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AC 330

Class 1, Week 3

Financial Accounting, Analysis and Valuation


Dr Stefano Cascino
2010-2011
Details

• Class Teacher: Dr Stefano Cascino - “Stefano”


• Office: OLD 3.32
• E-mail: s.cascino@lse.ac.uk
• Office Hours:
– Tue 8.30-9.30
– Thu 8.30-9.30
• Administrative Contact: Mr Justin Adams
– Office: OLD 3.20
– E-mail: j.adams5@lse.ac.uk

Dr Stefano Cascino AC330 2


It’s your turn now…

Introduce yourself!

Dr Stefano Cascino AC330 3


Setting the “game rules”…

• Handouts:
– By email after class
• Class Attendance:
– Compulsory: absence should be exceptional
– “Absent with reason”: Email before class with a “sound”
motivation
• Attending other classes:
– Only once per term, email before class with a “sound”
motivation
– Confirmation of presence (and permission!) via email by
other class teacher required

Dr Stefano Cascino AC330 4


Primary objectives

• The objectives of our class are:


– Not to overload you with irrelevant assignments and
make you feel unhappy!
– To provide you with applied knowledge of fundamental
issues in financial accounting
– To discuss “hot” topics that companies face nowadays in
a fun and enjoyable class environment
– To help you learn how to prepare and use financial
accounting information

Dr Stefano Cascino AC330 5


Class format

• How to make the most out of our class:


– Be always prepared! Do you homework (I will be checking your
weekly assignments). Time is a scarce resource…
– Be proactive! No worries for bad answers, you are here to learn!
• Class structure:
– Cooperation
– Discussion
– Group work (maximum 4 students)
– Class presentation
– Be ready to discuss/defend your (or your group’s) analysis
– Rules: Raise your hand to talk, avoid personal attacks (it’s just
accounting!)

Dr Stefano Cascino AC330 6


Today’s Class

Soloakk Limited

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How to deal with an assignment?

• Take a deep breath…


• Read it at least twice!
• Take notes of the main assumptions and relevant
information
• Find the link between the questions asked and the
information provided
• Read again!
• …and you will easily solve it!

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Requirements

• Income statement (P&L)


• Statement of comprehensive income
• Statement of financial position (Balance sheet)

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Income statement (I)
Cash sales banked £ 242,800
Cash sales not banked £ 300
Tot. £ 243,100

Amount paid to suppliers £ 158,300


Creditors at year-end £ 18,100
Total purchases £ 176,400
(-) Inventory at year-end: £ 15,000
£22,800*100/150=£ 15,200
Scratched goods at cost
£1,200*100/150=£ 800
Net realis. value £ 600
Write down £ 200
Cost of sales £ 161,400

Dr Stefano Cascino AC330 10


Income statement (II)

Rent £ 8,000
Rates £ 4,000
Wages & salaries £ 33,000
Electricity £ 2,400
Sundry expenses £ 2,400
Audit £ 2,000
Depreciation: £ 15,000*10% £ 1,500
Tot. £ 53,300
Prelim. expenses written off £ 1,700
Tot. £ 55,000

Overdraft interest £ 1,000


Loan interest: £ 30,000*10% £ 3,000
Tot. £ 4,000

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Statement of comprehensive income

• Do we have here “clean surplus accounting”?

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Statement of financial position

Rent prepaid £ 2,000

Suppliers £ 18,100
Electricity £ 200
Loan interest £ 3,000
Audit fee £ 2,000
Tot. £ 23,300

Profit for the financial year £ 13,900


(-) Dividends paid £ 6,000
Tot. £ 7,900

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Next week…

• Amazon
• Individual work
• Be well prepared!

Enjoy the rest of your week!

Dr Stefano Cascino AC330 14