Decision Making For Marketers (7BSP1012) Tutorial 2 based on Week 2 Lecture)

Activity 1 Discuss the validity of following statements: Accounting profit is the difference between cash received and cash paid.

Non-current assets normally provide benefit for short term period. Auditors are responsible for preparing accounts. The concept of materiality requires a cautious approach in accounting. Balance sheet shows the financial performance of a business at a point in time. Goodwill is an example of intangible non-current assets. Going concern assumption means that business will continue trading for indefinite period of time. Dividend is the part of profit that is distributed among shareholders. Unlimited liability is perhaps the biggest drawback of sole trader form of business. Management accounts are not required by law.

Activity 2 Visit websites of at least 3 companies of your choice. Get latest annual report of each and read through the Auditors Report. Highlight contents and major points in Auditors Report of each company. What are similarities and differences? Assess how auditors report adds to the utility of annual report? Activity 3 The following is the list of the assets and liabilities of a business as at 30 June 2010. Trade Payables Motor Vehicle Loan from Investment Bank Machinery Bank Overdraft Inventory Freehold Premises 000 86 38 260 207 116 153 320 Page 1

[7BSP1012 Tutorial based on Week 2 Lecture]

Trade Receivables

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Please note that equity capital is missing and needs to be detected.

Activity 4 Tick the right option. There is only ONE right answer. 1. Inventory or unsold stock is an example of. a) current assets b) current liabilities c) equity d) none

2. The Balance Sheet format is.. a) assets + liabilities = equity b) assets + equity = liabilities c) assets liabilities = equity d) assets equity = liabilities 3. Which one of the following is not a current asset. a) receivables b) cash in hand c) cash in bank d) payables

4. If a business has liabilities of 30K and equity of 60K, total assets are. a) 30K b) 90K c) 0 d) cant calculate 5. An overdraft is normally dealt in the balance sheet under.. a) current assets b) non-current assets c) current liabilities d) capital

6. Which branch of accounting provides information to external users . a) management accounting b) financial accounting 7. If total turnover is 40K and gross profit is 5K, what is cost of sales a) 45K b) 35K c) 20K d) 200K 8. Accounting is the language of a) industry b) accountants c) professionals d) business c) business health

9. Balance sheet is the measure of a) financial performance b) financial positions 10. If the sale price is less than the cost price, business will a) make profit b) make loss c) no profit no loss

11. Fill in the blanks a) Bank Loan is an example of liabilities b) Machinery is an example of assets c) Profit of the year is either paid as dividend or kept as d) Stock left unsold is ..assets e) Non-current assets has useful life of over .years 12. Identify the followings as a true or false [7BSP1012 Tutorial based on Week 2 Lecture] Page 2

a) b) c) d) e)

Auditors are appointed by management and report to management Accounting only deals with monetary transactions Profit and cash are the same things Equity capital is the owners investment in the assets of business Receivalbes and payables are shown on assets side of balance sheet

T/F T/F T/F T/F T/F

Activity 5 A junior employee in the office of financial controller has prepared the following income statement. It was ready to be despatched for the board meeting and came to your desk for final check. Identify the major mistakes and redraft the correct statement. DREAMS UNLIMITED LTD, Income Statement as at 31.12.09. 000 Sales Revenue Cost of Sales: Closing Inventory Add: Purchases Less: Opening Inventory Gross Profit Expenses: Selling Expenses Administrative Expenses Other Expenses Profit before interest and tax Less: Interest/finance cost Profit before tax Less: Tax 20% Profit after Tax 1000 600 100 (1700) (1700) (200) (1500) (300) (1200) 3000 6000 (1000) (8000) 0000 000 8000

[7BSP1012 Tutorial based on Week 2 Lecture]

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