Module: Accounting for Decision Makers - M70093E

Student Number (UWL Registration Number): 21452742

Assignment Name: Consolidation and Analysis on The Musical
Museum
Lecturer Name: Mr. Sanjaya Bandara
Word Count: 2260
(Excluding Bibliography, Acknowledgment and Table of content)
Acknowledgement

I hereby thank our lecturer, Mr. Sanjaya for his effective lecturing that made this report to be
completed successfully and on time. Thank you, sir, for your guidance and support. Also, I am
grateful to everyone who helped me throughout, in completion of my assignment.

Thank You!

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Table of Contents

Acknowledgement ................................................................................................................ 1
01. Introduction ............................................................................................................... 3
02. Consolidation of Musical Museum .......................................................................... 4
2.1. Consolidated Income Statement .................................................................................. 4
2.2. Consolidated Balance Sheet ........................................................................................ 5
2.3. Trend Analysis ............................................................................................................. 5
2.4. Vertical Analysis ......................................................................................................... 8
03. Budget for Next Financial Year ............................................................................. 10
3.1. Budgeted Income Statement ...................................................................................... 10
3.2. Budgeted Balance Sheet ............................................................................................ 11
3.3. Consolidated Budgeted Statement of Cash Flow ...................................................... 12
04. Breakeven Analysis ................................................................................................. 13
Minimum Income ........................................................................................................... 13
Total Expenses ................................................................................................................ 13
05. Suggestions to Increase Income ............................................................................. 14
06. Conclusion ................................................................................................................ 15
07. Bibliography ............................................................................................................ 16
Appendix

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 01. Introduction
In this report, an analysis will be conducted based on a consolidation of the charity and its’
trading limited. Based on the analysis along with a breakeven, suggestions will be discussed
for the company to improve the income levels to maintain the sustainability and success
moving forward.
The Musical Museum was established as a charity organization by late Frank Holland M.B.E
in the year 1963. This has been initially registered as a charity while then been converted to a
company limited by guarantee in 1989 and registered as charity. Therefore, all the activities
undertaken by the Musical Museum is on charitable purpose where Musical Museum (Trading)
Ltd undertakes all its commercial activities with the purpose of supporting the Museums
operation. Engaging and entertaining the public regarding the evolution of music reproduction,
Music education and demonstrations, Live performances, Talks and Exhibitions are some ways
that The Musical Museum operates with.

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 02. Consolidation of Musical Museum
The accounts of the Museum and its trading limited will be consolidated, based on the
statements over a five-year period from 2015 to 2019. Through this, the financial performance
and the position of company of each year, will be identified as one whole entity.
2.1. Consolidated Income Statement
Income Statement for the
year ended 31st March, 2015 2016 2017 2018 2019
(£)

Turnover 55,169 66,362 75,074 99,040 103,952

Cost of Sales (18,900) (19,186) (38,142) (35,983) (43,298)

Gross Profit 36,269 47,176 36,932 63,057 60,654

Other Income

Voluntary income 30,135 93,991 43,224 192,269 46,177

Investment income 7,992 8,354 9,441 6,210 5,097

Administrative and
Operational Expenses (182,598) (167,309) (191,613) (198,289) (105,697)

Finance Expenses (1,484) (1,630) (2,864) (2,059) (2,368)

Net Income/(expenditure)
before gains and losses (109,686) (19,418) (104,880) 61,188 (96,876)
Realized gains/(losses) on
fixed asset investments 6,895 (13,264) 21,105 (3,405) 1,432

Net Income/(Expenditure) (102,791) (32,682) (83,775) 57,783 (95,444)

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2.2. Consolidated Balance Sheet
Budgeted Balance Sheet
as at 31st March 2015 2016 2017 2018 2019
(£)
Non-current Assets
Tangible Assets 1,450,790 1,410,534 1,377,140 1,341,840 1,317,146
Investments 267,757 254,493 225,597 162,192 163,626

Current Assets 65,372 107,082 69,502 244,391 167,458

TOTAL ASSETS 1,783,919 1,772,109 1,672,239 1,748,423 1,648,230

Funds
Restricted 1,458,400 1,425,044 1,391,688 1,358,332 1,321,890
Un-Restricted 295,957 296,631 246,232 337,370 278,368

Current Liabilities 29,562 50,434 34,319 52,721 47,972

TOTAL EQUITY AND

LIABILITIES 1,783,919 1,772,109 1,672,239 1,748,423 1,648,230

2.3. Trend Analysis

Based on the prepared consolidated statements, a trend analysis was conducted with year-on-
year growth and several important ratios for the identification of company’s performance and
growth impact along the five years.
Based on the table 2.3.1 on the horizontal analysis of the income statement, it is evident that
the turnover has grown from year 2015-2019, however with a decline in the growth percentage.
Based on the impact of cost of sales, the Goss Profit is fluctuated between the period where
2019 shows a reduction of 7% compared with 2018. Also, there is a significant improvement
of Voluntary Income in year 2018, which is due to the bequest from the estate of Francis
Edward Thornycroft. In Investment Income, a decline is shown in 2019 when compared with
2015, which still shows the company’s potential of increasing it in future.
The administration and operational costs signify an incline throughout, where Finance
expenses have fluctuations in between. Overall with the net-outcome of the company, it is
evident that they have been making losses throughout except for 2018, which has a net income,
that is identified as majorly due to the impact of the legacy.
With analysis on balance sheet in table 2.3.2, a decline is identified in Non-Current Assets with
the disposals of Equipment and Furniture and Fittings, whereas Current Assets signify a huge
increase in 2018, due to Cash at Bank element. This is also identified an impact of legacy
received in the year. Restricted funds of company express a decline of 2% each year due to the
yearly charge on the leasehold improvements, that has been revaluated in 2019 by a small
amount, due to a write back in accumulated depreciation. Unrestricted fund reflects a
fluctuation with the net impact of the business, excluding the lease charge. When considered
the total assets of the company, it is reflected with a decline throughout, except in year 2018.

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Table 2.3.1 Horizontal Analysis- Income Statement

Table 2.3.2 Horizontal Analysis- Balance Sheet

Out of the important ratios calculated, a significant drop can be seen in Gross and Net Profit
margins in 2017, whereas 2018 is reflected with an increase especially in net margin which is
evidently due to the net income impacted with the legacy received, as discussed above. Also,
asset turnover has increased, due to the impact of the changes in company turnover and total
assets, however at a decreasing rate (Chart 2.3.1). Looking at liquidity of the company, the
current ratio reflects an incline thus showing positivity on to the short term. However, this
being higher than the required general benchmark of a company which is 2:1, reflects that the

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Musical Museum could make use of such in investing (Chart 2.3.2). A rise in the revenue
generated per a unit of non-current asset is reflected throughout the years, especially in 2018,
by the increase of Non-current utilization at a decreasing pace. Therefore, the efficiency seems
increasing in the company (Chart 2.3.3). Furthermore, gearing which is maintained at an
average of 82%, with the company’s only long-term commitment being the 50-year lease that
keeps reducing each year, signifies the need of improvements in long-term financial health, as
it is considerably higher with greater risk (Chart 2.3.4).

Profitability
100%
50%
0%
-50%
-100%
-150%
-200%
2015 2016 2017 2018 2019
Gross Profit Ratio 66% 71% 49% 64% 58%
Net Profit Ratio -186% -49% -112% 58% -92%
Asset Turnover 3.09% 3.74% 4.49% 5.66% 6.31%

Chart 2.3.1

Liquidity
5.00

4.00

3.00

2.00

1.00

0.00
2015 2016 2017 2018 2019
Current Ratio 2.21 2.12 2.03 4.64 3.49

Chart 2.3.2

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 Efficiency
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
2015 2016 2017 2018 2019
Non-Current
3.21% 3.99% 4.68% 6.58% 7.02%
Utilization Ratio

Chart 2.3.3

Solvency
85%
84%
83%
82%
81%
80%
79%
78%
77%
2015 2016 2017 2018 2019
Gearing Ratio 83% 82% 84% 80% 82%

Chart 2.3.4

2.4. Vertical Analysis

With reference to the vertical analysis of the company as in table 2.4.1 and 2.4.2, the major
portion over turnover had been Administration and Operational expenses and Net
Income/Expenses in terms of performance, whereas major portion over total assets had been
Restricted Funds and Tangible Assets in terms of financial position.

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Table 2.4.1 Vertical Analysis – Income Statement

Table 2.4.2 Vertical Analysis – Balance Sheet

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 03. Budget for Next Financial Year
With a consideration to the consolidated statements followed by an effective analysis, the
budgeted statements were prepared.
3.1. Budgeted Income Statement

Budgeted Income Statement for the year

Trading Charity Consolidated
ended 31st March 2020 (£)

Turnover 124,742 124,742

Cost of Sales (51,958) (51,958)
Gross Profit 72,784

Other Income
Management Charges 15,500 15,500
Voluntary income 213,000
Legacies (Pickstock estate) 160,500
Donations 10,000
Grants 4,000
Admissions 38,500
Investment income 5,950 5,950

Administrative and Operational Expenses (143,734) (101,128) (244,862)

Other expenses (3,632) (3,632)

Finance Expenses (2,660) (108) (2,768)

Net Income/(expenditure) before gains and

55,972
losses
Realized gains/(losses) on fixed asset
(2,002) (2,002)
investments
Net Income/(Expenditure) 53,970

The company could expect a Net Income in the year, majorly due to the legacy from Pickstock
Estate and with a more focus toward increasing the other aspects of the voluntary income using
effective strategies.

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3.2. Budgeted Balance Sheet

Budgeted Balance Sheet

Trading Charity Consolidated
as at 31st March 2020 (£)

Non-current Assets
Tangible Assets 6,680 1,295,400 1,302,080
Investments 161,624 161,624

Current Assets 56,329 183,097 239,426

TOTAL ASSETS 1,703,130

Funds

Restricted 1,285,450
Un-Restricted 368,778 1,654,228

Current Liabilities 45,600 3,302 48,902

TOTAL EQUITY AND LIABILITIES 1,703,130

Company could focus on increasing the fund base and investing that, which could be beneficial
for them in the long run. Also, the focus on areas with sustainable growth and increase of
income will enable them to preserve the collections to the future.

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3.3. Consolidated Budgeted Statement of Cash Flow
The statement below is prepared with consideration to the changes in the Income Statement
and Balance Sheet, in terms of cash transactions. Based on the budget for financial year 2020,
the closing balance of ‘Cash at Bank’ is considered as £144,920 and is represented in Current
Assets of the Budgeted Balance Sheet.

Consolidated Statement of Cash Flow

for the year ended 31st March 2020 £
Operating Activities
Voluntary Income received 213,000
Sales revenue received 120,742
Expenses involved with sales (49,535)
Charitable activities (19,358)
Administration costs (172,094)
Debt received 3,438
Payables paid (13,266)

Investing Activities
Investment Income 5,950
Equipment Improvements (20,000)
Tangible asset investments (5,006)
Transfers to CAF account (14,846)

Finance Activities
Bank charges (668)
Payment card fees (2,100)

Net Increase in Cash and Cash Equivalents 46,257

Opening Balance 98,663
Closing Balance 144,920

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 04. Breakeven Analysis
A breakeven will be conducted for the consolidated company in this section, where the
minimum income resources and total costs for survival are identified, mainly based on the latest
three years. The gap between the two aspects will be analyzed, to see if the company’s current
process is sustainable in the long run.
Minimum Income
Income sources are identified through the main activities of the group as follows:
Museum Shop 11,000
Events 12,500
Concerts, Dances and Hall Hire 41,000
Catering 24,000
Film Tickets 5,200
Admissions 29,600
Investment Income 5,000
TOTAL 128,300

Total Expenses
Expense aspects are identified relevant to the main activities conducted by the group as follows:
Accountancy 6,200
Legal and Professional Expenses 4,000
Payroll 88,000
Utilities and Museum conservations 24,000
Travel 4,000
Bank Charges 500
Cost of Sales Involved with the main income 40,000
sources of Trading
Repairs and Renewals 15,000
Payment Card Fees 1,800
Insurance 3,000
TOTAL 196,500

Based on the identified figures above, a gap of £68,200 is identified between main income and
expenses, where expenses are considerably higher than the income level. Therefore, with
reference to this analysis, it can be concluded that the current process of the group is not
sustainable in the long run, if it is continued the same, as the minimum income of the business
is not sufficient to carry out their general activities of the Musical Museum. However, several
suggestions will be discussed in the next section of this report, for the group to carry out the
business successfully with an improved growth in the long run. With the focus on those
strategies, the Musical Museum will be able to sustain in their industry.

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 05. Suggestions to Increase Income
As the Musical Museum operates in charity since its incorporation in 1989 with trading limited,
they have been able to sustain until now. However, with the global trend impacts falling in
terms of carrying out their process, it is crucial that they identify sustainable strategies to grow,
despite the current tendency of depending on legacies, which is with uncertain nature.
It was identified that museum operation dates for public will be changed from Thursday to
Sunday. However, Tuesday is open for their volunteers and experts in performing maintenance
and conservations, which will ensure the effective functioning during public openings. While
this being a positive aspect toward effective operation, the company needs sufficient income
for smooth functioning and maintaining their stability in the long run.
As a main strategy in increasing donations, Musical Museum could target music professionals
such as music producers, musicians and music teachers, as they are with music by profession
since the beginning, therefore will be highly interested in donating. By sending them letters
making aware of the groups’ commercial activities and plans for the year, with targeted
improvements required each year would help the museum increase donations. Also, the
museum could enter into contracts with music institutes and universities for yearly donations,
thereby providing them the opportunity of free planned group visits to the museum and to
attend music education sessions and talks, for their new batches, each semester. Furthermore,
as the museum is accredited by arts council, Musical Museum could write to funding
organizations in UK, especially the government, making them aware of valuable projects and
activities of museum being carried out each year, to qualify for annual grants.
As there are feedbacks and reviews being already published on apps like trip advisor, Musical
Museum could target short pop-up advertising on such apps where present usage is high. This
will help reach many users globally, where there is higher chance of increasing group visits
and new memberships through awareness and promotional advertising. The group could also
focus on social media advertising and promotions, as the reach through this is very high.
Alongside, the availability of concert hall for private hires could be promoted, due to its
availability for community meetings, concerts, weddings and parties with in-house catering.
As this hall is facilitated with many benefits especially for events and parties, promoting this
would help the group to increase the income from hires compared to present. Also, as an
advertising technique, company could create a calendar each year with pictures from special
events of Musical Museum and sell them at their events and gift shop. They also could modify
this, by highlighting their planned special event dates in this calendar.
The volunteer involvement seems high in the museum; therefore, they could also organize a
special annual event for the past volunteers and members, with fund raising activities on the
day, such as photo booth, food stalls and games along with musical sessions. This will help as
a fund-raising event for the museum and could be handled with a minimum cost in their own
premises. Furthermore, special yearly events handled such as Wurlitzer and Christmas
concerts, could be applied for sponsorships through the available strong connections, by
allowing the sponsoring parties to advertise at the events.

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 06. Conclusion
With the consolidation and analysis, it is evident that the Musical Museum group needs a long-
term sustainable plan to increase their income levels to succeed in their charity activities.
Having identified the losses throughout the considered period, except for 2018 signifies the
need of implementing the suggestions discussed above. Having generated a profit in 2018, the
group could expect such profit in 2020 as well, due to the legacies.
However, if the suggested methods are established, the group could find their way in sustaining
through long-term.

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07. Bibliography

• Musical Museum (2015) Report of the Trustees and Unaudited Financial Statements
for the Year Ended 31 March 2015 for The Musical Museum [Online]. Available at:
Black Board
• Musical Museum (2016) Report of the Trustees and Unaudited Financial Statements
for the Year Ended 31 March 2016 for The Musical Museum [Online]. Available at:
Black Board
• Musical Museum (2017) Report of the Trustees and Unaudited Financial Statements
for the Year Ended 31 March 2017 for The Musical Museum [Online]. Available at:
Black Board
• Musical Museum (2018) Report of the Trustees and Unaudited Financial Statements
for the Year Ended 31 March 2018 for The Musical Museum [Online]. Available at:
Black Board
• Musical Museum (2019) Report of the Trustees and Unaudited Financial Statements
for the Year Ended 31 March 2019 for The Musical Museum [Online]. Available at:
Black Board
• Musical Museum Trading Ltd (2015) Report of the Directors and Unaudited Financial
Statements for the Year Ended 31 March 2015 for The Musical Museum (Trading)
Limited [Online]. Available at: Black Board
• Musical Museum Trading Ltd (2016) Report of the Directors and Unaudited Financial
Statements for the Year Ended 31 March 2016 for The Musical Museum (Trading)
Limited [Online]. Available at: Black Board
• Musical Museum Trading Ltd (2017) Report of the Directors and Unaudited Financial
Statements for the Year Ended 31 March 2017 for The Musical Museum (Trading)
Limited [Online]. Available at: Black Board
• Musical Museum Trading Ltd (2018) Report of the Directors and Unaudited Financial
Statements for the Year Ended 31 March 2018 for The Musical Museum (Trading)
Limited [Online]. Available at: Black Board
• Musical Museum Trading Ltd (2019) Report of the Directors and Unaudited Financial
Statements for the Year Ended 31 March 2019 for The Musical Museum (Trading)
Limited [Online]. Available at: Black Board

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Appendix
Income Statement workings
Item\Year 2015 2016 2017 2018 2019

Tradin Charit Consoli Tradin Charit Consoli Tradi Chari Consoli Tradi Chari Consoli Tradi Chari Consoli
g y dated g y dated ng ty dated ng ty dated ng ty dated
Turnover 7507 99,0 1039
55,169 55,169 66,362 66,362 4 75,074 40 99,040 52 103,952
Cost of Sales
(18,90 (18,900 (19,18 (19,186 (38,1 (38,142 (35,9 (35,983 (43,2 (43,298
0) ) 6) ) 42) ) 83) ) 98) )
Gross Profit
36,269 47,176 36,932 63,057 60,654

Other Income

Voluntary income
30,135 30,135 93,99 93,991 43,22 43,224 192,2 192,269 46,17 46,177
1 4 69 7
Investment income
7,992 7,992 8,354 8,354 9,441 9,441 6,210 6,210 5,097 5,097

Administrative and Operational

Expenses (23,57 (159,0 (182,59 (33,69 (133,6 (167,30 (34,1 (157, (191,61 (74,3 (123, (198,28 (105, (100, (206,43
7) 21) 8) 9) 10) 9) 62) 451) 3) 72) 917) 9) 697) 739) 6)

Finance Expenses
(1,364) (120) (1,484) (1,532 (98) (1,630) (2,77 (94) (2,864) (1,93 (120) (2,059) (2,27 (91) (2,368)
) 0) 9) 7)

Net Income/(expenditure) before

gains and losses (109,68 (19,418 (104,88 61,188 (96,876
6) ) 0) )
Realized gains/(losses) on fixed
asset investments 6,895 6,895 (13,26 (13,264 21,10 21,105 (3,40 (3,405) 1,432 1,432
4) ) 5 5)
Net Income/(Expenditure)
(102,79 (32,682 (83,775 57,783 (95,444
1) ) ) )

Balance Sheet workings

Item/Year 2015 2016 2017 2018 2019

Tradi Charit Consolid Tradi Charit Consolid Trad Chari Consolid Trad Chari Consolid Trad Chari Consolid
ng y ated ng y ated ing ty ated ing ty ated ing ty ated

Non-current Assets

Tangible Assets 2,991 1,447, 1,450,790 2,243 1,408, 1,410,534 6,82 1,370, 1,377,14 8,33 1,333, 1,341,84 5,30 1,311, 1,317,14
799 291 0 320 0 8 502 0 6 840 6

Investments 267,7 267,757 254,4 254,493 225,5 225,597 162,1 162,192 163,6 163,626
57 93 97 92 26

Current Assets 22,67 42,69 65,372 44,29 62,78 107,082 23,6 45,90 69,502 35,7 208,6 244,391 39,4 128,0 167,458
3 9 3 9 02 0 35 56 18 40

TOTAL ASSETS 1,783,919 1,772,109 1,672,23 1,748,42 1,648,23

9 3 0

Funds

Restricted 1,458, 1,458,400 1,425, 1,425,044 1,391, 1,391,68 1,358, 1,358,33 1,321, 1,321,89
400 044 688 8 332 2 890 0

Un-Restricted 295,9 295,957 296,6 296,631 246,2 246,232 337,3 337,370 278,3 278,368
57 31 32 70 68

Current Liabilities 25,66 3,900 29,562 46,53 3,900 50,434 30,4 3,899 34,319 44,0 8,650 52,721 44,7 3,250 47,972
2 4 20 71 22

TOTAL EQUITY AND 1,783,919 1,772,109 1,672,23 1,748,42 1,648,23

LIABILITIES 9 3 0

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Ratio Workings
Ratios 2015 2016 2017 2018 2019
Profitability Gross Profit Ratio 66% 71% 49% 64% 58%
YOY Growth - 8% -31% 29% -8%
Net Profit Ratio -186% -49% -112% 58% -92%
YOY Growth - 74% -127% 152% -257%
Asset Turnover 3.09% 3.74% 4.49% 5.66% 6.31%
YOY Growth - 21% 20% 26% 11%
Liquidity Current Ratio 2.21 2.12 2.03 4.64 3.49
YOY Growth - -4% -5% 129% -25%

Efficiency Non-Current Utilization Ratio 3.21% 3.99% 4.68% 6.58% 7.02%

YOY Growth - 24% 18% 41% 7%

Solvency Gearing Ratio 82.6% 82.2% 84.4% 79.5% 82.0%
YOY Growth - -0.4% 2.6% -5.7% 3.1%

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