Exercise 23 - Answer

Simple Financial Reports Exercise

The main objective of this exercise is to assist the learner to begin to understand:
1. The difference between measurement of financial performance and financial value.
2. The difference between the Profit and Loss Statement, and the Balance Sheet.

Task 1
Table 1 below provides amounts of income and Profit and Loss Statement
expenditure that a sport and recreation club
Income
incurred in a year. You are not given which items
are expenses and which items are income but Canteen Sales 20,000
there are just enough cells to accommodate the Sponsorship 5,000
information. Work out how much profit the Membership Fees 75,000
business earned in the year.
Participant Fees 15,000
Total Income 115,000
Table 1
Expenses
Your Information
Telephones 3,500
Canteen Sales $20,000, Telephones $3,500,
Wages 55,000
Wages $55,000, Insurance Costs $5,000,
Sponsorship Receipts $5,000, Membership Fees Insurance 5,000
$75,000, Facility Maintenance $10,000, Facility Maintenance 10,000
Participant Fees $15,000, Canteen Purchases
$15,000, Rates $4,000, Electricity $7,500 Canteen Purchases 15,000
Rates 4,000
Electricity 7,500
Total Expenses 100,000
Profit 15,000

Task 2
Table 2 below provides a valuation of the assets Balance Sheet
and liabilities of a sport and recreation club at the
Assets
end of the year (30 June 2008). You are not given
which items are assets and which are liabilities. Motor Vehicles 25,000
Work out the value of the business at 30 June Bank A/c 500
2008. The figure that you work out will in fact be the Stock 8,000
Ownership Equity.
Equipment 22,000
Accounts Receivable 5,000
Table 2
Total Assets 60,500
Liabilities
Your Information
Bank Loan 30,000
Motor Vehicles $25,000, Bank Loan $30,000,
Bank A/c $500, Accounts Payable $11,000, Stock Accounts Payable 11,000
$8,000, Equipment $22,000, Accounts Receivable Total Liabilities 41,000
$5,000

Ownership Equity 19,500

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