Kelly Cook eTravel Pty Ltd Transaction Transactions for the month of May 2017... ASSETS = LIABILITIES + EQUITY Date Description Cash Receivable Accounts PPE = Accounts Payable Equity0
Trang 1TOPIC 2 RECORDING TRANSACTIONS 1
PART 1- RECORDING TRANSACTIONS USING THE
ACCOUNTING EQUATION
Trang 2Learning Objectives Topic 2
and events on the basic accounting equation.
Trang 3terms e.g the dollar
RECORDING
• Classification into categories & summarizing the transactions
COMMUNICATION
accounts for analysis & interpretation
Accounting is an
INFORMATION
SYSTEM that
…………
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THE ACCOUNTING
SYSTEM
Use the accounting equation to record transactions
Each transaction must be analysed to determine:
Assets, Liabilities, Equity (Income & Expense)
entry bookkeeping )
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THE ACCOUNTING
SYSTEM
Use the accounting equation to record transactions
Date
01-May-2017 Kelly Cook invests $30,000 to begin Kelly Cook’s eTravel P/L.
02-May-2017 Kelly Cook eTravel P/L purchases Office Furniture & Equipment paying $10,000 in cash.
15-May-2017 Kelly Cook eTravel P/L provides services and collects $5,500 in Revenue.
20-May-2017 Kelly Cook eTravel P/L provides services, and the client agrees to pay $3,000 within one month.
21-May-2017 Kelly Cook eTravel P/L pays cash expenses of $600 for Printing & Stationery.
21-May-2017 Kelly Cook eTravel P/L pays cash expenses of $1,100 for Rent.
21-May-2017 Kelly Cook eTravel P/L pays cash expenses of 1,200 for Salaries & Wages.
21-May-2017 Kelly Cook eTravel P/L pays cash expenses of $400 for Electricity.
25-May-2017 Kelly Cook eTravel P/L purchases some online Advertising, agreeing to pay $500 in 30 days.
26-May-2017 Kelly Cook renovated her bathroom at her personal residence.
30-May-2017 Kelly Cook eTravel P/L collected $1,000 from the client of 20th May.
31-May-2017 Kelly Cook eTravel P/L pays $300 to the supplier from which she purchased $500 worth of Advertising.
31-May-2017 Kelly Cook eTravel P/L pays $2,000 cash Dividends to Kelly Cook.
Kelly Cook eTravel Pty Ltd
Transaction
Transactions for the month of May 2017
Trang 6ASSETS = LIABILITIES + EQUITY Date Description Cash Receivable Accounts PPE = Accounts Payable Equity
01-May-2017 Kelly Cook invests $30,000 to begin Kelly Cook’s eTravel P/L
02-May-2017 Kelly Cook eTravel P/L purchases Office Furniture & Equipment paying $10,000 in cash
15-May-2017 Kelly Cook eTravel P/L provides services and collects $5,500 in Revenue
20-May-2017 Kelly Cook eTravel P/L provides services, and the client agrees to pay $3,000 within one month
21-May-2017 Kelly Cook eTravel P/L pays cash expenses of $600 for Printing & Stationery
21-May-2017 Kelly Cook eTravel P/L pays cash expenses of $1,100 for Rent
21-May-2017 Kelly Cook eTravel P/L pays cash expenses of 1,200 for Salaries & Wages
21-May-2017 Kelly Cook eTravel P/L pays cash expenses of $400 for Electricity
25-May-2017 Kelly Cook eTravel P/L purchases some online Advertising, agreeing to pay $500 in 30 days
26-May-2017 Kelly Cook renovated her bathroom at her personal residence
30-May-2017 Kelly Cook eTravel P/L collected $1,000 from the client of 20th May
31-May-2017 Kelly Cook eTravel P/L pays $300 to the supplier from which she purchased $500 worth of Advertising
31-May-2017 Kelly Cook eTravel P/L pays $2,000 cash Dividends to Kelly Cook
Transaction
Transactions for the month of May 2017
Trang 7Kelly Cook eTravel Pty Ltd Statement of Profit or Loss for the month of May 2017 Revenue
Service Revenue
Expenses
Advertising Electricity Printing & Stationery Rent
Wages & Salaries
Total Expenses
Profit
8,500
500 400 600 1,100 1,200
2/5/17 Purchase Office Furniture & Equipment -10,000 10,000 =
30/5/17 Collects cash from client (transaction 20/5) 1,000 -1,000 =
Trang 8Kelly Cook eTravel Pty Ltd Statement of Financial Position
Equity as at 1 May 2017
Share Capital invested Add Profit for month Less Dividends
Retained Earnings as at 31 May 2017
Total Equity 31 May 2017
20,900
2,000 10,000
32,900
200
30,000 2,700
2/5/17 Purchase Office Furniture & Equipment -10,000 10,000 =
30/5/17 Collects cash from client (transaction 20/5) 1,000 -1,000 =
Trang 9Kelly Cook eTravel Pty Ltd Statement of Cash Flows for the month of May 2017 Cash flows from operating activities:
Receipts from customers Payments to suppliers Payments to employees
Net cashflow from operating activites
Cash flows from investing activities:
Purchase of Property, Plant & Equipment
Net cashflow from investing activites
Cash Flows from financing activities:
Issue of shares Dividends
Net cashflow from financing activites
Net increase in cash
Cash at beginning of period 1 May 2017 Cash at end of period 31 May 2017
6,500 -2,400
28,000
20,900 0
20,900
ASSETS = LIABILITIES + EQUITY Date Description Cash Receivable Accounts PPE = Accounts Payable Equity
2/5/17 Purchase Office Furniture & Equipment -10,000 10,000 =
21/5/17 Paid cash expenses - Printing & Stationery -600 = -600
21/5/17 Paid cash expenses - Wages & Salaries -1,200 = -1,200
30/5/17 Collects cash from client (transaction 20/5) 1,000 -1,000 =
32,900 = 200 32,700 32,900
Trang 10Kelly Cook eTravel Pty Ltd Statement of Profit or Loss for the month of May 2017 Revenue
Cash 20,900 Accounts Payable 200
Total Equity 32,700
Total Assets 32,900 Total Liabilties &
Equity 32,900 Kelly Cook eTravel Pty Ltd
Statement of Changes in Equity for the month of May 2017
Equity as at 1 May 2017 0
Share Capital invested 30,000
Add Profit for month 4,700
Less Dividends -2,000
Retained Earnings as at 31 May 2017 2,700
Total Equity 31 May 2017 32,700
Kelly Cook eTravel Pty Ltd Statement of Cash Flows for the month of May 2017 Cash flows from operating activities:
Payments to suppliers -2,400 Payments to employees -1,200
Net cashflow from operating activites 2,900 Cash flows from investing activities:
Purchase of Property, Plant & Equipment -10,000
Net cashflow from investing activites -10,000 Cash Flows from financing activities:
Net cashflow from financing activites 28,000
Cash at beginning of period 1 May 2017 0 Cash at end of period 31 May 2017 20,900
Trang 11TOPIC 2 RECORDING TRANSACTIONS 1
STATEMENT ANALYSIS
Trang 122 Calculate and interpret ratios for analysing a business’ profitability,
liquidity, and solvency.
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Accounting is an INFORMATION
SYSTEM that identifies, measures,
records & communicates information to
both internal and external decision
makers.
The primary function of accounting is to
provide relevant & reliable (faithfully
represented) information for decision
making.
Accounting information about a
business' financial performance and
position is communicated to users via
four key financial statements.
how
do users of accounting information evaluate it to make
decisions????
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ANALYSING FINANCIAL STATEMENTS
FOR DECISION MAKING
Financial Statement Analysis uses various tool
and techniques to analyse an entity’s financial
statements to identify financial strengths and
weaknesses and aid decision making
Ratio Analysis is one such tool.
• A ratio is the mathematical relationship between two different quantities.
• The calculation of a ratio simply involves dividing the dollar amount of one item with the dollar amount
of another.
• Expressed in terms of percentages or
proportions.
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ANALYSING FINANCIAL STATEMENTS
FOR DECISION MAKING
performance – that is the business’s effectiveness in
earning profits & providing a return on shareholders’
investments
Return on assets Indicates amount of net profit
generated by each dollar invested in assets.
Profit margin Measures percentage each sales
dollar that results in profit.
Kelly Cook eTravel Pty Ltd
Statement of Profit or Loss for the month of May 2017 Revenue
Service Revenue 8,500 Expenses
Cash 20,900 Accounts Payable 200
Accounts Receivable 2,000
22,900 Equity Non-current Assets Capital 30,000 Property, Plant &
Trang 16Average Total Assets 32,900
Kelly Cook eTravel Pty Ltd
Statement of Profit or Loss for the month of May 2017 Revenue
Service Revenue 8,500 Expenses
Cash 20,900 Accounts Payable 200
Accounts Receivable 2,000
22,900 Equity Non-current Assets Capital 30,000 Property, Plant &
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ANALYSING FINANCIAL STATEMENTS
FOR DECISION MAKING
LIQUIDITY RATIOS measuring the business’s
short-term ability to pay its maturing
obligations and to meet unexpected needs
for cash.
Working Capital is the resources available for
day-to-day operations of a business, calculated simply
current assets minus current liabilities
Current Ratio Measures short ability to meet
current obligations
Current cash debt coverage indicates the
entity’s ability to generate sufficient cash to
meet short term needs.
Kelly Cook eTravel Pty Ltd Statement of Financial Position
as at 31 May 2017 Current Assets Liabilites
Cash 20,900 Accounts Payable 200
Accounts Receivable 2,000
22,900 Equity Non-current Assets Capital 30,000 Property, Plant &
Payments to suppliers -2,400Payments to employees -1,200
Net cashflow from operating activites 2,900
Cash flows from investing activities:
Purchase of Property, Plant & Equipment -10,000
Net cashflow from investing activites -10,000 Cash Flows from financing activities:
Net cashflow from financing activites 28,000 Net increase in cash 20,900Cash at beginning of period 1 May 2017 0
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ANALYSING FINANCIAL STATEMENTS
FOR DECISION MAKING
RATIO FORMULA $ Kelly Cook Flight
Kelly Cook eTravel Pty Ltd Statement of Financial Position
as at 31 May 2017 Current Assets Liabilites
Cash 20,900 Accounts Payable 200
Accounts Receivable 2,000
22,900 Equity Non-current Assets Capital 30,000 Property, Plant &
Payments to suppliers -2,400
Payments to employees -1,200
Net cashflow from operating activites 2,900
Cash flows from investing activities:
Purchase of Property, Plant & Equipment -10,000
Net cashflow from investing activites -10,000
Cash Flows from financing activities:
Net cashflow from financing activites 28,000
Net increase in cash 20,900
Cash at beginning of period 1 May 2017 0
Cash at end of period 31 May 2017 20,900
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ANALYSING FINANCIAL STATEMENTS
FOR DECISION MAKING
SOLVENCY RATIOS measures ability of entity
to survive over a long period of time.
generate sufficient cash to meet long term
needs
Kelly Cook eTravel Pty Ltd Statement of Cash Flows for the month of May 2017 Cash flows from operating activities:
Payments to suppliers -2,400
Payments to employees -1,200
Net cashflow from operating activites 2,900
Cash flows from investing activities:
Purchase of Property, Plant & Equipment -10,000
Net cashflow from investing activites -10,000
Cash Flows from financing activities:
Net cashflow from financing activites 28,000
Cash at beginning of period 1 May 2017 0
Cash at end of period 31 May 2017 20,900
percentage of assets financed by creditors rather than shareholders.
Kelly Cook eTravel Pty Ltd Statement of Financial Position
as at 31 May 2017 Current Assets Liabilites
Cash 20,900 Accounts Payable 200
Accounts Receivable 2,000
22,900 Equity Non-current Assets Capital 30,000 Property, Plant &
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ANALYSING FINANCIAL STATEMENTS
FOR DECISION MAKING
Kelly Cook eTravel Pty Ltd Statement of Cash Flows for the month of May 2017 Cash flows from operating activities:
Payments to suppliers -2,400 Payments to employees -1,200
Net cashflow from operating activites 2,900 Cash flows from investing activities:
Purchase of Property, Plant & Equipment -10,000
Net cashflow from investing activites -10,000 Cash Flows from financing activities:
Net cashflow from financing activites 28,000
Cash at beginning of period 1 May 2017 0 Cash at end of period 31 May 2017 20,900
RATIO FORMULA $ Kelly Cook Flight
25%
Cash debt coverage
Net Cash from Operating
1 to 14.5
1 to 0.50 Average Total Liabilities 200
Kelly Cook eTravel Pty Ltd Statement of Financial Position
as at 31 May 2017 Current Assets Liabilites
Cash 20,900 Accounts Payable 200
Accounts Receivable 2,000
22,900 Equity Non-current Assets Capital 30,000
Property, Plant &
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ANALYSING FINANCIAL STATEMENTS
FOR DECISION MAKING
RATIO FORMULA $ Kelly Cook Flight
Central
Return on Assets Profit 4,700 14.3% 12.5%
Average Total Assets 32,900
Profit margin Profit 4,700 55.3% 42%
Net Sales 8,500
Current Ratio Current Assets 22,900 114.5 or
1 to 114.5 1 to 3 Current Liabilities 200
Current cash debt coverage
Net Cash from Operating
Activities 2,900 14.5 or
1 to 14.5
1 to 0.80 Average Current Liabilities 200
Debt to Assets Ratio
Total Liabilities 200 1 to 0.006
or 0.6%
25% Total Assets 32,900
Cash debt coverage
Net Cash from Operating
Activities 2,900 14.5 or
1 to 14.5
1 to 0.50 Average Total Liabilities 200