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FINAL SPECIALPROJECT-BSBI422
Instructions:
Answer ALL questions/requirements / Present what are required in the CASE STUDIES
Marks will be awarded for good presentation and thoroughness in your approach
NO marks would be awarded for the entire project if any part is found to be copied
directly from printed materials or from another student.
Complete this cover sheet and attach it to your Case Study Output.
Student Declaration:
I declare that:
I understand what is meant by plagiarism (illegal copying of one’s work)
The implication of plagiarism is tantamount to cheating (work will get no pts.)
This project is all my own work and I have acknowledged any use of the published and unpublished works of
other people.
BSBI BSBI422
Course Title Financial Accounting
Professor’s Name
DR.MARY BENITTA JEGAN
FOR OFFICIAL USE ONLY
MARKS
Teacher’s Marking Scheme MARK
AWAR
/ Marker’s S
DED
Commen
ts
Question1 10
Question2 10
Question3 5
Question4 10
Question5 5
Question6 10
Marker Total Marks/ Marks Awarded 50
’s
Name
The choice of inventory costing method is an important one for companies since
consequence of the choice is apparent in both the balance sheet and the income statement. In
(LIFO) also leave the lower earlier prices in their inventory values.
This results in inventory values in the balance sheet that are based on the older prices, the
LIFO method results in lower net incomes and also lower values in the current assets. The only
advantage to choosing this method is the lower tax expenses based on the lower income. The
American tax code requires the use of the LIFO method for financial reporting purposes if that
method is used for tax purposes. When used for tax purposes, LIFO with its lower reported
incomes correspondingly results in substantial tax savings for companies with large amounts of
inventories, typically most large merchandising and manufacturing companies in the economy.
1. Problem:
From the following information , prepare stores ledger Account under FIFO Method(10
Marks)
2019 Particulars
Jan1 Received 600 Units at BD10 per unit
Jan10 Received 200 Units at BD 34 per unit
Jan15 Issued 600 Units
Jan20 Received 200 Units at BD18 per unit
Jan25 Issued 500 Units
Jan28 Received 700 Units at BD22
Answer1:
1. LIFO
Cost of Goods Sold = Opening Inventory + Purchases - Closing Inventory
Calculation of Closing Inventory Units
Closing Inventory Units = Opening + Purchases - Sales
= 6 + 10 - 7 = 9 units
Calculation of closing inventory value
Since LIFO is followed, it means units sold will be the one which are purchased later
2 Units sold on Jan 8 would be sold from the opening balance of 6 units. It means opening units remaining
is 4 units at cost of 10 each ie $ 40
5 units sold on Jan 20 would be sold from the 10 units purchased on Jan 13. It means purchased units
remaining would be 5 units at cost of $ 12 each ie $ 60
Inventory Cost = 40 + 60 = $ 100
Cost of Goods Sold = 60 (10*6) + 120(12*10) - 100 = $ 80
2. FIFO
Cost of Goods Sold = Opening Inventory + Purchases - Closing Inventory
Calculation of Closing Inventory Units
Closing Inventory Units = Opening + Purchases - Sales
= 6 + 10 - 7 = 9 units
Calculation of closing inventory value
Since FIFO is followed, it means units sold will be the one which are purchased first
2 Units sold on Jan 8 would be sold from the opening balance of 6 units. It means opening units remaining
is 4 units at cost of 10 each ie 40$
5 units sold on Jan 20 would be sold from the 4 units remaining from opening unit and 1 unit from the units
purchased on Jan 13. It means purchased units remaining would be 9 units at cost of $ 12 each ie 108$
Inventory Cost = 108$
Cost of Goods Sold = 60 + 120 - 108 = 72$
b) In order to reduce taxes, the owner can use the LIFO approach because the cost of products sold is higher,
which means the business must pay less tax because the profit is lower.
1. Problem:
From the following information , prepare stores ledger Account under LIFO(10 Marks)
2020 Particulars
March1 Received 600 Units at BD22 per unit
March10 Received 500 Units at BD 14 per unit
March15 Issued 400 Units
March20 Received 600 Units at BD28 per unit
March28 Received 200 Units at BD22 per unit
March31 Issued 300 unit.
Answer 2 :
Comparative statements of cash flows hold clues to a company’s earning potential, risk,
and liquidity. These statements show the repeatability of the company’s sources of funds,
their costs, and whether such sources may be relied on in the future. The uses of funds for
growth and for maintaining competitive position are revealed. An analysis of comparative
Statements of Cash Flows helps in understanding the entity’s current and prospective
financial health.
It facilitates planning future ventures and financing needs. Comparative data help the
Financial Manager, Controller and CFO identify abnormal or cyclical factors and changes
in the relationship among each flow element. The statement is a basis for forecasting
earnings based on plant, property, and equipment posture. It assists in appraising growth
potential and incorporates cash flow requirements, highlighting specific fund sources and
future means of payment. Will the company be able to pay its obligations and dividends?
The statement reveals the type and degree of financing required to expand long-term
assets and to bolster operations. The Financial Manager, Controller and CFO should
compute for analytical purposes cash flow per share equal to net cash flow divided by the
2. What are the three types of cash flows presented on the statement of cash flows?(5
marks)
Three types of cash flows presented in the statement of cash flows are as follows:
Cash Flow From Operating Activities: The amount of money a corporation earns from
continuing, daily business operations such as
producing and selling products or delivering a service
to customers is referred to as cash flow from
operating activities (CFO). It is the first segment
shown on a cash flow statement
Cash Flow From Investing Activities is a portion of the cash flow statement that indicates
how much money was made or expended on
investment activities. Investing practices include the
acquisition of physical properties, the purchasing of
shares, and the selling of securities or assets.
Cash Flow From Financing Activities is a portion of a company's cash flow statement that
displays the net cash flows used to finance the
business. Financing operations include debt, equity,
and dividend transactions.
4. Identify whether each of the following items would appear in the operating, investing, or
financing activities section of the statement of cash flows. (5 marks)
Answer:
5. Prepare Indirect Method of cash flow statement( 10 Marks)