Profitability, efficiency, liquidity, and financial structure

Write a report to evaluate the profitability, efficiency, liquidity, and financial structure
of ASOS over the financial periods 2018 to 2021.You should use the accounting ratios
shown below and any other information relevant to ASOS PLC. Information can be
accessed from the annual report and accounts and any other source of evidence that
you believe helps to explain the company’s performance and position. (40Marks)

Question 1 (49 Marks)
Ovid Ventures run a small private company selling swimwear from China. The owner
of the Venture asked you to prepare set of financial statement for the year ended 31
December 2021 as soon as possible as the previous accountant left the company at
very short notice.
Dr Cr
£ £
Audit and Accountancy 500
Advertising 900
Bank 1,500
Creditors 8,900
Long Term Bank Loan 2,200
Debtors 41,350
Delivery 8,500
Electricity 2,800
Insurance 1,700
Fixtures and Fittings:
At Cost 80,000
Accumulated depreciation (at 1.1.2021) 40,000
Motor Vehicle:
At Cost 25,000
Accumulated depreciation (at 1.1.2021) 1,350
Office expenses 700
Ordinary £1 shares (issued and fully paid) 20,000
Profit and loss account (at 1.1.2021) 13,200
Purchases 160,000
Rent and rates 7,500
Sales – 280,000
Stock (at 1.1.2021) 14,000
Wages and salaries 21,000
Bank Interest 200
£365,650 £365,650
AC4052QA Financial Accounting – NOV21INTAKE Assignment Brief
Additional Information:

  1. Stock at 31st December 2021 valued at cost amounted to £18000.
  2. Depreciation is to be provided on fixtures and fittings at 25% on cost
    and 10% on reducing balance method for motor vehicle.
  3. The electricity consumed but not paid for the period is £250.
  4. Insurance paid in advance at 31st December 2021 amounted to £400.
     Prepare Income statement for the year ended 31st December 2021.
    (26 Marks)
     Prepare Balance Sheet as at 31st December 2021. (23 Marks)
    Question 2 (11Marks)
  5. Briefly explain to Mr Ovid the owner of Ovid Ventures the impact of the
    following adjustments on Profit & Loss Account and Balance sheet:
    a. Prepaid Expenses
    b. Accrued Expenses
    c. Prepaid Income
    d. Accrued Income
    (8 Marks)
  6. Briefly explain to the Mr Ovid the owner of Ovid Ventures why the following
    items will be added back or deducted from the cash flow statement using the
    indirect method:
    a. Depreciation
    b. Disposal of non-current asset
    c. An increase in inventories

Sample Solution