The International Financial Reporting Standards - ADAM Ltd - Accounting and Finance Assignment Help

Assignment Task:

Question 1: 

A. According to the International Financial Reporting Standards, Assets should be classified into current and non-current assets, explain what “Assets” means and what are the main criteria for companies to record assets and how you can differentiate between current and non-current assets. With giving examples 

B. Discuss the main advantages and disadvantages of the Accounting Rate of Return, Internal Rate of Return, and Payback period  

C. Discuss the differences between the fixed, variable, and semi-variable costs with giving examples.

The following information is also available: - 

1. Closing stock at the 31st December 2019 is £50,000

2. Included in insurance expense is machinery insurance costs of £12,000 for the year to 30th June 2020 

3. Late salaries of £20,000 for November and December 2019 has not been included in the salaries expense 

Required: showing full workings, you are required to: 

A. Prepare an Income Statement and a Balance Sheet for ADAM Ltd at 31st of December 2019.  

B. Analyse the financial position for ADAM Ltd, your analysis should include a discussion of their profitability, liquidity, and efficiency positions (three ratios are required for each position).  

C. Advice the current and potential shareholders of ADAM plc on if they should sell or keep their shares in the company and why.  Given that the industry average for some of the ratios are as follows: net profit ratio is 25%, current ratio is 150%, debtors’ days 140 days and creditors days 100 days

Question 3:  

OLA Ltd is to be incorporated on 1st of October 2020. The opening cash balance £20,000.  

The business has produced the following estimates:  

1- Monthly purchases will be £4,000 on October; £6000 per month from November to March. 10% discount is agreed for immediate cash purchases over £5,000; otherwise purchases can be paid on two months credit. OLA Ltd’s policy is to receive cash discounts when available.   

2- Rent will be £1000 monthly. Salaries will be £2000 per month for the first four months and £3000 per month for the following two months. Both types of expense will be payable when incurred.  

3- Planned sales income will be £5,000 from October until, and including December; and sales revenue will rise to £10,000 for the next 3 months. All sales will be on one-month credit. 

4- On November, the company will buy a vehicle for £6,000 cash. The Vehicle’s depreciation for the six months calculated as £500 per month.    

Required  

A. Prepare a cash budget for OLA Ltd for the six-month period ended in March 31, 2021. 

B. Advice the management of OLA Ltd on what they need to do to properly manage their cash in the next six months (from October 2020 to March 2021). 

C. Discuss the difference between the role of financial accountants and management accountants

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