Brief Commentary on Final Accounts

Balance Sheet
A Balance sheet is an essential financial Statement, which needs to be produced by every
business. A Balance sheet shows the Assets and liabilities for the given business. A Balance
sheet also shows the performance of the business at that particular time.
Analysing this Balance sheet it can be seen that the overall sum for all the fixed assets is
£135,440 and the overall sum for the current assets is £46251.57. This means that for this
business its Total Assets are (£135,440 + £46251.57) = £181,691.57.
The Current Liabilities for this business have a total of £28,010.75, which is relatively large;
however the company does not have any Fixed Assets.
The Working Capital is calculated by subtracting the Current Liabilities from the Current
Assets.
(£46251.57 - £28,010.75) = £18240.82
The Working Capital Ratio is 1.65: 1. This is calculated by dividing the Current Assets by the
Current Liabilities.
Using the Working Capital Figure and the Working Capital Ratio it can be seen that this
Business has a healthy working capital, meaning that the company’s current assets can cover its
current liabilities. This ratio indicates how solvent the company is, basically how quick can the
liabilities be covered using the cash from the business.
As you can see the figures from the Net Current Assets and the Total Net worth are the same.
This is because there are no Long Term Liabilities. This is an advantage for the business as it
does not have any large sums of money coming out of the business.
The Total Net Worth indicates the overall financial position of the business at that time. In this
balance sheet the Total Net Worth figure is £153680.82. This shows that the business is doing
extremely well as its Assets Value is much Higher than its liabilities value.

Profit and Loss Sheet

Another important financial document is the profit and loss account which shows how much
the business has sold during the time period and how much the business has brought (costs).
The difference between the two indicates the amount of profit they have earned over the time
period. In this case the period is a year.
Looking at the figures from this profit and loss account it can be seen that the product sales
were 28,505.80.
However regarding stock and purchases, the company started with £1,625.00 of stock. They
then purchased a further £16,610.00, at the end of the accounting period they were left with a
closing stock of £13,715.00. This means that the company only sold £2895 of stock. Although
stock varies from one industry to another, however the opening and closing stock indicates that
something is wrong. This company purchased (4x) more than they actually sold.
There were no direct expenses therefore giving a Gross Profit of £23985.80. This is a healthy
gross profit. The Gross Profit percentage ratio of this company is 84%. This is calculated by
dividing the Gross Profit by Total Revenue.
The gross profit percentage ratio indicates how much profit the business makes on its cost of
sales. This company has a good percentage ratio and shows that the company is financially
healthy. The net profit margin ratio of this company is 61%. This shows that the company has
a very good overall profitability. This company overall made a very good net profit of
17,305.40.
 Analysis of Aged Debtor Reports

Bargain Bikes
Bargain Bikes had purchased 2 different items. They brought 13 reflective jackets and 28 racing
pedals. Both of these Items were not paid on time. They owe a total of £303.75. They were paid in
period 2 indicating that they were 2 months late with the pay. Both Invoices are dated back to
08/10/2008. There for the action to take would be firstly 2 invoices would be issued to Bargain
bikes indicating the products brought from the company and the prices charged.
Then after the first period as still no money was paid a polite written letter reminding them of their
purchases and how much they owe. Then as still no money had been paid after about 2 weeks a
telephone call could be made asking whether or not the invoice had been misplaced or if there were
any problems regarding the payments. This has a good credit limit of 3,000 as it is not too high.

Bartons Ltd
Bartons Ltd has got a good turnover with this company indicating that they have brought a lot of
products from us. However they have an opening balance of £41.13, which is overdue from the last
6 months and they have purchased 40 racing tyres worth £10,626.69. They were late with this
payment by 1 month, however because they have purchased such a significant amount, an
extremely polite letter could be issued reminding them of the purchases. Whereas they did not pay
the £41.13, till months later. Usually this means that the solicitors are involved, but because the
amount is so small and due to the fact that they are good customers who have paid a substantial
amount at the beginning this action will not be taken. At the most a telephone call will be made
regarding the issue.

The Cyclestore
The Cyclestore has not paid to invoices yet. The first invoice is 30 ATB Tyres in which they owe
£161.74. They did not pay this until period 2. After the first period a polite letter would have been
sent attached to an invoice just incase the original invoice was overlooked or misplaced. Then after
about 2-3 weeks as the payment was still not paid a telephone call will be made asking why the
payment has not been paid yet. Regarding the second invoice which was a payment of £3,942.72 as
the payment had not been paid until period 1, after the first 2 weeks as it is a big payment a letter
and a spare invoice would be spent to the Cyclestore. However the credit limit is too high, their turn
over wasn’t even half of the amount of the credit limit.

Gemini Cycles
Gemini Cycles have only purchased £798 worth of goods from us last year, taking this into account
feel that the credit limit given is too large. Gemini Cycles have two invoices which are overdue by 1
month, in which the total coming to 937.65. When the purchases were made an invoice would have
been issued straight away then after 3 weeks a polite letter reminding them of the payment due
would be issued.

Speedway Cycles
Speedway Cycles purchased 50 Touring mudguards at a price of £14,473.65. Looking at the
previous turnover it can be seen that they are good customers who usually purchase large amounts
of products. In this case as they are good customers only a polite letter attached to a spare invoice
will be issued just incase they have overlooked the original invoice or misplaced it.

Trent Bridge Tandems

Trent Bridge Tandems only have one invoice, which is overdue by 1 month. In this case the
necessary action would be to issue a polite letter regarding a reminder of the payment, and then an
invoice for proof that the purchase was made and the products have been dispatched to Trent Bridge
Tandems. An Invoice also gives proof of how much Trent Bridge Tandems owe.
 Purchase Re-order analysis

Glasgow Sports
Looking at the figures it can be seen that the quantity in stock is 15, which is below the
reorder level. If the quantity in stock goes below the re-order level then it is advisable to
reorder. However if a reorder is made then 100 ATB pedals are ordered. In this case the
necessary action to take would be to reorder the ATB pedals. Therefore a stock of 100 will
be coming in. Another action, which will be taken, will be for future reference, and that is to
keep a close eye on the stock levels, so that if they drop tremendously then they can be
reordered straight away.

Halifax Cycle supplies

Halifax cycle supplies have 3 different items, which need reordering. Off Road Mudguards,
there are only 3 left therefore as they are below the reorder level which is 50 then they must
be reordered.
The Reflective jackets have also dropped down to 5 in quantity and there must be reordered.
Touring Mudguards however do not need to be reordered as yet but the action to take in this
case would be to keep a close check on how much stock is left so if it goes down to about
25 then they must be reordered. Waterproof jackets have dropped down to 59 in quantity of
stock, how ever the reorder level is 100. So the required action will be to reorder.

Tyre Towns
City Tyres, even though they are below the reorder level by 35, they do not need to be
reordered as of yet. However regular checks are required to make sure that the stock doesn’t
finish.
Touring tyres do not need to be reordered, as they are not below the reorder level. However
again a close check on the stock must be kept.
 Sage Line 50 system

This system was used to create our balance sheets, profit and loss account and carry out
many other financial transactions.
This system is used instead of carrying out financial transactions the manual way.
Of course the advantage of using Sage line 50 system compared to the manual system is that
Sage is a lot faster and saves a lot of time. The data is produced much quicker and it is also
inputted a lot quicker. Obviously for a business time is precious, because if time is wasted
then money is also wasted.
Also using sage compared to the manual system has many other advantages such as
accuracy. When inputting data into accounts, sometimes-small errors can be made, also
when calculations are being made or when figures are being inputted. However Sage carries
out the majority of the calculations for you improving the accuracy and decreasing the
chance of any mistakes occurring.
Then following on from time consumption, as Sage processes data a lot quicker than a
manual system this means that more data can be processed. Sage can calculate large
amounts of data in a very quick time without any mistakes occurring. Where as manually
the accountant would have to carry out the calculations himself which would be time
consuming and therefore mean that he would only be able get small amounts done in the
time it would take for a computerised system to do it such as Sage.
Another advantage of using a computerised system such as sage compared to a manual
system is that if certain data is altered then it can effect and possibly change the related data
connected to it.
If accounts need to be altered then any figures, which are amended, this will cause any other
figures, which are connected to the altered figure to be altered as well. Where as if there is a
mistake in a manual system then it is usually hard to rectify and therefore needs to be
redone.
This means that alterations can be made easily and quickly by using a computerised system
such as sage line 50.
As an accountant one of the most important jobs is to analyse data. In a manual system the
accountant before being able to write anything would have to analyse all of the data in front
of him which can be time consuming. Whereas Sage line 50, like all other computerised
systems analyses all of the data easier and more effective. Again for a business this
decreases errors and saves time. Both, minimising errors and effectiveness saves a lot of
money for a business. Also after the data has been inputted into the system, reports can be
generated. Generating reports is extremely easy and quick using Sage Line 50. Whereas
obviously using a manual system it will take a lot longer and there’s a possibility mistakes
and errors can occur.
However using a computerised system such as Sage line 50 can also have its
disadvantages. A computer can be subjected to viruses, hackers and even power failure. I
these occur sometimes, saved information can be lost. These are probably the main
problems for using computerised systems. Viruses are corrupted files and can delete data or
even wipe out the whole of the computer system. Hackers are a huge problem for
computerised system especially when accounts are concerned. This is because accounts deal
with a lot of numbers and to produce accounts; a lot of private information needs to be
stored onto the system. So if a hacker manages to hack onto a company’s computer then
there is a good chance that any private information could be stolen and this could be
extremely dangerous for the business. Whereas manually there is a less likely chance of this
happening as the documents can be easily locked away in a safe or hidden somewhere.
Another disadvantage of using a computerised system is that it can be costly to run and it
can be costly to buy more upgrades and packages.
Sage Line 50 is not that easy to use. The person who is using sage must know how
to run sage line 50 and how to create accounts on there. However the good thing about sage
line 50 is that there is help whenever you need it, there are Wizards which take you step by
step through the different tasks, such as creating journals or amendments etc. Another
amazing aspect about Sage Line 50 is that it has an automatic back-up routine, this is useful
because sometimes you may make mistakes so instead of restarting all over again you can
just reload your work from the previous step before you made the mistake. Again this saves
a lot of time. Also when you back up your work a data checking system appears which
basically does a quick scan through your work to find any problems or errors in the data.
Obviously this makes it easy to amend any mistakes, which have occurred.
Sage line 50 also allows you to transfer data to excel sheets allowing you to create
spreadsheets and therefore allowing you to analyse any necessary data.
However there are a few disadvantages of using Sage Line 50 and that is, you must have
at least some background knowledge on accounts. This is because even though there is a
help guide it won’t tell you everything. You need to know what is required in a balance
sheet, profit and loss and many other transactions so that you can analyse and understand
the data that Sage produces. Another disadvantage is that Sage Line 50 is very costly.
Obviously the main advantage of sage Line 50 is that it creates reports and financial
accounts quick and easy. You can view trial balances or stock cat reports or profit and loss
accounts. Sage Line 50 is a very good financial software.