The figures in the income statement are calculated/included because accountants apply the Matching concept and the Prudence Concept.

accounting

Description

Question 2 continued           


You are required to:

⦁                    (30 marks)

 

Calculate the ratios listed below for both years 2 marks per ratio


Show clearly how you calculated the ratio 1 mark per ratio


 and 


Give 1 reason why the ratio may have changed from 2019 to 2020, referring to the figures in the financial statements if relevant.

  2 marks per ratio.


The ratio you should calculate are;

Gross margin 5 marks in total

Operating Margin 5 marks in total

Days sales in closing inventory 5 marks in total

Usage of non-current (fixed) assets 5 marks in total

Days purchases in payables and 5 marks in total

The Gearing ratio. 5 marks in total


⦁

(i) Calculate the company’s net cash flow for 2020 and explain in 1 sentence what your 

    answer means.             (6 marks)


(ii) From a review of the company’s financial statements (no additional calculations are 

     required)


     Provide 2 possible reasons for the net cash flow in 2020. (4 marks)

Question 3 Total 20 Marks

Answer Part A OR Part B


Part A.


⦁ The figures in the income statement are calculated/included because accountants apply the Matching concept and the Prudence Concept.

Explain what each concept means and how it affects any 1 figure in the Income Statement                    (12 marks)


⦁ Explain any 2 differences between financial accounting and management accounting.

                                          (8 marks)


OR


Part B

You are considering setting up a public relations business. A number of your college friends from DkIT have expressed an interest in assisting you in the new venture. 


You are now considering if you should set up the business as a sole trader, a partnership or a limited liability company

⦁ Explain one advantage and one disadvantage of each of these methods of operating your business                    (12 marks)


⦁ Describe how the income statement and the statement of financial position differ between a sole trader and a limited liability company. 

            (8 marks)


Instruction Files

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