ACCOUNTING -Q3

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QUESTION3COMPLETED.xlsx
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Sheet1

a. Liquidity Ratios
Current Ratio
Current Ratio = Current Assets/Current Liabilites
James Ltd Smith Ltd
Current Assets 97 101
Current Liabities 34 56
Current Ratio 2.85 1.80
Quick Ratio = Quick Assets/Current Liabilites
Quick Assets = current assets- inventories
Quick Assets 37 43
Current Liabities 34 56
Current Ratio 1.09 0.77
b. Profitability Ratios
Gross Margin=Gross Profit/Revenue
James Ltd Smith Ltd
Gross profit 307 196
Revenues 638 493
Current Ratio 48.12% 39.76%
Net Profit Margin=Net Profit/Revenue
James Ltd Smith Ltd
Net profit 151 99
Revenues 638 493
Net Profit Margin 23.67% 20.08%
c. Financial Gearing Ratios
Gearing Ratio=(Long term debts/Capital Employed)*100
Capital Employed = Total assets-current liabilities
James Ltd Smith Ltd
Long term debts 151 99
Capital Employed 638 493
Gearing Ratio 23.67% 20.08%

Question 4 Answer

Khan Limited
Adjusting Entries Adjusted Trial Balance
Transaction Particulars Debit Credit For the period ending 31, 3, 2015
2 salaries &Wages Expense 3610 Dr. (£) Cr. (£)
Salaries &Wages payable 3610
(Salaries &Wages accrued) Plant and Machinery (cost) 14,000
3 Prepaid Rent 670 Plant and Machinery- accumulated depreciation 4,500
Rent 670 Equipment (cost) 9,500
(Prepaid Rent) Equipment - accumulated depreciation 2,475
Motor vehicle (purchased 1 April 2011) 12,000
4 Depreciation Expenses 475 Motor vehicle- accumulated depreciation 4,980
Equipment-Accumulated dep. 475 Opening inventory (stock) 5,600
(To record depreciation)5%*9500 Trade receivables 12,000
Wages and Salaries Payable 3610
Depreciation Expenses 1400 Tax Payable 3200
Plant& Machinery-Accumulated dep. 1400 Trade payables 17,000
(To record depreciation)10%*9500 Cash in hand / Bank 15,610
Prepaid Rent 670
Depreciation Expenses 1400 Ordinary Share Capital of £1 share each 26,660
Motor Vehicle-Accumulated dep. 1400 Revenue 167,150
(To record depreciation)10%*9500 Purchases 54,100
Returns outwards 1,200
5 Tax expense 3200 Water bills 4,150
Tax payable 3200 Delivery Cost 3,600
(Tax accrued) Discount allowed to customers 2,150
Wages and Salaries Expense 45,710
Rent Expense 13,630
Insurance 5,600
Miscellaneous expenses 26,600
Tax expense 3200
Depreciation expense 2655
230,775 230,775
Khan Limited
For the period ended 31, 3 , 2015
Revenue 167150 Khan Limited
Discount allowed -2150 Statement of financial position
Net Sales 165000 For the period ended 31, 3 , 2015
Less; Cost of goods sold
Opening Inventory 5600 Assets Current Liabilities
Purchases 54100 Current Assets Trade Payables 17000
Return Outwards -1200 Cash 15610 Salaries & Wages payable 3610
Closing Inventory -7120 51380 Trade Receivables 12000 Tax Payable 3200 23810
Gross Profit 113620 Opening Inventory 7120
Prepaid Rent 670 35400
Operating Expenses:
Water Bills 4150 Non-current Assets
Delivery Cost 3600 Plant and Machinery 14000
Salaries and wages expense 45710 Accumulated Dep. -Plant& Machinery -4500 9500
Rent 13630 Equipment 9500
Insurance 5600 Accumulated Dep. -Equipment -2475 7025 Share capital
Miscellaneous Expense 26600 Motor Vehicle 12000 Ordinary Share Capital 26660
Depreciation Expense 2655 101945 Accumulated Dep. -Motor Vehicle -4980 7020 Retained Earnings 8475 35135
Profit before Taxation 11675 Total Assets 58945 Total Liabilities & Equity 58945
Tax Expense -3200
Net Income 8475