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Principle Of Accounting (ACC211) - Assignment Solution

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Principle of Accounting (ACC211) - Assignment Solution for Skyline University College BBA Level.

Siddharth C / Sharjah

6 years of teaching experience

Qualification: MBA, Pearson BTEC Level 7 Diploma in Strategic Management & leadership, B.Com (Finacial Accounting, Audting & Taxation)

Teaches: Communicative English, Language, Personality Development, Sales Training, Management Training, Marketing: Strategy, Strategic Marketing, Economics, Business, Marketing, Marketing Communication

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  1. Small merchandising company Name: Distributors & Suppliers LLC. Introduction: Distributors & Suppliers private LLC is in the business of supplying of International brands of soaps in the UAE region. They are souring finished goods from Germany in bulk order quantity and supplying it to all the major retail outlets like malls, hypermarkets, petrol station and supermarkets spread across seven emirates in UAE, there by earning their share of commission. The sale is in the form of Cash as well as credit, hence budgeting for inventory and volume of sales is vital for the enterprise. Importance of the study: Master budgeting is important to plan and control business activity and to track business direction and take necessary corrective action so as to avaoid losses and take opportunities as as and when they arise. Master Budget prepared with right ethical approach enables business to take accurate decision which will benefit the business in the long run and build strong reputation in the market. Master Budgets can be used to generate financing for the business either in form of approaching lenders for loans or going for public issue to generate funding form the investors, which is crucial points for business expansion and long term growth. Master Budget and Other various budgets of Distributors & Suppliers LLC Sales Budget for the year 2015: Distributors & Suppliers private LLC forecasts that it will increase it unit sales volume month on month, thereby, retaining the Unit Sales price constant at $30. The aim of the business to achieve Total sales of 7800 units of International branded soaps. Resulting in total gross revenue resulting from 1 st year (2015) sales at $234000, this gives the indication that there exist good scopes for business of International Branded Soaps Trading in UAE region. Sales Bud et of Distributors & Su liers Ltd for the ear 2015 Sales Forecast Units Unit Sales price in $ Forecasted otal Revenue Jan 100 30 3000 Feb March 200 30 6000 300 30 9000 400 30 12000 Ma 500 30 15000 June 600 30 18000 Jul 700 30 21000 800 30 24000 900 30 27000 Oct 1000 30 30000 Nov 1100 30 33000 Total Sales in $ Dec 1200 7800 30 30 36000 234000 Purchase Budget for the year 2015: Distributors & Suppliers private LLC forecasts that payment for the monthly purchase will be made at the end of the month of purchase date. For calculation purpose the beginning inventory is assumed to be 11 units of International brand of soaps. Total unit forecasted to be purchased during the year 2015 is 1210 costing $12100, with desired closing inventory of 130units. Purchase Bud et of Distributors & Su liers Ltd. for the ear 2015 Feb March an r Ma ul une u otal pur. In $ Nov Dec ct Desired Endin Inventor Plus: Unit Sales otal Needed Less: Be . Inventor Unit Purchases unit cost Cost of Purchases 20 100 120 11 109 10 1090 30 200 230 20 210 10 2100 40 300 340 30 310 10 3100 50 400 450 40 410 10 4100 60 500 560 50 510 10 5100 70 600 670 60 610 10 6100 80 700 780 70 710 10 7100 90 800 890 80 810 10 8100 100 900 1000 90 910 10 9100 110 1000 1110 100 1010 10 10100 120 1100 1220 110 1110 10 11100 130 1200 1330 120 1210 10 12100 130 7800 7930 11 7919 10 79190 Selling & Administrative Expense Budget for the year 2015: Distributors & Suppliers private LLC forecasts for following expenses for the year 2015: Commission to sales person at 5% per unit, Delivery cost at $1 per unit, Sales person salaries at $1000 per month, Administrative supplies at $2 per unit, Administrative staff salaries at $1500 per month and Administrative
  2. Depreciation at $50 per month. Selling & Administrative Expenses for the business is forecasted realistically as it is new start-up which can't afford to spend high due to financial constraints. The aim of business being efficient sales and administrative staff less in number so it is easier to manage, thereby resulting higher earning for the business & consistent growth with market reputation. Sellin & Administrative Ex ense Bud et of Distributors & Su liers Ltd. for the ear 2015 Feb an ct 1500 1000 1000 2000 1500 50 7050 ov Dec Commission 5% er unit Deliver $1 er unit Sales Salaries $1000 er month Administrative su lies $2 er unit dministrative Salaries $1500 er month Administrative De reciation $50 er month otal 150 100 1000 200 1500 50 3000 300 200 1000 400 1500 50 3450 arch 450 300 1000 600 1500 50 3900 600 400 1000 800 1500 50 4350 a 750 500 1000 1000 1500 50 4800 une 900 600 1000 1200 1500 50 5250 ul 1050 700 1000 1400 1500 50 5700 u 1200 800 1000 1600 1500 50 6150 1350 900 1000 1800 1500 50 6600 1650 1100 1000 2200 1500 50 7500 1800 1200 1000 2400 1500 50 7950 Expected Cash Collection for the year 2015: The company will adopt following collection of dues policy for the year 2015: 70% Cash collection in the same month of sale and remaining 30 % in the month following sales; giving 1 month credit period for 30% sales, thereby increasing its sales volume and market presence. This gives negotiation space for sale person to achieve their sales target and maintain client relations, over period of time company plans to increase credit period to its clients when its build its reputation in the market and is financially sound with capital inflows in form the overdraft facilities and other short term funding, resulting in increased sales volume. Ex ected Cash Collection of Distributors & Su liers Ltd. for the ear 2015 Cash Sales 70% current month Credit sales 30% collection of the revious month sales Feb an 2100 4200 900 1800 arch 6300 2700 8400 3600 ul une a 10500 12600 14700 4500 5400 6300 u 16800 18900 7200 8100 ov Dec ct 21000 23100 25200 9000 9900 10800 Cash Budget for the year 2015: Distributors & Suppliers private LLC opening cash balance is assumed to be $3000 and for the purpose of functioning of its business cycle its had borrowed Loan of $2000 as it working capital at 4% interest rate, with re- payment of installment fixed at $100 per month from the month following loan sanctioned. Cash Bud et of Distributors & Su liers Ltd. for the ear 2015 Feb an ct 8970 21000 29970 10100 7050 12820 80 100 12640 Dec ov Cash Be innin balance Add: Cash Collection Cash Inflow Cash Pa ments: Purchases Sellin & Adminstrative Ex Net Cash Inflow arch 1480 6300 7780 3100 3900 780 80 100 600 r Ma enses Financin loan Intrest @ 40/0 Re a ment Cash Endin Balance 3000 2100 5100 1090 3000 1010 2000 3010 3010 4200 7210 2100 3450 1660 80 100 1480 600 8400 9000 4100 4350 550 80 100 370 370 10500 10870 5100 4800 970 80 100 790 une 790 12600 13390 6100 5250 2040 80 100 1860 ul 1860 14700 16560 71 oo 5700 3760 80 100 3580 u 3580 16800 20380 8100 6150 6130 80 100 5950 5950 18900 24850 9100 6600 9150 80 100 8970 12640 231 oo 35740 11100 7500 17140 80 100 16960 16960 25200 42160 12100 7950 22110 80 100 21930
  3. Budgeted Income Statement for the year 2015 Sales 3000+3450+3900+4350 +4800+5250+5700+6150+6600+7050+7500 +7950 Cost of Goods Sold: Be innin Inventor 11*$10 Add: Purchases 1090+2100+3100+4100+5100+6100+7100+8100+9100+10100+1 1 1000+121 oo Cost of Goods available for Sale Less: Endin Inventor 130*$10 Gross Mar in Less: Selling & Adminsitrative Expenses 3000+3450+3900+4350+4800+5250+5700+6150 +6600+7050+7500+7950 Income Before Intrest and Taxes Net Income Considerin No Income tax deducation as er UAE laws Amount in $ 234000 110 79190 79300 1300 78000 156000 65700 90300 90300
  4. Bud eted Balance Sheet as on Assests Cash Account receivable ear 2015 Current Assest Land Total Assets Liabilititea and E uit Account Pa able Add: Term loan Total Liabilities Business E uit . Ca ital Stock Total Liabilit & Business E uit 16960 10800 27760 15000 42760 12100 2000 14100 28660 42760

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