Club Accounts
What is a club?
A club is an organisation set up for the benefit of its members, rather than to make a profit e.g. Golf club, drama club, GAA club
Statement of Capital and Reserves
In Type A - What order do the accounts appear ?
T, P + L Acc then BS
Examples of Non Cash Expenses
Depreciation
Loss on sale of fixed assets
Increase in Provision for bad debts
Return on Capital Employed (ROCE)
Operating Profit / Capital Employed x 100 = ?%
What is a Cash Budget?
A cash budget is a forecast or plan of cash inflows and cash outflows over a period.
True or False
Add Opening Stock
Minus Closing Stock
False
Fixed
What is a bar trading account an example of?
Special Purpose Trading Account
Where does Issued share capital go in the Statement of Capital and Reserves?
Liability
Drawings
Why are Cash Flow Statements prepared/Benefits of preparing Cash Flow Statements/Purposes of Cash Flow Statements
It shows the cash inflows and outflows during the past year.
It shows that profit does not always equal cash.
It helps with financial planning
It helps with loan applications
It ensures a business is complying with Company Law.
Stock Turnover
Cost of Goods Sold / Average Stock
Average Stock = (Opening Stock + Closing stock) ÷ 2
How do you calculate net cash ?
Total receipts - total payments
What is meant by a favourable variance
When actual costs are less than budgeted costs.
What is the name of the method to split mixed costs into their fixed and variable elements?
High-Low Method
1/1 - Subscriptions received in advance €1,850.
+ or - from Subscriptions Income
Add it on - its for this year
1/1 3 months insurance prepaid €3,600
Insurance (12 months) 19,800
What figures go where?
SOC+R = 3600 Asset
P+L Income = 3600+19800-4950 = 18450
19800/12*3 =4950
BS = Asset 4950
The Accruals Concept
All expenses incurred (which happened) in a particular period must be included in the accounts of that period, whether the expenses have been paid or not.
Similarly, all incomes must be included in the accounts of that period, whether the incomes have been received or not.
Net Debt Calculation
(Debenture + Bank Overdraft) - (Cash + Bank + Government Securities)
Return on Equity Funds/Return on Shareholder’s Funds (ROSF)
Net Profit after Preference Dividend (& tax)/Equity Funds X100
Equity Funds = Ordinary Issued Shares + Profit and Loss Balance
What options does a business have when it has a cash surplus
The surplus could be placed in a short term investment so as to gain maximum interest. The surplus could also be used to pay off any loans or purchase fixed assets
How do you calculate the raw materials budget
Contribution vs Profit
Contribution = Sales - Variable Costs
Profit = Sales - Total Costs
Is levy reserve fund an asset or liability?
1/1 stock of dental supplies €10,500; creditors for dental supplies €4,500;
Purchase of dental supplies 31,600
31/12 Stock of dental supplies €9,800, Creditors for dental supplies €3,200
31,600 + 10500 - 4500 - 9800 + 3200 = 31000
Calculate Goodwill:
On 01/01/2024, R. Ryan lodged €1,300,000 to a business account and on the same day purchased a business for €1,220,000 which included the following tangible assets and liabilities: Premises €880,000; Equipment €140,000; Stock €38,700; four months’ Rates prepaid €10,400; Debtors €58,600; Trade Creditors €39,100; Wages due €7,300; 3% Investments €100,000.
Goodwill
Purchase Price 01/01/2024 1,220,000
Assets
Premises 880,000 Equipment 140,000 Stock 01/01/2024 38,700 Rates prepaid 10,400 Debtors 58,600 3% Investments 100,000 =1,227,700
Less Liabilities
Trade Creditors 39,100 Wages due 7,300 = 46,400
1,227,700 - 46,400 = 1,181,300
Goodwill = 1,220,000 - 1,181,300
Abridged Profit and Loss A/C. List all items in order
Operating Profit
Add Investment Income
Less Debenture Interest
Less Tax
Less Dividends paid
Add Profit and Loss Balance 1 – 1 – 20?? Profit and Loss Balance 31 – 12 – 20??
Earnings per share
Net Profit after Preference Dividends (& tax) / Number of issued ordinary shares x 100
What happens the opening cash?
Net cash + bank loan + opening cash = closing cash
Outline the factors which a company should take into account when estimating future sales figures
Last year’s sales (from other stores)– NB Must have this point
Market research – could indicate trends and potential demand.
State of Economy – is it expected to grow in the coming months?
Level of Competition – are there many other businesses producing similar goods? If so, do we have a competitive advantage.
Price to be charged – demand for the product will be determined by the price.
NB: For the first point above only use “from other stores” if the company in the question is a new business
What does a Flexible budget show?
A Flexible budget shows whether actual costs were more than or less than budgeted costs.
1/1 bar creditors €8,300
Bar purchases 65,700
31/12 bar creditors €6,400
What is the final figure that will be transferred to the Bar Trading Account?
Bar purchases 65,700
Year End 31/12/2019 - Client Fees
1/1 clients’ deposits paid in advance €5,700
Clients’ fees 273,100
Clients’ fees include €7,300 for 2020.
Fees due from clients at 31/12/2019 were €900.
273100 + 5700 - 7300 + 900 = 272400
Year End = 31/12/2019. Calculate my rent income for this year.
Rent for one year €24,000
The figure for Rent was in respect of an adjoining building rented by Saffron on 01/10/2019.
It was payable in advance and Saffron estimated that one-third of the building was used as a private residence
24000/3 = 8000
16000 = 12 months
3 months = 4000 this year (Income)
9 months = 12000 next year (CA in BS)
Cash Flow Statement -5/7 Headings
Operating Activities
Return on Investments and Servicing of Finance
Taxation
Capital Expenditure and Financial Investment
Equity Dividends Paid
Management of Liquid Resources
Financing
Dividend Yield
Dividend per share / Market price per share x 100
Fixed overheads (including depreciation) €80,000 per month, payable as incurred.
Equipment will be purchased on 1 March 2022 costing €48,000 which will have a useful life of 5 years and a scrap value of €6,000 at the end of this period.
Calculate fixed overheads
48000-6000/5 = 8400 / 12 = 700
80000 - 700 = 79300
Principal Budget Factor
This is the factor that limits output and therefore prevents continuous expansion. Usually the principal budget factor is sales demand. A company cannot sell more of its products, if there is no demand for more of these products.
The principal budget factor could be some other factor such as availability of raw materials.
Items that could be considered Principal Budget Factors (2008, 2014):
Sales Demand
Availability of Raw Materials
Availability of Labour
Availability of Capital
Capacity of the plant.
What is meant by the term ‘sensitivity analysis’
Sensitivity Analysis is also known as ‘what if’ analysis. It is a technique used by management accountants to show the effect on profit brought about by changes in the following:
1. Selling price
2. Sales volume
3. Variable costs
4. Fixed costs