Transcript Managing Finance and Budgets

Session 5
Case studies and Solutions
Nursery Management
Understanding and
Managing Finance
2.6
Mc Laney and Atrill 2.6 Original Balance
Sheet
Original Balance Sheet
ASSETS
Freehold Premises
Furniture and Fittings
Stock-in-trade
Trade Debtors
Total
CLAIMS
£145,000
£63,000
£28,000
£33,000
269,000
Capital
Bank Overdraft
Trade creditors
Total
£203,000
£43,000
£23,000
£269,000
FINANCE AND BUDGETS - MCLANEY & ATRILL - EXERCISE 2.6
TRANS
Mc Laney
and Atrill
2.6
Transactions
EFFECT
Amount
A
Reduce Stock
Reduce Bank Overdraft
Increase Profit This Year
£8,000
£11,000
£3,000
B
Reduce Stock
Increase Debtors
Increase Profit This Year
£17,000
£23,000
£6,000
C
Reduce Bank Overdraft
Reduce Debtors
£18,000
£18,000
D
Reduce Bank Overdraft (NB neg!)
Increase Share Capital
E
Create new category "Van"
Increase Capital
£10,000
£10,000
F
Increase Stock
Increase Creditors
£14,000
£14,000
G
Reduce Creditors
Increase Bank Overdraft
£13,000
£13,000
£100,000
£100,000
Mc Laney and Atrill 2.6 Revised Balance
Sheet
Revised Balance Sheet
ASSETS
Freehold Premises
Van
Furniture and Fittings
Business Bank A/C
Stock-in-trade
Trade Debtors
Total
CLAIMS
£145,000
£10,000
£63,000
£73,000
£17,000
£38,000
346,000
Capital
Trade creditors
Profit this year
Total
£313,000
£24,000
£9,000
£346,000
Cost of Sales Example
•
•
At the start of January, a small furniture retailer held
£35,000 worth of stock. During the month, a further
£12, 000 was bought in, and at the end of the month,
the stock level was £27,000.
Calculate the cost of Sales for January.
Opening stock:
Purchases:
Total
less Closing stock:
Cost of materials:
£35,000
£12,000
£47,000
£27,000
£20,000
Cost of Sales (2)
•
In service and some manufacturing industries, The
cost of sales may also include other Direct Costs.
These are costs directly incurred as a result of
making the sale, manufacturing the item, or in
carrying out the service.
Direct Costs:
• Cost of Materials
• Labour costs incurred
• Transportation costs
• Fuel and other costs
P and L Example Spreadsheet
T r a n sa c ti o n s fo r F e b r u a r y
O T H ER P A YM EN T S
S TOCK CONTROL
W a g e s B ill
J a n u a r y S to c k ta k e
£8,125
£2,400
G a s / E le c t ric it y
£425
P e t ro l
£250
£575
0 2 -F e b P u rc h a s e
£1,300
R ent/R ates
0 5 -F e b P u rc h a s e
£1,250
In t e re s t o n B a n k L o a n
1 0 -F e b P u rc h a s e
£1,000
Ta x P a y m e n t
1 2 -F e b P u rc h a s e
£1,300
2 0 -F e b P u rc h a s e
£2,400
2 2 -F e b P u rc h a s e
£800
£225
£1,050
P R O F I T & L O S S A c ti v i ty
0 4 -F e b S a le s
£1,900
1 U s e t h e S TO C K C O N TR O L d a t a (le ft ) t o c o m p le t e t h e
0 6 -F e b S a le s
£2,250
s t o c k s u m m a ry p a g e , a n d w o rk o u t t h e C o s t o f S a le s
1 1 -F e b S a le s
£1,850
fo r F e b ru a ry . (A s s u m e a ll s t o c k is o f e q u a l va lu e )
1 4 -F e b S a le s
£1,700
2 U s e t h is d a t a , a n d t h e d a t a a b o ve t o c o m p le t e t h e
1 6 -F e b S a le s
£1,400
2 1 -F e b S a le s
£1,800
F e b r u a r y S to c k ta k e
£11,050
P ro fit & L o s s A c c o u n t fo r F e b ru a ry .
P rin t t h is p a g e
P and L Example – Solution Part 1
January Stock Take figure
S to c k S u m m a ry :
O p e ning S to c k :
£ 8 ,1 2 5
P urc ha s e s
£ 8 ,0 5 0
C lo s ing S to c k
£ 1 1 ,0 5 0
C o s t o f S a le s
£ 5 ,1 2 5
Opening Stock
+ Purchases
- Closing Stock
Total of all
Purchases
for February
February Stock Take figure
P and L Example – Solution Part 2
P ro fit & L o s s A c c o u n t
T u rn o v e r
£ 1 0 ,9 0 0
C o s t o f S a le s
£ 5 ,1 2 5
G ro s s P ro fit
£ 5 ,7 7 5
O v e rh e a d s
£ 3 ,6 5 0
N e t P ro fit
£ 2 ,1 2 5
In te re s t
£225
P ro fit B e fo re T a x
£ 1 ,9 0 0
Tax
£ 1 ,0 5 0
E a rn e d S u rp lu s (P ro fit)
£850
P and L Example – Solution Part 2
P ro fit & L o s s A c c o u n t
T u rn o v e r
Total of all Sales
for February
£ 1 0 ,9 0 0
Total of
C o s t o f S a le s
£ 5 ,1 2 5
G ro s s P ro fit
£ 5 ,7 7 5
O v e rh e a d s
£ 3 ,6 5 0
Wages,
Gas/Electric,
Rent/Rates,
Petrol
N e t P ro fit
£ 2 ,1 2 5
for February
In te re s t
£225
P ro fit B e fo re T a x
£ 1 ,9 0 0
Tax
£ 1 ,0 5 0
E a rn e d S u rp lu s (P ro fit)
£850
Mc Laney and Atrill Ex 3.8 P and L
Account
Trading & Profit & Loss Account for the Year Ended 31 December
2000
£000
Sales
Less Cost of Sales
Less
Salaries & Wages
Selling & Distribution Costs
Rent & Rates
Bad Debts Written Off
Telephone & Postage
Insurance
Motor Vehicle
Loan Interest
Depreciation - Motor Van
Depreciation - Fixtures & Fittings
£000
382.5
114.8
267.7
86.4
75.4
22.0
4.0
4.4
2.8
8.6
5.4
3.3
4.5
2001
£000
£000
420.2
126.1
294.1
92.6
98.9
22.0
19.7
4.8
2.9
10.3
4.6
3.1
4.3
216.8
50.9
263.2
30.9
Mc Laney and Atrill Ex 3.8 Points to note
Increase in Sales
Value and Gross profit
Trading & Profit & Loss Account for the Year Ended 31 December
2000
£000
Sales
Less Cost of Sales
Less
Salaries & Wages
Selling & Distribution Costs
Rent & Rates
Bad Debts Written Off
Telephone & Postage
Increase in
Insurance
Bad debts
Motor Vehicle
Loan Interest
Depreciation - Motor Van
Depreciation - Fixtures & Fittings
Decline in
Net Profits
£000
382.5
114.8
267.7
86.4
75.4
22.0
4.0
4.4
2.8
8.6
5.4
3.3
4.5
2001
£000
92.6
98.9
22.0
19.7
4.8
2.9
10.3
4.6
3.1
4.3
216.8
50.9
£000
420.2
126.1
294.1
Increase in
Salaries
and
Distribution
Costs
263.2
30.9
Mc Laney and Atrill Ex 3.8 Analysis
• There has been an increase in turnover and Gross profits
• There has not been a corresponding increase in net
profits because:
• There has been a significant rise in overheads
• Increase in sales achieved only through greater
marketing effort
• Increase in bad debt suggest that sales being offered
to poor credit risk customers
• This seems to mark a sales policy shift from the previous
year, and has not been successful.