Assignment Questions

Total marks: PASS or FAIL. There are NO grades

Students should answer ALL questions.

Assignment Scenario:

Mr. A owns a factory which is successful, so he is interested in expanding his business and
establishing another premises. Mr. A knows that you are studying finance as part of your
qualification and has asked your advice on financial matters related to his current business
and future investment plans.

Additional Information:

Mr A. wants to set up the new factory either as partnership or as a limited liability

company. He is not sure of the requirements and techniques for financial recording and
reporting for these forms of business organisations. He is aware that he has a legal
obligation for the preparation of financial statements. Also he is wondering if such
reporting is beneficial at all and whether it provides any useful information to stakeholders.

Task:

You are required to give a briefing to Mr. A covering following issues. Prepare a briefing
paper which you will take to a meeting
a. Explain the legal and tax purposes for keeping financial records, and explain the
internal control requirements in maintaining financial records
b. Provide an overview of the technique of double entry book keeping and Analyse in
greater depth further techniques for recording financial information
c. Analyse the requirements for financial reporting in different forms of business entities
d. Analyse the different financial statements necessary for a business entity and
evaluate the usefulness of these financial statements.
e. Purpose of financial repoting
f. Usefulness of financial statements to stakeholders.
Question 2:

Additional Information:

Mr. A is concerned with the increasing investments in working capital for his current business
and he has provided you with the following information for further analysis and discussion.

000

Sales 900
Cost of goods sold 350
Opening Inventory 50
Closing Inventory 350
Debtors 140
Bank 260
Creditors 450

Task:

You are required to

a. Analyse the components of working capital by calculating the relevant ratios and
interpreting their results.
b. Explain how business organizations can effectively manage working capital using at
least two methods

End of Question 2
Question 3:

Additional Information:

Mr. A has recently attended a conference highlighting the importance of different

management accounting techniques and the role of management accountants. He has asked
you to explain the budgetary control process and presented you with following information.

Budget Actual

Production and Sales 20,000 units 17,600 units

Sales Revenue 100,000 90,000
Indirect labour 20,000 19,540
Consumables 800 1,000
Material 4,200 3,660
Depreciation 10,000 10,000
Semi variable overheads * 5,000 4,760
Budgeted Gross Profit 60,000 51,040

*Semi-variable overheads are budgeted to be 4500 at a level of production of 15,000 units.

Mr. A is also bit confused about the terms, characteristics and functions of
management accounting and financial accounting.

Task:

You are required to

a. Explain the difference between management and financial accounting.
b. Explain the budgetary control process.
c. Calculate and interpret variances from the above budget.
d. Evaluate the use of at least two different costing methods for pricing purposes.

End of Question 3
Question 4:

Additional Information:

Mr. A is interested to know about financial viability and potential sources of finance for
setting up a new factory. He estimates that setting up a factory will require a capital of
1,70,000 in initial investment and is expected to provide operating cash inflows of 52,000,
78,000, and 90,000 at the end of each of the next 3 years. Due to the technological nature of
the product Mr. A believes that there will be no demand for the product after three years and
the business may need to be closed down by selling all its assets for 10,000 or alternatively
some diversification will be required.

Task:

You are required to

a. Using the above information, Apply appropriate methods to appraise the project and
comment on its viability.
b. Evaluate the methods of project appraisal
c. Explain the various sources of finance for a business project and explain how you
would make a case for a business project.

End of Question 4

End of Assignment Questions