Business Study

Question1:

Part 1

(a)

Houdini's income statement for the week 1 July to7 July 2007

Fees for magic show 650

Less, direct costs of the income 0

Gross income 650

Less expenses 0

Travel expenses 15

Net profit £635

The income statement shows that Mr. Houdini has made total profit £635 in the 1st week of July 2007

(b)

Houdini's fixed and net assets at 7 July 2007

Long-term assets

Costume 1500

equipments 1000

Playing cards 200

2700

Less account depreciation 0

2700

Short-term assets

Bank balance 650

Less short-term liabilities

Creditors 200

Working capital 450

Total investment 3150

Less long-term liabilities

0

Net assets 3150

Part2

(a)

Cash account for Mr. Houdini from 8 July to 14 July 2007

Cash inflow

Party cash revenue 100

Fee cash revenue 100

Cash back for unused feed 50

Third party 70

320

Cash outflows

Rabbits 180

Rabbits food 150

Travel expenses 15

Train ticket 8

Cleaning 15

Payments to Alf cooks 200

568

Net inflow of cash 248

Opening balance in the bank 650

Closing balance in the bank 402

(b)

The cash account purpose is to comparison between what has gone in and out over the period of time since the balance was last calculated, Therefore it is exploring the companies inflows and outflows of cash, which is necessary to companies and business to predict when and how much money is coming in and when they will need more or less for there business operations.

Cash account some times called Cash-flow statement, which is the same thing because cash inflow provides a look at the cash into the company , and cash-outflow is the cash out of the company.

Cash-flow statement is helping the business to determine either cash is enough or not to pay for there expenses and other operations.

Part3

(a)

Houdini's income statement from 1 July to 31 Dec 2007

Sales of novelties (1500+350)=1850

Fees as entertainer 17350

19200

Less costs of novelties sold (1000+1100-50)= 2050

Goss profit 17150

Less expenses

Depreciation magician equipments 540

Depreciation apparatus 400

Wages (1200+100) 1300

Travel expenses (1500-50) 1450

Cleaning 110

Rabbit food 100

Total expenses 3900

Net profit 13250

(b)

The purpose of (profit and loss) income statement is to show what income has been earned and what expenses were incurred in earning it, and the difference between what has earned and the earning or revenues expenses is the net profit of a company over a period of time.

If the earned or income was larger than expenses that's profit, or a loss if the expenses is larger than the income, and that's why some times it is called profit and loss statement.

Therefore, the income statement is corresponding with the financial performance of a business.

Part4

(a)

Houdini's balance sheet at 31 July 2007

Long-term assets

Costume 1500

equipments 1000

Playing cards 200

2700

depreciation 540

2160

Disappearing lady apparatus 2500

Less account depreciation 400

2100

Long-term assets after depreciation deduction £4260

Short-term assets

Cash on hand 460

stock 50

Account receivable 350

Detors "Mr peter" 180

unused train ticket 50

Cash in bank 120

Total short-term assets £1210

Less short-term liabilities

Creditors 1100

Accrued wages 100

Total short-term liabilities 1200

Working capital 10

Total

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