principle of accounts sba
TRANSCRIPT
Table of Content
Aims of project..................................................................................................................1
Acknowledgement ...........................................................................................................2
Research question............................................................................................................3
Methology.......................................................................................................................4
Limitation........................................................................................................................5
Description of business..................................................................................................6
Account procedure used kept .......................................................................................7-8
General Journal................................................................................................................9
Sales Journal..................................................................................................................10
Purchases Journal...........................................................................................................11
Return Outwards Journal................................................................................................12
Return Inwards Journal...................................................................................................13
General Ledger..............................................................................................................14-36
Sales Ledger...................................................................................................................37-46
Purchases Ledger...........................................................................................................47-56
Cash book........................................................................................................................57
Trial Balance....................................................................................................................58
Trading and Profit and Loss Account...............................................................................59
Balance Sheet...................................................................................................................60
Sales control account.......................................................................................................61
Purchases control account.................................................................................................62
Update Cash book...............................................................................................................63
Bank reconciliation statement............................................................................................64
Supporting Document
• Debit note...............................................................................................................65
• Credit note..............................................................................................................66
• Cheque....................................................................................................................67
• Receipt.....................................................................................................................68
• Invoice.......................................................................................................................69
• Purchases order........................................................................................................70
Ratios..................................................................................................................................71-74
Interpretation of data.........................................................................................................75-77
Recommendation..................................................................................................................78
Conclusion..............................................................................................................................79
Performance of Business………………………………………………………………………………………………….80
Organization chart..................................................................................................................81
Bibliography...........................................................................................................................82
Aims of Project
1. To get better acquainted with the operations of a soletradership.
2. To access the overall performance of the business.
3. To interpret and analyse accounting information accurately.
4. To gain a better understanding on the preparation of accounting records.
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Acknowledgement
Firstly and most importantly, I would love to thank Jesus Christ for giving me the strength
and patience to finish as well as keep in touch with the aspect of this Assessment.
Secondly, I would love to show gratitude to my wonderful Principles of Account teacher.
Without their teachings and knowledge, I would not have completed my School Bases
Assessment, better yet, not have started it.
Last but not least, my next door neighbour, Mrs. Pantry, who played a huge role in getting
this project done. Whenever certain aspects were not clear, she offered explanations and
assistance which I can not leave unacknowledged.
Sincerely, I show full appreciation and gratitude to the persons listed above.
2
Research Question
1. The researcher wishes to find out if the business is profitable or not.
2. What can be done to maximise profit made in the business.
3. To discover how effective sales is in an organization.
3
Methology
The researcher uses source of document such as credit note, debit note, cheque, receipt, invoice
and purchases order to investigate and to do the recording process.
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Limitation
This research depend on the accuracy in the recording process of the sales, purchases, return in
ward and out ward journal, ledgers, cash book, trial balance, trading profit and loss and balance
sheet, if any error have occur it would have significant effect on the financial statement
therefore this research would have a wrongly interpretation.
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Description of business
Shaniker Anderson is the owner of tech Plus. The business is a sole trade, it is located at 10
Main Street, Riversdale St.Catherine.The business trades in computer, printer, Televisions,
papers, Speakers and stationeries. The opening and closing hours of the business are 8:30 am to
5:00 pm on Monday to Thursday and 9:30 am to 6:00pm on Friday and Saturday. The business
is advertised in the Sunday Gleaner and on bulletin board.
The business employs one Supervisor, a sale clerk, cashiers and one accounting clerk- a total of
four persons (see organizational chart page 80). The business buys and sells on credit as well as
cash.
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Accounting Procedures Used and Accounts Records Kept
The following sources of documents were used and records kept were prepared: sales and
purchases invoices, cash receipts, debit and credit note, so the ledgers and the other books could
be prepared.
The capital for May 2010 was obtained from the previous month of April 2010. This was the old
capital plus the net profit, less the drawings.
Some goods were purchased on credit; all goods that were bought on credit were recorded in
the purchases journal. Some goods purchased were returned to the supplier. These were
recorded in the return outwards journal which amounted to $60,000.
Goods were sold which amounted to $1,477,000. Some goods were sold on credit while some
were sold for cash or cheque. All credit sales were recorded in sales journal and all cash or
cheque sales and payments made out were recorded in the cashbook. Some goods sold were
returned to the business by our customers which were recorded in the return inwards journal
which amounted to $ 79,000.
The purchases and sales journal were totalled and posted to the purchases and sales ledger
respectively. The return outwards and return inwards journal were totalled and posted to the
purchases and sales ledger respectively. Return inwards was posted to the sales ledger while the
return outwards were posted to the purchases ledger.
All expenses which were incurred, revenues earned sales; purchases capital, fixed assets and
drawings were recorded in the general ledger.
All ledgers including the cashbook were balanced off and a trial balance was extracted to check
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the arithmetic accuracy of the ledgers. From the trial balance the final account was prepared.
The
Trading and Profit and Loss account was prepared to calculate the gross and net profit. The
balance sheet was then constructed to show the financial position of the business.
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General Journal
General Journal
Date
Details Folio Debit Credit
May 1 Premises GL/2 2,000,000
May 1 Moto van GL/3 700,000
May 1 Fixtures and Fittings GL/4 500,000
May 1 Stock GL/5 1,400,000
May 1 Debtor: R. Tucker SL/1 50,000
May 1 R. Pointing SL/2 45,000
May 1 Cash CB/1 85,000
May 1 Bank CB/2 890,000
May 1 Creditors: R. Harris PL/1 55,000
May 1 D. Kelly PL/2 25,000
May 1 Loan Scotia Bank GL/6 1,800,000
May 1 Prov For Dep: Moto van GL/7 70,000
May 1 Fixtures and Fittings
GL/8 25,001
May 1 Capital GL/1 3,695,500
5,670,500 5,670,500
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Sales Journal
Sales Journal
Date Details Folio Amount
May 2 R. Pointing SL/3 89,500
May 2 S. Smith SL/4 120,500
May 2 T. Tucker SL/5 38,500
May 2 V. Terrylong SL/6 80,000
May 2 K. Wilson SL/7 45,000
May 5 B. White SL/8 65,000
May 5 J. Harris SL/9 100,000
May 5 K. Brown SL/10 92,000
May 5 V. Terrylong SL/6 50,000
May 5 K. Wilson SL/7 80,000
May 10 B. White SL/8 36,000
May 10 J. Harris SL/9 78,000
May 10 K. Brown SL/10 54,000
May 10 B. Anderson SL/11 35,000
May 10 s. Walcott SL/12 75,000
May 16 R. Pointing SL/3 66,000
May 16 S. Smith SL/4 120,000
May 16 T.Turner SL/5 55,000
May 16 B. Anderson SL/11 87,000
May 16 s. Walcott SL/12 110,000
May 31 Total credit sales for the month transfer to the sales A/C GL 1,477,000
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Purchases Journal
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Return Outward Journal
PURCHASES JOURNAL
Date Details Folio Amount
may 4 R. Tucker PL/1 120,000
may 4 J. Green PL/6 100,000
may 4 D. Kelly PL/2 120,000
may 4 M. Webster PL/7 200,000
may 9 B. Spencer PL/8 50,000
may 9 R. Robinson PL/9 80,000
may 9 H. Thomas PL/10 48,000
may 9 G. Bravo PL/11 92,000
may 12 M. Miller PL/12 75,000
may 12 J. Green PL/6 50,000
may 12 D. Kelly PL/2 80,000
may 12 R. Tucker PL/1 70,000
may 31 Total purchases for the month transfer to the purchases A/C
GL 1,085,000
REATURN- OUT- WARD
Date Details Folio Amount
May 21 G. Bravo PL/11 12,000
May 21 R. Tucker PL/1 18,000
May 21 J. Green PL/6 15,000
May 23 M. Miller PL/12 15,000
May 31 Total return out ward for the month transfer to the return out ward A/C
GL/10 60,000
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Return Inward Journal
RETURN- IN-WARD
Date Details Folio Amount
May 18 J. Harris SL/1 20,000
May 18 S. Smith SL/4 25,000
May 18 B. Anderson SL/11 12,000
May 20 K. Brown SL/10
12,000
May 20 V. Terrylong SL/6 10,000
May 31 Total return in ward for the month transfer to the return inward A/C
GL/9 79,000
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Trial Balance
TRIAL BALANCE DATE Details Debit CreditJune 1 Capital 3,695,500June 1 Premises 2,000,000June 1 Moto Van 1,300,000June 1 Fixture and Fitting 500,000June 1 Stock 1,400,000June 1 Purchases 1,205,000June 1 Sales 1,812,000June 1 Return Out ward 60,000June 1 Return In ward 79,000June 1 Loan Scota Bank 1,800,000June 1 Prov for Dep Moto Van 70,000June 1 Prov for Dep Fixture and Fitting 25,000June 1 Rent 120,000June 1 Moto Sales and Services 300,000June 1 Drawings 35,000June 1 Utilities 40,000June 1 Moto Expenses 30,000June 1 Loan Interest 60,000June 1 Discount Allow 24,025June 1 Discount Receive 20,400June 1 Carriage In Ward 15,000June 1 Carriage Out Ward 23,000June 1 Staff 70,000June 1 Debtor 645,000June 1 Creditor 470,000June 1 Cash 20,000June 1 Bank 686,875
8,252,900 8,252,900
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Trading profit and loss A/C
TRADING PROFIT AND LOSS FOR THE YEAR31-May
Details
Sales 1,812,000
Less Return In Ward 79000
Net Sales 1,733,000
Less Cost Of Sales:
Opening Stock 1,400,000
Add Purchases 1,205,000
Add Carriage In 15000
1,220,000
Less Return Out Ward 60000
Goods Available For Resale 1160000
2,560,000
Less Closing Stock 1580000 9,80,000
Gross Profit 753,000
Add Discount Received 20400
773,400
Less Expenses:
Carriage Out 23,000
Staff 70,000
Discount Allow 24,025
Utilities (4,000- 5,000) 35,000
Moto Expenses 30,000
Loan Interest (6,000₊30,000) 90,000
Rent (120,000+30,000) 130,000
Prov For Bad Debt 32,000
Depreciation Moto Van 123000
Fixtures And Fittings 25,000 582,275
Net Profit 191,125
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Balance Sheet
BALANCE SHEET FOR THE YEAR ENDEDMAY31
Assets Cost Dep To Date NBV
Moto Van 1,300,000 193,000 1,107,000
Fixtures And Fittings 500,000 50,000 450,000
Premises 2000000 - 2000000
3,800,000 243,000 3,557,000
Current Assets:
Stock 1,580,000
Debtors 645,000
Less prov For Bad Debt 32,250 612,750
Cash 686,875
Prepayment 5,000
Bank 20000
2,904,625
Less Current Liabilities:
Creditor 470,000
Accruals (30,000+10,000) 40,000
Moto Sales And Services 300000 810,000
2,094,625
Less Long Term Liabilities:
Loan Scota Bank 1800000 294,625
3,851,625
Financed by:
Opening Capital 3,695,000
Add Net Profit 191,125
3,886,625
Less Drawings 35000 3,851,625
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SALES LEDGER CONTROL A/C
Bal b/d 95,500Sales 1,477,000
1,572,500
Return In Ward 79,000Bank 824,475Discount Allow 24,025Bal c/d 645,000 1,572,500
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PURCHASES LEDGER CONTROLE A/C
Return out Ward 60,000 Bank 614,600
Bal b/d 30,000Purchases 1,085,000
Discount received 20,400
Bal c/d 470,000 1,165,000
1,165,000 470,000
18
UPDATE CASH BOOK AS AT MARCH 31
Bal b/d 686875 Credit Transfer 135000
821,875
Bank Charges 6500Standing Order 70,000Balance c/d 745,375 821,875
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Bank Reconciliation Statement
Balance as per update cashbook 745,375
Add unpresented cheque 490,000
1,235,375
Less late lodgment 102,000
1,133,375
20
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Calculation of Ratio
Profitability Ratio
Gross profit as a percentage of sales:
Gross Profit *100Sales
Gross Profit 753,000Sales 1,733,000
753,000 * 100 = 43.5%1,733,000
1. Net Profit as a percentage of sales:
Net Profit *100Sales
Net Profit 171,125Sales 1,733,000
171,125 * 100 = 9.9%1,733,000
2. Expenses as a percentage of sales:
Expenses * 100Sales
Expenses 582,275Sales 1,733,000
582,275 * 100 = 33.6%1,733,000
3. Return on capital employed ratio (ROCE):
ROCE = Net Profit *100 Capital Employed Capital Employ = Opening Capital + Closing Capital 2
Opening Capital 3,695,500Closing Capital 3,851,625Net Profit 191,125
Capital Employed: 3,695,500 + 3,851,625 = 7,547,125 = 3,773,562.5 2 2
Roce: 191,125 * 100 = 5.06% 3,773,562.5
4. Stock turnover ratio:
Cost of goods soldAverage stock
Average Stock = Opening Stock + Closing Stock 2
Opening Stock 1,400,000Closing Stock 1,580,000Cost of Goods Sold 980,000
Average Stock: 1,400,000 + 1,580,000 = 2,980,000= 1,490,000 2 2
Stock turn over: 980,000 = 0.65 or 0.66 1,490,000
Liquidity Ratio
5. Current ratio:
Current AssetsCurrent Liabilities
Current Assets 2,904,625Current Liabilities 810,000
2,904,625 = 3.6: 1810,000
6. Acid Test Ratio:
Current assets – stock Current liabilities
Current Assets 2,904,625Stock 1,580,000Current Liabilities 810,000
2,904,625 – 1,580,000 810,000
7. Debtors to sales ratio:
Debtors *12Sales
Debtors 685,000Sales 1,733,000
685,000 *12 = 4.5 months1,733,000
8. Creditor to purchases:Creditor * 12Purchases
Creditor 470,000Purchases 1,160,000
470,000 * 12= 4.9 months1,160,000
Interpretation of Data
The whole purpose of the recording and classifying information about a business, and
communicating this to the owner and manager in the form of the financial statement, is to assess
the performance of the business. This information contained in the financial statement can be
used to evaluate various aspect of the company by the use of accounting ratio. Five ratios were
us to test the profitability of the business.
The grass profit ratio was calculated the figure of sale and gross profit are found in the trading
account. For every $100 of sales made in the business 43.5% of gross profit was obtained,
before any expenses were paid. This ratio measures how effectively the business has controlled
it cost of goods and sold them at the right price to give maximum gross profit.
Again the figure of sales can be found in the trading account whilst the net profit can be
obtained from the profit and loss account. The net profit/sales percentage take into account the
expenses incurred and show the amount of profit remaining, for every $100 invested in the
business 9.9% of net profit was gained.
It is useful to compare the expenses/sales percentage with previous result. For every $100 of
sales made in the business 33.3% of expenses were incurred therefore the business require
further investigation by management, for expenses to minimise to ensure that a reasonable net
profit is made.
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Return on capital employed ratio illustrates that what is important is not simple how much profit
has been made but how well the capital has been employed. The business has achieved a return
of $5.06 net profit for every $100 invested.
According to the stock turned over ratio the business less profitable as well as it is slow, the
business make a turnover of 0.6 times for the year, this indicate that most of the profit was use
to pay expenses which cause the business not to be more profitable.
A business that satisfactory liquidity will have sufficient fund, normally referred to as working
capital, to pay creditor at the required time. The ability to pay creditors on time is vital to ensure
that good business relationships are maintained, four ratios are used to check the liquidity of the
business.
Alternatively the current ratio said to be 3.6 times, the business can cover its short term debts
3.6 times, this business may have too much closing stock of a large amount of money in the
bank. The business will then need to make decision relative to employing their current assets
better by reducing the stock level and or investing surplus money.
To determine a further aspect of liquidity the liquid test ratio takes into account. This ratio show
whether there are enough liquid asset to be able to pay current liabilities quickly. The business
manages to pay its supplier 1.6:1 times.
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The debtors to sales ratio shows that the business gives its debtors 4.5 months to pay what they
owe to the business.
According to the creditor to purchases the business get 4.9 months to pay its supplier taking
longer pay supplier.
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SUGGESTION AND RECOMMENDATIONS
• The business could ensure publicity/public relations. It could give scholarships to
employees, their relatives and customers and report this in the gleaner so that the public
will hear and customers may increase hence more profit for the business.
• Advertisement could be carried out in by other forms of media communication for
example on the television, the internet and also on the radio; as a result a wide range of
prospective customers would be attracted to the business which will increase sales,
hence profit will increase.
• Most of the money made in the business was use to pay expenses. The business could
therefore reduce their expenses so that they can generate more profit, thus, increasing the
net profit.
• The business could have promotional events. They could give discounts, sales
promotions such as ‘buy-one-get-one-free”
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Conclusion
From doing this project I have increase my knowledge on the preparation of the accounting books, and I
have also gain more knowledge on the accounting principle and procedures. In this project and taking
account personnel, I have learnt how to analyse and interpret accounting data and information effectively
for future use.
This project has helped me in ways of preparing myself for the CXC and achieving a grade one in
accounts.
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Performance of Business
The business is profitable because it did not make a loss.
At Shaneka’s auto supply most of the profit made in the business was use to pay expenses which result
in less profit, therefore expenses need to minimise to ensued that a reasonable net profit is made. (See
figure1 below).
Comparison between net profit and Expenses
Net Profit
Expenses
Figure 1 business made a Net Profit of $191,125, the total expenses for the business is $ 582,275. Therefore the business could have been more profitable if
expenses minimise..
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Organization chart
Shaneka Anderson
(Manager)
Supervisor Accounting clerk Sales clerkCashier
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Bibliography
Robinson, K (2003). The Jamaica Observer, Principles of Business CXC Lecture Series (Kingston, Jamaica, W.I.).
Sheila Robinson, Frank Wood, S (2001). CXC Principles of Account (Carlong Publishers, Kingston, Jamaica).
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