BSc FIRST YEAR TAKE AWAY PAPER (20%)
N1092 INTRODUCTION TO ACCOUNTING
Assessment Period: Week 10
Read the case study about Datahelp Ltd, at the end of this question, and produce a report on the financial risks and rewards arising from the plans for this business.
Your report should include a section summarising recommendations for dealing with any problems you identify
Your answer must not exceed 1,500 words
You are advised to show any substantial calculations in an Appendix (not part of the wordcount)
You are advised to include citations for any sources other than lecture materials
Your report should have a suitable title and contain the following sections:
1.1 Cash budget
1.2 Income Statement
1.3 Statement of Financial Position
1.4 Statement of Cashflows
1.5 Analysis of key ratios
2 Summary of Recommendations
You are not required to provide an abstract, management summary or introduction
Sections 1.1 – 1.5 (and any supporting calculations in the appendix) are allocated 15 marks each.
Sections 2 & 3 are allocated 15 marks in total.
There is a further 10 marks available for overall quality of presentation.
Case study: Datahelp Ltd.
When Mark left university, he decided to run a business selling and repairing computers. In order to do this, he set up a limited company, Datahelp Limited.
He planned to deposit £100 in the company’s bank account on 1 January 2022 and issue 100 shares, with a nominal value of £1 each, in his own name. He also planned for the company to borrow £8,000 from his father
David planned to rent premises for his business at £2,000 a month and lease test and IT equipment for £600 a month. He would pay £4,000 for signage and furniture.
For each of the first two months he would spend £7,500 on computers for resale and components for repairs. In the third month he hoped to buy £7,000 of computers on credit.
At the outset, he would hire a technician, at a cost of £2,000 a month, to do the repair work, whilst he mostly dealt with selling and administration. He would pay himself £1,000 a month in salary and planned to take further income as dividends.
He estimated that he would use £200 worth of electricity per month and expected to get the first bill at the beginning of April. He would pay £1,200 for 12 months’ insurance.
Other expenses paid for during the first 3 months would be:
£ per month
Utilities (excluding electricity) 300
Mileage (not deliveries) 250
Each month he hoped to sell computers for £8,667 and charge £2,500 for repairs
At the end of 3 months he estimated that he would have inventory, of unsold computers, which would have cost him £10,000
He estimated that wear and tear on the long-term assets of the business would amount to about £800 a year, so they would need replacing after about 5 years (5 x £800 = £4,000)
The company’s projected key financial data is shown below.