Write Out an Income Statement in the Standard Format with Headings of Cost of Sales, Selling: Managerial Finance Assignment, ENU, Singapore

What is the module about?

After studying this module you should be able to:

• Calculate and explain the significance of key ratios for assessing the financial
  position of the firm.
• Analyze corporate performance from an internal and external perspective
• Apply a range of management accounting techniques to various business
  situations relating to analysis, planning, control, and decision making.

Assessment

You will be assessed in this module by coursework and examination.

Coursework

Your coursework will comprise a report requiring you to examine the recent financial performance of a major company and apply the tools of financial analysis to present a report on the company and its future.

Examination

The examination paper will have two sections. Section A will comprise three
computational questions worth 30 marks each, from which you will be required to answer two. Section B will comprise three discursive questions from which you will also be required to answer two. The questions will be based on the main topics covered in the module.

Topics

1. Introduction to the module. Primary Financial Statements: Income Statement, Statement of Financial Position and Statement of Cash Flows.
2. Interpreting Financial Statements including profitability, solvency, efficiency and investment ratios.
3. Cost classification, cost behavior, and CVP analysis.
4. Short-term and long-term decision making.
5. Budgetary control, flexible budgeting, divisional performance measurement.

Topic 1: Primary Financial Statements

Subject Content

In this lecture, we will consider the main primary statements to understand what they contain and how they can be used to carry out a financial analysis of an organization.

Learning objectives

1. Explain the purpose of accounting and the needs of accounting information users
2. Explain the nature and purpose of the main financial statements
3. Understand the objectives of financial reporting.
4. Describe the basic assumptions of accounting.

Question 1

The following is a list of assets and claims of Minor Ltd. at 30 September 20X1 before this year’s profit has been included:

Required:

a) Review the list of balances and decide whether they are an asset or a claim of Minor Ltd.
b) Write out a statement of financial position in the standard format incorporating these figures and using the balance sheet equation to deduce the profit or loss for the year. (this will be the figure that makes the balance sheet balance)

Question 2

The following is a list of revenue and expenses items of Minor Ltd. for the year ended September 20X1:

In addition to the above interest charges of £13,000 were paid in the year and the corporation taxation charge was estimated at £20,500. During the year the company paid a dividend of 5p on each £1 ordinary share

Required:

Write out an income statement in the standard format (with headings of Cost of Sales, Selling and Distribution costs and Administrative costs) incorporating these figures and reconcile the profit or loss for the year with Question 1 above.

Topic 2: Analysis of Financial Statements

Subject Content

In this lecture, we will consider how the financial statements can be used to analyze a company’s financial performance. We will use a range of financial ratios to assess a company’s profitability, efficiency, and solvency. We will also consider the limitations of ratio analysis and the use of the financial statement to assess a company’s financial position and performance.

Learning Objectives

After completing this topic you should be able to:

1. To identify the major categories of ratios that can be used for analysis purposes
2. To calculate important ratios for assessing the financial performance and position of a business
3. To discuss the limitations of ratios as a tool for financial analysis

Topic 3: Costing

Subject content

In this lecture, we will consider Management Accounting and the ways in which this differs from Financial Accounting. We will look at cost classification and in particular consider how costs can be classified according to their behavior. We will then consider cost volume profit analysis and the importance of operational gearing for a company.

Learning Objectives

After completing this topic you should be able to:

1. Understand the difference between Financial Accounting & Management Accounting
2. Identify the role of the Management Accountant
3. Understand the different ways that costs can be classified
4. Distinguish between fixed and variable costs and understand the relationship between cost volume and profit
5. Apply what-if analysis / cost-volume-profit analysis
6. Understand the importance of operational gearing to an organization

Topic 4: Decision Making

Subject content

In this lecture, we will distinguish between relevant and irrelevant costs for decision making. We will then apply marginal cost analysis to short term decision making and consider the importance of non-financial factors when making decisions. We will also look at the different methods that can be applied to the appraisal of long term investment decisions.

Learning Objectives

After completing this topic you should be able to:

1. Distinguish between relevant and irrelevant costs and understand the importance of this distinction for decision-making.
2. Demonstrate the way that marginal cost analysis can be used when making short term decisions.
3. Understand the advantages and disadvantages of the different methods used for investment project evaluation.
4. Apply a range of methods to evaluate investment decisions.

Topic 5: Budgeting and Control

Subject Content

In this lecture, we will look at budgeting and control. We will consider the main purposes and behavioral effects of budgeting. We will also consider how budgets are used as a control mechanism. We will then look at the main measures that are used to measure divisional performance and the potential problems with these measures.

Learning Objectives

After completing this topic you should be able to:

1. Understand the link between the annual budget and the long term strategic plans of an organizations
2. Identify the potential behavioral implications of budgeting
3. Calculate the ROI and RI for a division
4. Explain the problem with these measure of divisional performance

Discussion Question 1

Identify the main users of accounting information and identify what their needs are.

Discussion Question 2

Discuss the major accounting concepts of realization, matching, and prudence.

Discussion Question 3

Discuss the main advantages and disadvantages of debt and equity finance

Discussion Question 4

Going Concern plc has a loan of $30m which is due for repayment in 6 months’ time. The company can afford to pay the loan off in full by selling some short-term investments. However, the Treasury Manager wants to consider keeping the investments and taking out a new loan. What information does the company need in order to make a decision on?
a) Which is the best of a range of new borrowing options on offer?
b) Whether or not to take out a new loan at all?