Poa sba free essay sample

The Case of ABC Photography Supplies and Services Prepared by the authors of Principles of Accounts for Caribbean Examinations www. highschoolaccounts. weebly. com SBA Simulation: Suggested Approach | Principles of Accounts for Caribbean Examinations ABC Photography Supplies and Services Table of contents Aims of the project and Description of the Business 3 Financial Statements 4 Analysis of Business Performance 6 Suggestions/Recommendations 7 Conclusion 8 Appendix 2 SBA Simulation: Suggested Approach | Principles of Accounts for Caribbean Examinations ABC Photography Supplies and Services Aims of the project This project has four main aims: 1. To assist Jane Brown in determining the best business type suited for her activities. 2. To prepare the source documents, journals and ledger accounts necessary for the recording of transactions for January and February 2009. 3. To prepare her balance sheet as at 31 January, 2009; trial balance at 28 February, 2009; income statement for the two months ended 28 February, 2009; and balance sheet at that date. 4. To assess the firm’s performance over its first two months of operation. Description of the Business ABC Photography Supplies and Services is a small photography business established, owned and operated by Jane Brown. The firm sells photo equipment and accessories but may also provide basic photographic services in the future. Ms. Brown chose to commence business as a sole trader primarily because she would be fully in control of all decision making. In addition, she would retain all profits for herself. The firm is located in the busy financial sector of the city at 84 Main Street, Port of Lane. 3 SBA Simulation: Suggested Approach | Principles of Accounts for Caribbean Examinations Financial Statements ABC Photography Supplies and Services Balance Sheet as at 31 January, 2009 $ $ Fixed Assets Computers Signage Office Furniture Current Assets Inventory (Stock in Trade) Bank 4,000 500 50,000 54,500 2,000 195,500 197,500 252,000 Financed by: Capital 202,000 Current Liabilities Accounts payable (Trade Creditors) ABC Photography Supplies and Services Income statement for the two months ended 28 February,2009 $ Sales Sales returns Net Sales Cost of sales Opening stock Purchases 490. 00 Purchases returns 98. 00 Net purchases Closing stock Gross profit Other Income Discounts received 50,000 252,000 $ $ 1,320. 00 240. 00 1,080.  00 2,000. 00 392. 00 1,600. 00 792. 00 288. 00 19. 60 307. 60 Expenses Electricity Net income 185. 00 122. 60 4 SBA Simulation: Suggested Approach | Principles of Accounts for Caribbean Examinations ABC Photography Supplies and Services Balance sheet as at 28 February,2009 Fixed assets Office furniture Computers Signage Current assets Inventory Accounts receivable Bank Cash Current liabilities Accounts payable Owners equity At start of the period Net income At end of the period $ $ $ 50,000. 00 5,500. 00 500. 00 56,000. 00 1,600. 00 960. 00 194,627. 60 435. 00 197,622. 60 51,500. 00 146,122. 60 202,122. 60 202,000.  00 122. 60 202,122. 60 5 SBA Simulation: Suggested Approach | Principles of Accounts for Caribbean Examinations Analysis of Business Performance ABC Photography Supplies and Services performed reasonably well in its first two months. It remained very liquid and generated a reasonable return. Liquidity The firm was very liquid over the period, registering healthy current (3. 95:1 and 3. 84:1) and quick ratios (3. 91:1 and 3. 81:1). Merchandise moved relatively slowly (every 26. 4 days) but this is understandable since the business has only just begun operations. It is anticipated that this will pick up in a short time. Profitability ABC was profitable over the two-month. The gross margin (27%) as well as the net profit percentage (11. 4%) reflected good control of costs and expenses. These contributed to an ROCE of 0. 06%, a sign of overall prudent management of the business. Sales vs Costs/Expenses 9% 52% Net Sales Cost of sales Electricity 39% 6 SBA Simulation: Suggested Approach | Principles of Accounts for Caribbean Examinations Suggestions/Recommendations Greater emphasis needs to be placed on cash management. Presently, there is too much tied up in idle cash ($194,628) representing 98% of total current assets and 77% of total assets. Jane can look to investing excess cash in short – term investments. Idle Cash 198,000. 00 197,500. 00 197,000. 00 196,500. 00 196,000. 00 195,500. 00 195,000. 00 194,500. 00 194,000. 00 193,500. 00 193,000. 00 Bank Current assets 7 SBA Simulation: Suggested Approach | Principles of Accounts for Caribbean Examinations Conclusion 1. Jane Brown was assisted in determining that the best business type suited for her activities and size is the sole trader form. 2. Her source documents, journals and ledger accounts necessary for the recording of transactions for January and February 2009 were prepared. 3. Her balance sheet as at 31 January, 2009; trial balance at 28 February, 2009; income statement for the two months ended 28 February, 2009; and balance sheet at that date were prepared. 4. Based on the financial results, the firm performed well over its first two months of operation. 8 SBA Simulation: Suggested Approach | Principles of Accounts for Caribbean Examinations Appendix Source documents ABC Photography Supplies and Services 84 Main Street,Port of Lane Phone 056-4532 Invoice#R541 Date 12 February, 2009 Customer Janet Shepherd 34 Sap Drive Treeland Heights Phone 123-4567 Description of goods/services  supplied Quantity 10 Price per unit TT$ Cases film Total 120 Total amount due TT$ 1,200. 00 0. 00 1,200. 00 Total amount received 0. 00 Balance receivable 1,200 Terms:5% discount if paid within 15 days. Net due in 30 days. Signs R Us Ltd 14 Main Street,Port of Lane Phone 019-3245 Receipt# A345 Date: 8 January, 2009 Received from Jane Brown For the sum of Five hundred P. Laird T T$500. 00 Signature ABC Photography Supplies and Services 84 Main Street,Port of Lane Phone 056-4532 9 SBA Simulation: Suggested Approach | Principles of Accounts for Caribbean Examinations CN#1 Date 16 February, 2009 Customer Janet Shepherd 34 Sap Drive Treeland Heights Phone 123-4567 Description of goods/services supplied Quantity 2 Price per unit TT$ Cases film Total 120 Total credit granted TT$ 240. 00 240. 00 Big Bank Ltd 52 Davidsbrook Ave, Broadwalk ABC Photography Supplies and Services Cheque# 002 84 Main Street, Port of Lane Phone 056-4532 Date: 31 January, 2009 Payee For the sum of LapTop Village Four thousand TT$4,000. 00 Dollars 160-345-678 Signature H. Rambally Teaching note: Any four source documents will be sufficient. Journals Cash Book Date 2009 Jan 1 Details Capital Discounts Allowed $ Cash $ Bank $ 200,000 Date 2009 Jan 8 31 Details Discounts Received $ Cash $ Bank $ Signage Computers 500 4,000 10 SBA Simulation: Suggested Approach | Principles of Accounts for Caribbean Examinations 31 Balance c/d 195,500 200,000 200,000 Feb 1 Balance b/d 2 Feb 3 Sales Bank 195,500 Feb 3 120 500 11 27 28 620 Cash Big Electronics Electricity Balance c/d 500 19. 60 372. 4 185 435 620 195,500 194,627. 60 195,500 Sales Journal Date 2009 Feb 12 Customer name Folio Janet Shepherd Invoice # Amount R541 1,200 Total credit sales 1,200 Purchases Journal Date 2009 Feb 4 Supplier name Folio Big Electronics Invoice # Amount X43 490 Total credit purchases 490 Returns Outwards Journal Date 2009 Feb 5 Supplier name Big Electronics Folio Cr. note # CNX3 Amount 98 11 SBA Simulation: Suggested Approach | Principles of Accounts for Caribbean Examinations Total returns 98 Returns Inwards Journal Date 2009 Feb 16 Supplier name Janet Shepherd Total returns Folio Cr. note # CN1 Amount 240 240 12 SBA Simulation: Suggested Approach | Principles of Accounts for Caribbean Examinations JOURNAL 2009 Jan 1 Jan 8 Jan 15 Jan 22 Jan 31 Feb 25 Feb 28 Feb 28 Feb 28 Feb 28 Feb 28 Feb 28 Folio Bank Capital To record the start of Jane Brown’s business Signage Bank To record the supply and installation of a wall sign Office Furniture Furniture Guys Ltd. To record credit purchase of office furniture. Inventory Capital To record owners increased investment. Computers Bank To record the purchase of a laptop Computers Charles and Sons To record the purchase of colour printer. Sales Income Statement To close the sales a/c. Returns outwards Income Statement To close returns outwards a/c. Income Statement Purchases To close the purchases a/c. Income Statement Returns inwards To close returns inwards a/c. Income Statement Inventory To record opening inventory. Inventory Income Statement To record closing inventory. Dr. $ 200 000 Cr. $ 200 000 500 500 50,000 50,000 2,000 2,000 4 000 4 000 1,500 1,500 1,320 1,320 98 98 490 490 240 240 2,000 2,000 1,600 1,600 13 SBA Simulation: Suggested Approach | Principles of Accounts for Caribbean Examinations General Ledger Accounts Capital a/c 2009 Jan 31 Balance c/d 202,000 2009 Jan 1 22 Bank Inventory 200,000 2,000 202,000 Feb 1 Balance b/d 202,000 202,000 Feb 28 Balance c/d 202,000 Office Furniture a/c G/L# 2009 Jan 15 Feb 1 Furniture Guys Ltd 50,000 2009 Jan 31 Balance c/d 50,000 Balance b/d 50,000 Feb 28 Balance c/d 50,000 Balance c/d Income statement Balance c/d 2,000 Inventory a/c 2009 Jan 22 Capital 2,000 Feb 1 Feb 28 Balance b/d Income statement 2,000 1,600 3,600 2009 Jan 31 Feb 28 Feb 28 2,000 1,600 3,600 Computers a/c 2009 Jan 31 Feb 1 Feb 25 Bank Balance b/d Charles and Sons 4,000 4,000 1,500 5,500 2009 Jan 31 Feb 28 Balance c/d Balance c/d 4,000 5,500 5,500 Signage a/c 2009 Jan 8 Feb 1 500 2009 Jan 31 Balance c/d 500 500 Bank Feb 28 Balance c/d 500 Income statement 490 Purchases a/c 2009 Feb 28 2009 Total for the period 490 Feb 28 14 SBA Simulation: Suggested Approach | Principles of Accounts for Caribbean Examinations  Sales a/c 2009 Feb 28 2009 Feb 2 Income statement 1,320 Feb 28 Cash Total for the period 120 1,200 Discounts received a/c 2009 Feb 28 2009 Income statement 19. 60 Feb 28 Total for the period 19. 60 Returns inwards a/c 2009 Feb 28 2009 Total for the period 240 Feb 28 Income statement 240 Returns outwards a/c 2009 Feb 28 2009 Income statement 98 Feb 28 Total for the period 98 El ectricity expense a/c 2009 Feb 27 2009 Cash 185 Feb 28 Income statement 185 Accounts Payable Ledger Furniture Guys Ltd a/c 2009 Jan 31 Balance c/d Feb 28 Balance c/d 50,000 2009 Jan 15 Office Furniture 50,000 50,000. Feb 28 Balance b/d 50,000 Charles and Sons a/c 2009 Feb 28 Balance c/d 1500 2009 Feb 25 Computers 1500 15 SBA Simulation: Suggested Approach | Principles of Accounts for Caribbean Examinations 2009 Feb 5 11 11 Returns Discount received Bank Big Electronics 2009 98. 00 Feb 4 19. 60 372. 40 490. 00 Purchases 490. 00 490. 00 Accounts Receivable Ledger Date Details 2009 Feb 12 Sales Mar 1 Balance b/d $ Janet Shepherd Date 2009 1,200 Feb 16 Feb 28 1,200 Details Returns Balance c/d $ 240 960 1,200 960 16 SBA Simulation: Suggested Approach | Principles of Accounts for Caribbean Examinations. ABC Photography Supplies and Services Trial Balance as at 28 February, 2009 GL# 100 Electricity 110 Returns inwards 120 Returns outwards 130 Sales 135 Discounts received 140 Purchases 150 Inventory 500 Accounts payable 600 Accounts receivable 700 Cash 800 Bank 900 Office furniture 1000 Computers 1100 Signage 1200 Capital $ 185. 00 240. 00 $ 98. 00 1,320. 00 19. 60 490. 00 2,000. 00 51,500. 00 960. 00 435. 00 194,627. 60 50,000. 00 5,500. 00 500. 00 202,000 . 00 254,937. 60 254,937. 60 Closing inventory at 28 February, 2009 was valued at $1,600. Ratios Name of ratio Calculation January February. Stock turnover (Turnover) Ratio Cost of goods sold ? Average stock, where Average stock= 26. 4 days Current assets ? Current liabilities 3. 95:1 3. 84:1 Acid-test (Quick) Ratio Current assets (less closing stock) ? Current liabilities 3. 91:1 3. 81:1 Gross margin percentage (Gross profit ? Net sales)x100 27% Net profit percentage (Net profit? Net sales)x100 11. 4% 0. 06% (Opening stock + Closing stock) ? 2 Current (Working capital) Ratio (Net profit ? Capital employed)x100 Return on capital employed (ROCE) For an unincorporated business, the capital employed = (Opening Capital + Closing Capital) ? 2 17.