Balance Sheet as at As at 30/9/16 As at 30/9/15 $ $ Assets Current assets- Cash 8,200 9,400 Accounts Receivable 107,000 103,500 Inventory 82,700 71,300 Non-current assets less accumulated depreciation 242,600 245,700 Total assets 440,500 429,900 Liabilities and Owners' equity Current liabilities 117,000 120,000 Loan (repayable in 2019) 152,000 150,000 Total liabilities 269,000 270,000 Owners' equity 171,500 159,900 Total Liabilities and Owners' equity 440,500 429,900 Summarised Income Statement of Bishan Enterprise for the year ended 30 September 2016 $ Sales 990,000 Cost of goods sold 580,000 Gross profit 410,000 Operating expenses 350,000 Net profit 60,000 · Note - The owner withdrew $48,400 during 2016. Required: Calculate the following ratios for the year ending 30 September 2016. i) Gross profit margin ratio (%) ii) Operating expense to sales ratio (%) iii) Current ratio (times) iv) Average collection period (days) v) Average Inventory turnover (times)
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
$ $
Assets
Current assets-
Cash 8,200 9,400
Inventory 82,700 71,300
Non-current assets less
Total assets 440,500 429,900
Liabilities and Owners' equity
Current liabilities 117,000 120,000
Loan (repayable in 2019) 152,000 150,000
Total liabilities 269,000 270,000
Owners' equity 171,500 159,900
Total Liabilities and Owners' equity 440,500 429,900
Summarised Income Statement of Bishan Enterprise for the year ended 30 September 2016 $
Sales 990,000
Cost of goods sold 580,000
Gross profit 410,000
Operating expenses 350,000
Net profit 60,000
· Note - The owner withdrew $48,400 during 2016.
Required:
Calculate the following ratios for the year ending 30 September 2016.
i) Gross profit margin ratio (%)
ii) Operating expense to sales ratio (%)
iii)
iv) Average collection period (days)
v) Average Inventory turnover (times)
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