ACCOUNTING ANALYSIS

Accounting Analysis

Accounting - Analysis

Part A

Financial statements of Lazarus Ltd for the year ended 30th June 2010

Lazarus Ltd Income Statement

For the year ended 30th June 2010

Sales

 

4235000

less: cost of Goods sold

 

 

Merchandise inventory opening

194000

 

Add: Purchases

3052000

 

Less merchandise inventory

190000

 

Cost of goods sold

3056000

 

Gross profit

 

1179000

Less Operating Expenses

 

 

Wages and salaries

179000

 

Directors salaries

127000

 

Advertising

45000

 

Depreciation: Motor

20000

 

Depreciation: Furni & fix

50000

 

Rent Expense

106500

 

Electricity

42000

 

Insurance

28000

 

Office expenses

76000

 

Rates

31000

 

 

 

 

Total Operating Expenses

 

704500

Net operating income

 

474500

Less other expenses

 

 

Interest expenses

 

7000

Tax

 

107000

Net income/ loss

 

360500

Lazarus Ltd

Balance Sheet

30th June 2010

Assets

 

Liabilities and Equity

Current Assets

 

 

Current liabilities

 

Cash at Bank

 

294000

Creditors

82000

Accounts receivable (net)

 

455000

Bank Loan

70000

Inventories

 

190000

tax

107000

Insurance

 

28000

interest payable

7000

prepaid expense

 

4500

 

 

Mis Expenses

 

70000

share capital

300000

 

 

 

 

 

Fixed Assets

Owner's Equity

Property, Plant, and Equipment

 

 

 

 

motor

160000

 

 

 

Dep

100000

60000

Retained Earning

275000

Buildings

500000

 

net profit

360500

Dep

400000

100000

 

 

 

 

 

 

 

Total Assets

 

1201500

Total Liabilities

1201500

Explanation and application of accounting concepts

Income Statement: The profit and loss statement shows the income and expenses of a company over during an accounting period. It represents the type, amount and source of that income and expense components. Result of the profit and loss account is the net income or net loss. It is one of the key success indicators for the evaluation of companies and their management.

In the profit and loss account of the company's revenues and expenses of the last accounting period are presented. As an accounting period is usually the last calendar year, but in any case a period of twelve months. Deviations are possible only in special cases and must be clearly marked on the outside reader. Purpose of profit and loss account (income statement) is to the success of the company, expressed in net profit or loss for the year to present.

The profit and loss statement is in principle provided in report form. Here are the sales of last year - counted among the most important yield component in succession all other income and all expenses deducted. The result of this calculation is the net income (or net loss) this year.

In preparing the profit and loss account, all income and expense components used in the same period (fiscal year) are available. Then any revenue will be charged only with the expenses that were necessary at the same time for their production. Since in most cases, production and sales volumes do not match, have the income and expense components are matched to each other mathematically. For this purpose, leaves the Commercial Code (HGB) to two processes: the total cost method and cost of sales. When the total cost method, the income is adjusted to the cost, while the adjusted cost of sales incurred expenses to revenues (Paul, D. K. 2009.pp. 139).

The business owners and managers need updated financial information to make appropriate decisions about their future operations. The financial information of a business is registered in the ledger accounts. However, transactions that occur during the fiscal period alter the balances of these accounts. The changes must be reported regularly in the financial statements.

Balance Sheet: The balance sheet is a statement of source and application of the capital of an undertaking, such as a company or a corporation. It is a brief comparison of wealth (assets) and debts (liabilities) in the form of accounts. Another approach, the dynamics of the resources in the fore front utilizing ...