivalents | 34,619 | 4,433 | | | | Current liabilities | | | | | | Trade and other payables | (71,738) | (62,761) | Current tax liabilities | (8,857) | (8,337) | Provisions for liabilities and charges | (857) | (2,843) | | | | Net current liabilities | (13,741) | (34,658) | Non-current liabilities | | | Other payables | (30,460) | (26,108) | Provisions for liabilities and charges | (3,296) | (2,428) | | | | Net assets | 164,237 | 147,947 | Capital and reserves | | | Share capital | 2,080 | 2,080 | Share premium account | 13,533 | 13,533 | Other reserves | 359 | 359 | Retained earnings | 148,265 | 131,975 | Total equity | 164,237 | 147,947 |

Cash flow statements

| 2009
£’000 | 2008
£’000 | Cash flows from operating activities | | | Cash generated from operations | 87,944 | 59,163 | Tax paid | (14,731) | (14,807) | Net cash generated from operating activities | 73,213 | 44,356 | Cash flows from investing activities | | | Purchase of property, plant and equipment | (30,296) | (40,758) | Purchase of intangible assets | - | (686) | Proceeds from sale of property, plant and equipment | 2,368 | 2,200 | Interest received | 346 | 857 | Net cash used in investing activities | (27,582) | (38,387) | Cash flows from financing activities | | | Sale of own shares | 1,182 | 698 | Shares purchased and cancelled | - | (9,738) | Dividends paid | (15,339) | (14,535) | Other financing cash flows | 1,087 | 8,083 | Net cash used in financing activities | (13,070) | (15,492) | Net increase/(decrease) in cash and cash equivalents | 32,561 | (9,523) |

Notes:

* The market value of the company’s shares at the year end was £4.37
(2008: £3.50).

* Share capital consists of 104 million shares with a nominal value of 2p per share.

Requirements:

a) Prepare a report describing how the liquidity of the company has changed between 2008 and 2009. Comment on why these changes may have occurred. What possible changes in the business’s activities and /or efficiency may have had an effect on the changes in liquidity? You should use appropriate ratios in your analysis.
(10 marks)

b) Imagine you are a prospective investor in this company’s shares. Calculate 3 investor ratios for 2009 and 2008 which would help you to decide whether to invest, and briefly explain the meaning of each one.
(10 marks)

c) Explain why financial statements include an accounting policies note. Give examples of how users of financial statements would find such a note useful, illustrating your answer with respect to the financial statements in this question.
(5 marks)

Total: 25 marks

Requirement:

a) Prepare a report describing how the liquidity of the company has changed between 2008 and 2009. Comment on why these changes may have occurred.
Show More

Related Documents: Essay on Accounting Test Questions

Essay on Assessment Task

ACC1030 Introduction to financial accounting Unit Guide Semester 2, 2014 Copyright © Monash University 2014. All rights reserved. Except as provided in the Copyright Act 1968, this work may not be reproduced in any form without the written permission of the host Faculty and School/Department. The information contained in this unit guide is correct at time of publication. The University has the right to change any of the elements contained in this document at any time. Last updated: 04 Jul 2014…

Words 3725 - Pages 15

Test Bank Solutions

Test bank Solutions for Management Accounting Information for Managing and Creating Value 6th Edition by Kim Langfield-Smith ISBN 9780070997608 0070997608 INSTRUCTOR TEST BANK SOLUTIONS VERSION DOWNLOAD NOW Test bank Solutions for Management Accounting Information for Managing and Creating Value 6th Edition by Kim Langfield-Smith ISBN 9780070997608 0070997608 INSTRUCTOR TEST BANK SOLUTIONS VERSION Test bank Solutions for Management Accounting Information for Managing and Creating Value…

Words 470 - Pages 2

International Student Interview Essay

own experience and answered questions we asked. And then, she told us how to prepare for the interview, what should pay attention to during the interview and things we should do after the interview. The top take–away for me is to how to prepare for the interview. First, we should research the employer. For example, the organizational structure, current news and products. Second, we should practice. We all know that practice makes perfect. So we should list some questions that the employer will ask…

Words 418 - Pages 2

Essay on AIM 6305 Online Syllabus Fall 14 2 1

Dallas | Course Info | Technical Requirements | Communications | Assessments | | Academic Calendar | Scholastic Honesty | Course Evaluation | University Policies | Course Information Course Course Number/Section ACCT 6305.OI1 Course Title Accounting for Managers Term and Dates Fall 2014 (08/25/14 - 12/18/14) Professor Contact Information Professor Surya Janakiraman Office Phone 972 883 6370 Email Address Send email using the “Message” option in eLearning Pilot (Preferred option). Do not…

Words 3312 - Pages 14

Days of the Year and Midterm Examination Essay

University of Manitoba I. H. Asper School of Business Department of Accounting and Finance Winter 2012 ACC 1100 INTRODUCTORY FINANCIAL ACCOUNTING A01 Tuesday and Thursday 8:30 a.m. – 9:45 a.m. Instructor: Sonja Carney Office: 374 Drake Centre Office Hours: Monday and Wednesday 10:00 a.m. – 12:00 p.m. or by appointment Telephone: Fax: E-mail: 474-9709 474-7545 Sonja_Carney@umanitoba.ca INTRODUCTION Accounting is the language of business. If you do not understand its fundamental concepts…

Words 3503 - Pages 15

Impairment Test Essay examples

Part A Question 1 Valuation of the Acquiree In a typical cooperative merger, it may be more reliable to measure the equity or member interests of the Acquiree, rather than attempting to measure the value of the interests transferred by the Acquirer. As a result, in most cases, the determination of the consideration transferred will be determined by valuing the business of the Acquiree. In order to determine the value of the Acquiree’s equity, it will be necessary to have the cooperative that…

Words 812 - Pages 4

Actuary Career Research Paper

an actuary, which is in the accounting field. What will it take to become an actuary? It will take hard work and dedication in order to succeed in this field. What exactly is actuary? Actuary is the management of risk. These professionals use analytical skills to help organizations plan for the future and protect them from any…

Words 1411 - Pages 6

How Do Earnings Numbers Relate To Stock Returns

past literature, it developed a relation between accounting earnings and stock returns. This article follows the steps of former articles and provides deeper insights for understanding this relation. It developed a large body of theory about the association between accounting income numbers and changes in share prices. But there are still some questions that haven’t been solved. In this article, the authors tried to figure out what kinds of questions are still unexposed and what new research methods…

Words 727 - Pages 3

ACC220 Timetable 2013 Essay

Form Quick outline search at Bottom of Form ACC220 - Accounting Basics II Top of Form Bottom of Form Outline info Semester Top of Form Bottom of Form School Top of Form Bottom of Form Last revision date Nov 27, 2012 12:12:12 PM Last review date Nov 27, 2012 12:12:12 PM Subject Title Accounting Basics II Subject Description In this second of the two introductory accounting courses, students will expand their understanding of accounting principles and concepts while covering specific topics…

Words 1234 - Pages 5

intermediate accounting 2 test bank Essay

Intermediate Accounting Kieso 15th Edition Test Bank Click here to download the solutions manual / test bank INSTANTLY!!! http://www.solutionsmanualtestbanks.com/2013/05/intermediate-acc ounting-kieso-15th-edition-test-bank.html Intermediate Intermediate Intermediate Intermediate Accounting Accounting Accounting Accounting Kieso Kieso Kieso Kieso 15th Edition Test Bank 15th Edition Test Bank Weygandt Warfield 15th Edition Test Bank Weygandt Warfield 15th Edition Test Bank…

Words 8328 - Pages 34