Introduction to

Accounting & Finance

Accounting Assignment (A2)

This is a GROUP assignment

Due Friday 12, January 2018,

12:00 noon

See Blackboard for full submission instructions

The construction of financial statements & their interpretation through
using financial ratios

TASK 1 (25 marks)

You are provided with the trial balance with notes for Pluto Hotels Ltd as at 30
August 2017. You are requested to construct the appropriate final accounts for
the year ended 30 August 2017.

Pluto Hotels Ltd, Trial Balance at 30 August 2017

Debit Credit
£'000 £'000
Revenue 13,400
Cost of sales 6,000
Administration expenses 1,200
Rent 2,600
Interest on investments received 20
Interest paid 170
Tax 380
Fixture and Fittings (Cost) 20,000
Fixtures and Fittings (Acc Dep) 5,000
Inventories 160
Trade receivables 1,700
Cash 60
Trade payables 250
Bank overdraft 20
Long-term loan 2,000
Share capital 6,800
Retained profits (b/f) 4,780
32,270 32,270

Notes:
1. Depreciation is to be charged for Fixtures and Fittings on a straight line
basis over 10 years. The residual value is estimated to be £2,000
2. Rent includes a payment up to 31 October 2017 and a prepayment of
£350,000 was made in the previous financial year.
3. Included in the Administrative Expenses is £235,000 of expenditure for
electricity. This includes accrued electricity expenses of £15,000
outstanding from the previous year. The electricity bill for August 2017
has not been received and appropriate provision needs to be made.
4. Doubtful debts at 2% of receivables is to be provided for.

Required:
You are required to prepare the Income Statement (11 marks) and the
Statement of Financial Position (14 marks).
Task 2 (25 marks)
The purpose of this task is to compare and contrast the profitability, liquidity
and efficiency of Whitbread PLC in years 2016 and 2017 by using its annual
reports, which have been uploaded on the Blackboard (under Course
Documents > Financial Accounting Area > Annual Reports).

You are required to calculate, compare and contrast the following financial
ratios for both years, 2016 and 2017:

a. Profitability ratios:
Net Profit Margin (3 marks)
Return on Equity (ROE) (4 marks)

b. Liquidity ratios:
Current Ratio (3 marks)

c. Efficiency ratios:
Accounts Payables Payment Period (4 marks)

d. Capital Structure ratios:

Gearing ratio (3 marks)
Dividend Cover (3 marks)

You should use average figures where required (using also, where needed,
figures from the 2015 financial statements).

The marks for each ratio will be split in three parts (approximately 1/3 for each
year’s ratio and 1/3 for the comparison).

Overall Presentation (5 marks)

The presentation marks for the report will be awarded on the basis of:
(a) A word count of no more than1,500 words;
(b) A table of contents and a summary;
(c) Good spelling and grammar;
(d) Appendices that support your arguments and calculations;
(e) Citation of sources in the text and bibliography using the Harvard
system

At the end of you report, you should provide an appendix providing clear
workings of your calculations, including the formulas used.