Accounting and Financial Management for Sales- myassignmenthelp

Question: Discuss about theAccounting and Financial Management for Credit Sales. Answer: Comprehensive income statement for year ended 31st December 2016 Particulars Note Amount Amount REVENUE Costume revenue - costume hire 75,000.00 Costume revenue - costume sales 20,000.00 Less: Sales return 1 1,700.00 Total revenue 93,300.00 Less: Cost of sales 8,000.00 Gross revenue 85,300.00 LESS: EXPENSES Salaries 2,800.00 Cleaning 3,000.00 Accounting fees 1,800.00 Insurance 2 416.67 Interest expense 2,100.00 Marketing 2,750.00 Depreciation expenses 3 57,900.00 Total expense 70,766.67 Net income 14,533.33 Financial Position as on 31st December 2016 Particulars Note Amount Amount ASSETS Current assets Cash 14,500.00 Accounts receivable 23,600.00 Less: Bad debts 1 1,700.00 36,400.00 Inventory - costumes 6,500.00 Prepaid insurance 2 833.33 Total current assets 43,733.33 Non-Current assets Building 1,06,000.00 Less: Depreciation 3 10,600.00 95,400.00 Delivery truck 49,000.00 Less: Depreciation 3 9,800.00 39,200.00 Costumes 75,000.00 Less: Depreciation 3 37,500.00 37,500.00 Total non-current assets 1,72,100.00 Total assets 2,15,833.33 LIABILITIES Current liabilities Suspense account 400.00 Non-current liabilities Mortgage payable 1,00,000.00 Add: Interest payable 4 15,000.00 1,15,000.00 Total non-current liabilities 1,15,400.00 Shareholders equity Capital -Peter Pan 1,20,000.00 Less: Drawing 34,100.00 85,900.00 Net income 14,533.33 Total shareholder's equity 1,00,433.33 Total liabilities and equity 2,15,833.33 Statement of changes in equity for year ended 31st December 2016 Particulars Amount Capital - Peter Pan 1,20,000.00 Drawing -34,100.00 Net income 14,533.33 Balance as on 31st December 2016 1,00,433.33 Notes for adjustments Credit sales return As the sales made during the year amounting to R 1700 has been returned by the customer, it will be reduced from the revenue from the costume sales as well as from the account receivables. Prepaid insurance Total amount paid for 12 months 1,250 4 months insurance (1250*4/12) 466.67 8 months insurance (1250*8/12) 833.33 Total 1,250 As the 4 months period that is, 1st September 2016 to 31st December 2016 falls under the current year, it will be accounted as expense of the current year. On the other hand, As the 8 months period that is, 1st January 2017 to 31st August 2017 falls under the next year, the amount of 833.33 will be treated as current asset. Depreciation Asset Value Depreciation Adjusted value Building 1,06,000.00 10,600.00 95,400.00 Delivery truck 49,000.00 9,800.00 39,200.00 Costumes 75,000.00 37,500.00 37,500.00 Interest on mortgage Interest at 15% will be 100,000*15/100 = 15,000 Background of SAA SAA is the carrier of national flag from South Africa and the most rewarded airline from the continent. For last 80 years, SAA is engaged in transportation of the cargo as well as the passengers from the country. The airline provides various related services through the wholly owned subsidiary and through the group. Recent development SAA has revalidated their turnaround strategy for the long-term period and updated the strategic plan for navigating the economic, political, and the social environment under which it operates. Ratio calculation Ratio Formula 31st March 2016 31st March 2015 Amount Result Amount Result Liquidity and efficiency Current ratio Current assets 9,681 0.54 7022.00 0.41 Current liabilities 18,060 16947.00 Acid test ratio Current assets less inventories 8,954 0.50 6297.00 0.37 Current liabilities 18,060 16947.00 Accounts receivable turnover Net sales 28,827 4.49 28513.00 5.89 Accounts receivable 6,422 4842.00 Profitability Return on asset ratio Net Income -1,473 -8.79 -5639.00 -39.17 Total assets 16,761 14396.00 Return on sales Net income -1,473 -5.11 -5639.00 -19.78 Sales 28,827 28513.00 Debt ratio Total liabilities 27,725 1.65 23639.00 1.64 Total assets 16,761 14396.00 Equity ratio Total equity -10,964 -0.65 -9243.00 -0.64 Total assets 16,761 14396.00 Conclusion It can be concluded from the above analysis that the performance of the company in some aspects has been improved as compared to the previous year and in some aspects the performance has been worsened. However, if the overall performance of the company is considered, it can be identified that the performance of the company is not at all satisfactory. The liquidity ratio is indicating that the company is not efficient to pay-off the short-term obligation. Further, the company is not able to generate profit in both the year. Moreover, the solvency ratio is indicating that the company is highly leveraged and the solvency level is significantly low. Bibliography Ak, B. K., Dechow, P. M., Sun, Y., Wang, A. Y. (2013). The use of financial ratio models to help investors predict and interpret significant corporate events.Australian journal of management,38(3), 553-598. Bodie, Z. (2013).Investments. McGraw-Hill. Omar, N., Koya, R. K., Sanusi, Z. M., Shafie, N. A. (2014). Financial statement fraud: A case examination using Beneish Model and ratio analysis.International Journal of Trade, Economics and Finance,5(2), 184. Zainudin, E. F., Zainudin, E. F., Hashim, H. A., Hashim, H. A. (2016). Detecting fraudulent financial reporting using financial ratio.Journal of Financial Reporting and Accounting,14(2), 266-278.