a) Discuss the limitations of Ratio analysis of the Financial Statement of a company (5 Marks) b)…
a) Discuss the limitations of Ratio analysis of the Financial Statement of a company
(5 Marks)
b) The following information was extracted from the books of Kogo Manufacturers as at 31
December 2009
Kogo Manufacturers Limited
Trial balance as at 31 December 2009
| DR |
CR |
||||
| Shs’000′ |
Shs’000′ |
||||
| Capital as at 1.1.2009 | 305,000 | ||||
| Drawings | 18,000 | ||||
| Production Machinery (Cost Shs. 230,000) | 180,000 | ||||
| Accounting Machinery (Cost Shs. 4,000) |
2,400 |
||||
| Stock of Raw Materials 1.1.2009 | 19,000 | ||||
| Stocks of finished goods 1.1.2009 | 35,000 | ||||
| Work in Progress 1.1.2009 | 10,000 | ||||
| Sales |
1,450,000 |
||||
| Debtors and Creditors | 165,000 | 127,000 | |||
| Carriage Outwards |
4,800 |
||||
| Wages (Direct Shs. 180,000); factory | |||||
| Indirect Shs 120,600 | 300,600 | ||||
| Carriage inwards on raw materials |
2,800 |
||||
| Purchase of raw materials | 350,000 | ||||
| General factory Expenses | 32,000 | ||||
| Lighting |
6,600 |
||||
| Factory power | 15,600 | ||||
| Administrative Salaries | 54,000 | ||||
| Sales Representatives salaries | 25,000 | ||||
| Commission on sales |
9,800 |
||||
| Rent | 12,000 | ||||
| Insurance | 4,500 | ||||
| General Administration Expenses |
12,400 |
||||
| Bank | 602,000 | ||||
| Cash | 7,400 | ||||
| Bank charges | 2,600 | ||||
| Discount allowed | 4,500 | ||||
| Royalties | 6,000 | ||||
| 1,882,000 | 1,882,000 | ||||
Additional Information
1. Stock balance as at 31 December 2009 was made up of the following:
Shs’000′
Raw Materials 26,000
Finished goods 38,000
Work in Progress 18,000
2. Lighting, rent and Insurance are to be apportioned; Factory 2/3, Administration 1/3
3. Depreciation on productive and accounting Machinery is at 10% on cost.
Required:
i. Manufacturing, Trading, profit and loss account for the year ended 31 December 2009
(15 Marks) ii. Balance sheet as at 31 December 2009
