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ANSWER: 2000 (Excluding financial statements)
. What is the goal of Financial Accounting, and why is it important to maintain precise
records of financial transactions?
(10marks)
2. Gulf Residential Services has started a business. During the Month of May 2024, the
following transactions occur:
Required:
1st May
3rd May
4th May
6th May
8th May
10th May
10th May
12th May
16th May
18th May
20th May
25th May
28th May
Introduced 24,000 Capital into the business.
Bought goods for 7,000.
Sold goods on credit for 4,400 to Bahrain Mgt Co
Paid wages of 800.
Received a 18,000 cash loan from the bank.
Bought goods on credit for 12,000 From Super GCC Supplies
Sold goods for 7,000 cash.
Bought a delivery van for use in the business costing 10,000.
Bought Stationary for 40.
Received and paid an electricity bill for 1000.
Sold goods for 1600 on credit to Jumeriah Estates.
Paid a supplier 3,600.
Received 900 from Bahrain Mgt Co
a) Show the nominal ledger entries (using T-accounts) for the above transactions
Close off each T-account and prepare an initial trial balance as at 31st May2024
(15 marks)
b) Produce a Statement of Profit or Loss for year ended 31st May 2024 and a Statement
of Financial Position as at 31st May 2024 Note:
Note: Closing inventory was 10,000 for Gulf Residential Supplies
(15 marks)
3.
a) Calculate the 8 financial ratios for GCC Wholesale Plc (Full accounts listed in the
appendix)
(12 marks)
4.
5.
b) Comment on the performance of GCC Wholesale Plc based on the ratios calculated
in part a. (5 marks)
c) Do you think it is likely that GCC Wholesale might experience problems running
the business with so little cash. Outline some of the challenges?
(5 marks)
d) Despite its drawbacks why do so many analysts rely on ratio analysis
(8 marks)
Explain the following key accounting concepts
Accruals Concept
Business Entity Concept and;
Matching Concept
(10marks)
The Trial Balance is an early indicator of the quality of accounting control systems as
it highlights an equal level of Debit and Credit Accounts. Explain COPCOR errors
and why they might not be highlighted in the Trial Balance.
(10 marks)
Financial ratio analysis
Below are the financial statements of GCC Wholesale Plc
Income statement for the year ended 31 December 2023
Revenue
Cost of sales
Opening inventory
Add purchases
Less closing
inventory
Gross profit
Various expenses
Operating profit
Finance costs
Profit before tax
Tax
Profit after tax
AED’000
200
1594
1,794
(205)
AED’000
2,600
(1589)
1,011
(519)
492
(80)
412
(64)
348
Appendix 1.
Statement of Financial position as at 31 December 2023
AED’000
Assets
Non-current Assets
Current assets
Inventories 204
Trade receivables 270
Cash at bank 20
Total assets
Equity and Liabilities
Equity
Share capital (AED1 each) 900
Retained earnings 1248
Non-current Liabilities
Borrowings
Current liabilities
Trade and other payables
Total equity and liabilities
Required: Calculate the following ratios
Gross Profit Margin
Net Profit Margain
Asset Turnover
Return on Capital Employed (ROCE)
Current Ratio
Quick Ratio
Inventory Days
Capital Gearing
AED’000
2,813
494
3,307
2148
1000
159
3,307
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