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ANNEXURE – A. [ All three accountancy problems are compulsory and need to be attempted by students ]   PROBLEM 1. BUDGETING (Note: students are advised to use the raw budget data in spreadsheet format provided below, which they will then manipulate and model. A Cash Budget Template has also been provided )   Expected Sales Revenue Expected Purchases  Expenses on  Marketing   Budget  Rental/Property Expenses Selling and Admin Expenses Column1 [£] [£] [£] [£] [£] Jan 60,000 48000 5000 1800 2800 Feb 40,000 80,000 4200 2400 3400 Mar 45,000 81,000 3000 1500 1800 Apr 40,000 90,000 2500 1000 1000 May 50,000 75,000 4000 2000 2000 Jun 60,000 48000 2800 2400 2400 Jul 40,000 80,000 2400 2500 2500 Aug 45,000 81,000 4200 2400 2400 Sep 65,000 80,000 2800 2600 2600 Oct 45,000 90,000 2500 2600 2600 Nov 40,000 60,000 2400 2400 2400 Dec 60,000 48000 3000 1500 1500   Based on the above data, you have been asked to produce a 12-month cash budget. The following information is also available : Opening Balance as on 1st Jan was £8000Shares were issued in Mar & Jun @ £2000 in each month to meet deficit of funds Debentures were issued in October and December @ £ 2500 in each month to infuse funds Make use of variance analysis to show the impact of the different individual scenarios below: Prepare a memorandum that includes the following. 1. Discounting prices by 20 per cent, which in turn increases sales volume per month by 10 per cent 2. Increasing the marketing budget by 10 per cent per month, which in turn generates an additional 20 per cent in sales revenue 4. Reducing rental/property related costs by 15 per cent per month.   Cash Budget Template   Particulars Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Receipts Opening Balance XX XX XX XX XX XX XX XX XX XX XX XX Sales XX XX XX XX XX XX XX XX XX XX XX XX Issue of Shares/Deb XX XX XX XX XX XX XX XX XX XX XX XX Total XX XX XX XX XX XX XX XX XX XX XX XX Less Payments   Purchases XX XX XX XX XX XX XX XX XX XX XX XX Selling & Admin Exp XX XX XX XX XX XX XX XX XX XX XX XX Marketing Exp XX XX XX XX XX XX XX XX XX XX XX XX Property/Rental Exp XX XX XX XX XX XX XX XX XX XX XX XX     Closing Cash XX XX XX XX XX XX XX XX XX XX XX XX    

PROBLEM 2. Preparation of Financial Statements – P&L Account and Balance Sheet

B1 Trial balance of Alpha Ltd as at 31st December 2021
 Dr    Cr
Capital 180,000
Drawings                                                       12,000
Premises160,000     
Equipment                                                   150,000
Cash at Bank14,000
Rent & Rates                                                10,000
Energy6,000 
Wages & Salaries34,000 
Trade Receivables50,000 
Trade Payables 46,000
Purchases158,000 
Sales Revenue 400,000
Inventory as at 1/1/202032,000 
 626,000626,000
Additional information  
1.   An energy bill for £3,000 was received for the period November 2020 to
      December 2020, but was unpaid at the end of the year.
2.   A bad debt of £8,000 has arisen as a result of a customer going into liquidation,
      but this has not been entered in the accounts.
3.   A provision for doubtful debts of 10% of trade receivables is to be made.
4.   Inventory as at 01/01/2021 is valued at £28,000.

From the data provided, you are required to prepare the year-end financial statements, taking into consideration accounting principles, conventions and standards. You will need to make and show appropriate adjustments to both the Income Statement and the Balance Sheet.

PROBLEM 3. PROBLEM ON RATIO ANALYSIS

The following is the Balance Sheet of ABC Ltd as at 31st March 2021

Liabilities         [£] Assets                     [£]
Share Capital200,000 Land and Building140,000
Profit & Loss30,000 Plant & Machinery350,000
General Reserves40,000 Stock200,000
   Sundry Debtors100,000
12%Debentures420,000 Bills receivable10,000
Sundry Creditors100,000 Cash at Bank40,000
Bills payable50,000   
 840,000  840,000

Calculate the following Ratios [ any 4 ] :

  1. Current Ratio
  2. Quick Ratio
  3. Inventory to Working Capital
  4. Debt to Equity Ratio
  5. Proprietary Ratio
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