YALLA MOMOS INCOME STATEMENT FOR THE YEAR ENDING 2015 (IN AED) Net Revenue 504,000 Expenses Cost of food sales 151,200 Rent 68,000 Salaries 54,000 Administrative costs 23,000 Depreciation 30,200 Utilities 13,000 Miscellaneous expenses 15,800 Advertising costs 0 Interest 13,000 Net Profit 135,800 EXHIBIT 2: YALLA MOMOS PROJECTIONS FOR THE YEAR 2016 (IN AED) Without expansion With expansion Rent 75,000 88,000 Salaries 61,400 75,000 Administrative costs 26,000 34,000 Depreciation 34,720 38,360 Utilities 14,000 19,000 Miscellaneous expenses 17,060 19,180 Advertising costs 8,000 12,000 Interest 13,000 16,000 Source: Company documents, Ivey publications Required: Calculate the 2015 BEP and Margin of safety (MOS) in quantity and monetary terms.
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.
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EXHIBIT 1: YALLA MOMOS INCOME STATEMENT FOR THE YEAR ENDING 2015 (IN AED) |
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Net Revenue |
504,000 |
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Expenses |
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Cost of food sales |
151,200 |
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Rent |
68,000 |
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Salaries |
54,000 |
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Administrative costs |
23,000 |
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Depreciation |
30,200 |
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Utilities |
13,000 |
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Miscellaneous expenses |
15,800 |
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Advertising costs |
0 |
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Interest |
13,000 |
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Net Profit |
135,800 |
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EXHIBIT 2: YALLA MOMOS PROJECTIONS FOR THE YEAR 2016 (IN AED) |
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Without expansion |
With expansion |
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Rent |
75,000 |
88,000 |
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Salaries |
61,400 |
75,000 |
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Administrative costs |
26,000 |
34,000 |
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Depreciation |
34,720 |
38,360 |
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Utilities |
14,000 |
19,000 |
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Miscellaneous expenses |
17,060 |
19,180 |
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Advertising costs |
8,000 |
12,000 |
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Interest |
13,000 |
16,000 |
Source: Company documents, Ivey publications
Required:
- Calculate the 2015 BEP and Margin of safety (MOS) in quantity and monetary terms.
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