Reference no: EM133076145

Question - Part A - Anne York is a sole trader who started the business of buying and selling furniture in Brighton on the 1st of October 2021. She is going to prepare accounts to 31st of September 2021.

She contributed to the business with £10,000 in the Bank, £4,800 cash, 45,000 flat and 12,000 Car. The transactions during the month are as follows: 2/10 Purchased furniture £5400 for sale on credit from Home Ltd

4/10 She bought a computer for £800 and a printer £200 from a local shop in London and paid by cheque.

5/10 Sold goods for £ 2800 and received the money via Bank account 12/10 Paid in Cash £110 for repairing printer

18/10 Part of furniture returned to Home Ltd £250 Page | 13 21/10 The owner received rent £800 for flat and deposited it to the bank account

23/10 Sold goods to Rayan £2100; from this amount £1800 cash received immediately and the rest remains on credit.

23/10 Sold goods of £700 to David and received cash

24/10 Bought a new Laptop for business use by issuing a cheque £1700

26/10 Paid the month's wages to the part-time shopkeeper by cheque £820

30/10 The owner rented an office place in a Business Park near the London on 1st October and paid rent by cheque £850

31/10 The owner has also paid £ 1200 from the business bank account to book a hotel and flight in Scotland for her holiday.

31/10 £150 Cash received from Rayan.

Required -

a) Write double entry record the transactions in T-accounts.

b) Balance the accounts and bring down an opening balance.

c) Extract a Trial balance as at 31st October 2021.

d) Prepare an Income Statement for the period ended 31st October 2021 13 marks The closing inventory is £ 320.

e) Prepare a Statement of Financial Position as at 31st October 2020.

f) Write a brief letter to Linda explaining what drawings are concerning small business and answering her query concerning her holiday.

PART B - a) According to the information available in Income and Financial position statements in Part A, calculate the following ratios for Anne's business for October 2021 Competitors Average Net profit margin Gross profit margin Current ratio Acid test ratio Accounts receivable collection period Accounts payable payment period Year 2019 0.32 0.55 2.7 1.34 16 Days 27 Days Year 2020 0.28 0.56 2.6 1.32 28 Days 12Days Page | 14 Year 2021 0.02 0.08 2.8 1.38 26 Days 17 Days

b. Assuming Anne's competitor's ratio averages are as stated above for month October of years 2019, 2020 and 2021: Analyse her performance with reference to the ratios of October 2021 calculated in comparison to those of her competitor. Also, briefly explain the impact of Covid -19 outbreak on the average ratios.