Acc2 final

(differentiate between capital expenditure and revenue expenditure)

Capital expenditure : For fixed asset, which are expected to be productive assets for a
long period of time.
Revenue expenditure : are for costs that are related to specific revenue transactions or
operating periods, such as the cost of goods sold or repairs and maintenance expense.

What is depreciation?
Two depreciation:
- Straight line method :(purchase price-scrap value)/lifetime, default method used to
recognize the carrying amount of a fixed asset evenly over its useful life.
- Reducing balance method :an accelerated depreciation method that records larger
depreciation expenses during the earlier years of an asset's useful life, and smaller ones
in later years.

(differentiate between ordinary share and preference share)

Preference share :a share which entitles the holder to a fixed dividend, whose payment
takes priority over that of ordinary share dividends.
Ordinary share : a share entitling its holder to dividends which vary in amount and may
even be missed, depending on the fortunes of the company.

Advantages and disadvantages of LTD

Advantages: Limited Liability, separate entity, Taxation and Tax Advantages
Disadvantages:Dilution of Powers, Restricted Capital Raising, Complex Accounts,
COST

What is fixed asset, variable cost and non variable cost

Fixed asset : A fixed asset is a long-term tangible piece of property or equipment that a
firm owns and uses in its operations to generate income. Fixed assets are not expected to
be consumed or converted into cash within a year. EG. Land, building, machine
Variable cost : Variable costs are costs that change as the quantity of the good or service
that a business produces changes. Variable costs are the sum of marginal costs over all
units produced. They can also be considered normal costs. Eg. Electricity(KW), material
etc.
Non-variable cost(fixed cost):depreciation, rent, salaries cost that does not change with
an increase or decrease in the amount of goods or services produced or sold. Fixed costs
are expenses that have to be paid by a company, independent of any specific business
activities.
5 purpose of Ratio analysis
Analysis of Financial Statements
Helps in Understanding the Profitability of the Company
Analysis of Operational Efficiency of the Firms
Liquidity of the Firms
Helps in Identifying the Business Risks of the Firm
Helps in Identifying the Financial Risks of the Company
For Planning and Future Forecasting of the Firm
To Compare the Performance of the Firms

Long question
Question 1..-cash budget
receipt June July August
Sales RM61000 RM51000 RM68000

Total Receipt RM61000 RM51000 RM68000

Payment
Wages incurred RM12000 RM10000 RM9000
Material purchases RM30000 RM25000 RM35000
Over head RM12000 RM16000 RM14000
commission RM2250 RM3150 RM2700
loan RM25000
delivery RM15000
machines RM15000

Total Payment RM81250 RM69150 RM75700

Cash surplus/Deflect (-RM20250) (-RM18150) (-RM7700)
Opening balance RM22000 RM1730 (-RM16400)
Closing balance RM1750 (-RM16400) (-RM24100)

B. Define cash budget

A cash budget is an estimation of the cash inflows and outflows for a business over a
specific period of time. This budget is used to assess whether the entity has sufficient
cash to operate.

C. Benefit of cash budget

1. You can avoid debt.
2. You are forced to budget better.
3. You become more resourceful.
4. You stay in-touch with reality.
5. You can quickly identify potential deficits.
6. You are able to communicate your financial position.

-cash flow statement

-ratio analysis
i.(gross profit as a percentage of sale/gross profit margin)= Gross profit/sales x 100%

ii.(net profit as a percentage of sale/net profit margin) =(net profit before tax/sales)x100%

(liquidity ratio)
iii.Current ratio= current asset/current liability

iv.Acid test/quick ratio = (current asset-closing inventory)/current liability

(efficiency ratio)
V. Inventory turnover (in number of times) = cost of goods sold/average inventories
**average inventories= (opening inventory+closing inventories)/2

Vi. Inventory turnover (in number of days)

Average inventory/cost of goods sale x 365

limited company final account

Company’s Name
Statement of Profit and Loss for the year ended......
RM RM RM
Sales XX
Less: Returns inwards (XX)
Net Sales XX
Less: Cost of goods sold
Opening Inventories XX
Purchases XX
Less: Returns outwards (XX)
XX
Add: Carriage inwards XX
Wages XX XX
XX
Less: Closing Inventories (XX) (XX)
Gross Profit XX
Add: Income
Discount received XX
Rent received XX
Decrease in allowance for doubtful debts XX
Bank interest earned XX XX
XX
Less: Expenditure
Carriage outwards XX
Salaries XX
Discount allowed XX
Insurance XX
Utilities XX
Increase in allowance for doubtful debts XX
Depreciation XX (XX)
Net Profit XX

Company’s Name
Statement of Financial Position as at……
RM RM RM
Non-current assets
Building XX
Less: Accumulated Depreciation (XX) XX
Machinery XX
Less: Accumulated Depreciation (XX) XX
Office Equipment XX
Less: Accumulated Depreciation (XX) XX XX
Current assets
Inventories (Closing) XX
Trade receivables XX
Fixed Deposit XX
Bank XX
Cash XX
Petty Cash XX
Expenditure paid in advance/Prepaid expenditure XX XX
XX
Equity
Capital as at… (start of accounting period)… XX
Add: Additional capital XX
XX
Add: Net profit/Minus: Loss XX
XX
Less: Drawings (XX)
Capital as at… (end of accounting period)… XX
Non-current liabilities
Loan XX
Current liabilities
Trade payables XX
Bank overdraft XX XX
XX