Assignment 0n

Introduction to financial statements

Course code MGT 101

Semester 1
Date 13-11-2019

Submitted by Submitted to
Name: Rubab zahra Pro. Mujahid eshal
Roll no:400560 FCA
QUESTIONCC
Following information is extracted from the books of
ABC Business on 30th June 2019
particulars Rs. Particulars Rs.
Advertising expenses 65,000 Amount earned on 121,00
sale of goods 0

Carriage/ transportation 1,65,000 Amount earned on 8,40,00

paid on sales of goods rending services 0
Purchases 550,000 Total liabilities 10,30,0
00
Carriage/Transportation 50,000 Copy rights 250,00
paid on purchase 0
Rent of office building 2,78,222 Goodwill 150,00
0
Taxes paid 20,364 Furniture and 170,00
fixtures 0
Mark up on loan 15,228 Plant and 750,00
machinery 0
Salaries paid to 16,369 Land and building 770,00
employees 0
Bank charges 29,367 Cash in hand 150,00
0

Other financial 17,268 Total asses 2,240,0

charges 00
Note:There is no opening and closing stock of inventory.
Required: based on the above information of ABC
business ,you are required to calculate the amount of
1. Intangible assets
2. Equity
3. Total income / revenue
4. Selling expenses
5. Cost of goods sold
 Solution:
1. Intangible Assets :
Def: the assets that you cannot touh . examples of intangible assets are copy
rights, patents, computer software, mailing list, trade marks, brand names, domain names and so
on .

Often the market value of an intangible assets is far greater than the market value of
company tangible assets.

Calculation:
As we are given from the data that

Copy rights = 250,000

Goodwill = 150,000

So

Intangible = 400,000

2. Equity :
Def : equity is typically referred to as shareholder equity which represents the
amount of money that would be returned to a companey’s shareholders if all of the assets were
liquidated and all of the c company’s was paid off. it is found on a company’s balance sheet and
is one of the most common financial metrices employed by analysts to assess the financial health
of a company.

Formula of equity:
Shareholders equity =total assets – total liabilities

Calculation: as we have from the data

Total assets = 22,40,000

Total liabilities = 10,30,000

So

total = 12,10,000
3. Total income /revenue :
def: fees earned from providing services and the amounts of merchandise sold .
under the accrual basis of accounting ,revenues are recorded at the time of delivering the services
or the merchandise, even if cash is not received at the time of delivery. Often the term income is
used instead of revenues.

Its examples are sales, service revenue, fees earned, interest revenue, interest income,

Formula :
Revenue = the sale of goods /services

Calculations: we have from the data that

income = value of goods +services

amount earned on the sale of goods =1,21,000

amount earned by rending services =8,40,000

so. total = 9,61,000

4. selling expenses :
def: these are the part of the operating expenses . it include sales commissions,
advertising, materials distributed, rent of the sales showroom, rent of sales offices, utilities and
telephone usage in the sales department ,etc.

calculations: as we have
advertising expenses = 65,000

transportation paid on sales of goods = 1,60,000

SO, total = 2,25,000,

5. cost of goods sold:

def: it refers to the direct costs
of producing the goods sold by a company. This
amounts includes the cost of the materials and labor directly used to create the goods .it excludes
indirect expenses, such as distribution costs and sales force costs.

Formula for COGS:

COGS = beginning inventory +purchase during the period – ending inventory

Purchases =5,50,000

Transportation paid on purchases = 50,000

Total = 6,00,000