Final Accounts Ms. Zucchero

Purposes of Accounts Final accounts are financial statements compiled by businesses at the end of a particular accounting period Created to help inform internal and external stakeholders Professional accountants have a responsibility to act in the public interest

Main Final Accounts Profit and Loss Account, also known as the income statement The Trading Account, The Profit and Loss Account, Appropriation Account

Profit and LoSs Account Sales Revenue 800 Trading Account Cost of Goods Sold 250 Trading Account Gross Profit 550 Profit and Loss Account Expenses 300 Profit and Loss Account Net Profit Before Interest and Tax 250 Profit and Loss Account Interest 20 Profit and Loss Account Tax 40 Profit and Loss Account Net Profit After Interest and Tax 190 Profit and Loss Account Dividends 50 Appropriation Account Retained Profit 140 Appropriation Account

Trading Accounts Formulas Gross Profit = Sales Revenue - Cost of Sales Cost of Sales = Opening Stock + Purchases - Closing Stock A firm at the beginning of a trading period had $500 worth of stock. It then bought more stock during this period valued at $800. It then closed this period with stock valued at $200. What is its COGS during this period? COGS = $500 + $800 - $200 COGS = $1,100 What would its gross profit be if it sold 400 units at $10 each? Sales Revenue = $10 X $400 = $4000 Gross Profit = $4000 - $1,100 = $2,900

The Balance Sheet Known as the financial position Outlines the assets, liabilities, and equity of a firm A snapshot of a business Assets - Resources of value to a business Fixed/Long Term - for more than 12 months - equipment, machinery Current Assets/Short Term - last up to 12 months Liabilities - Firms legal debt or what it owes to other firms Long Term - long term debt or borrowing after 12 months - loans Current Liabilities - Short term debt payable by the business within 12 months Equity - Share Capital and Retained Profits

Profitability and Liquidity Ratio Analysis

Profitability RaTios, Efficiency Ratios, Liquidity Ratios Ratio Analysis is a tool used in the interpretation and assessment of a firm’s financial statements Profitability Ratios - Gross Profit Margin (GPM), Net Profit Margin (NPM) Efficiency Ratio - Return on Capital Employed Liquidity Ratios - Current Ratio, Acid Test Ratio