College of Administrative and Financial Sciences

Bachelor of Science in Business Informatics 2nd

Trimester, AY 2020-21

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This project is all my own work and I have acknowledged any use of the published and unpublished works of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.

Student’s Signature:………………………………….. Date:…………………………..

Total number of pages including this cover page

Program Course Section Time/Days Due Date Date Submitted

BSBI BSBI422
Course Title Financial Accounting

Student’s Full Name

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

Signat Grade Equivalent

ure
 A. STORES LEDGER

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

periods of raising prices, companies choosing the income-reducing method of Last-in-First-out

(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.

With the understanding of these answer the below questions.

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:
LIFO
Cost of Goods Sold = Opening Inventory + Purchases - Closing Inventory

1. Calculation of Closing Inventory Units

Closing Inventory Units = Opening + Purchases - Sales

= 6 + 10 - 7 = 9 units

2. Calculation of closing inventory value                   

The first in, first out (LIFO) approach is used to account for inventory. The costs of the most recent goods
purchased (or produced) are the first to be expensed under LIFO.

In our case Two of the sales unit on January 8 will be deducted from the opening balance of six units. It
means that the remaining opening units are four units at a cost of ten dollars each, for a total of forty(40)
dollars.

Five units will be sold on January 20th from the 10 units purchased on January 13th. It means that the
remaining purchased units will be 5 units at a cost of $ 12 each, for a total of $ 60.

Inventory Cost = 60+ 40 = 100 USD

Cost of Goods Sold =(10×6) +(12×10) = 60 + 120- 100 = 80 dollar

1. FIFO
Cost of Goods Sold = Opening Inventory + Purchases - Closing Inventory

1. Calculation of Closing Inventory Units

Closing Inventory Units = Opening + Purchases - Sales

= 6 + 10 - 7 = 9 units

2. Calculation of closing inventory value                   

(FIFO) is a form of accounting in which properties bought or acquired first are disposed of first. FIFO
assumes that the remaining inventory consists of the most recently purchased pieces.

2 units sold on January 8 will be removed from the 6 unit was in the opening balance. So this means the
Balance of the opening units will be 4 units at 10 USD, in total 40 USD then 5 units will be sold on
January 20 from the 4 units left from the Starting unit and only 1 unit from the units bought on January 13.
It imply that the residual bought units will be 9 units at a cost of $ 12 each, for a whole of 108 USD..

Inventory Cost = 108 USD

Cost of Goods Sold = (10×6) + (12×10) = 60 + 120 - 108 = 72 USD

b) The owner will use the LIFO strategy to minimize taxation because the cost of goods sold is higher,
which means the company must pay less tax because the profit is lower. .
 3. 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 :

B.CASH FLOW STATEMENT

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

number of shares. A high ratio indicates the company is liquid.

4. 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:

(i) 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.

(ii) 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.

(iii) 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.
5. Explain any differences between partnership and sole proprietorship(10marks)

 Number of Owners

The number of owners is the most obvious difference between a partnership and a sole
proprietorship. A sole proprietorship means "one and only," and it has only one owner: you. A
partnership, on the other hand, must be formed by two or more individuals, so this type of
company must have at least two owners. That is everything there is to it. However, whether a
business has one or two shareholders affects how it works in other ways.

 All Owners Are Held Liable

Unlike corporations, which by definition exclude the owners from responsibility for the
company's debts, partnerships and sole proprietorships do not have this protection. All parties in a
partnership are responsible for debts, lawsuits, and other problems. As a result, the financial
burden is distributed. It also means that both partners are liable for each other's mistakes and must
take responsibility for correcting them.

A sole proprietorship is completely reliant on you. You sign for any loans, and if the company
fails, you are personally responsible for their repayment. So, even though you have the luxury of
making all decisions, you are also technically liable for the company's debts and mistakes.

 Partnerships Often Fail

Statistics show that half of all new businesses fail within the first five years of operation.
Partnerships, on the other hand, are much more prone to failure. Though estimates vary, it has
been claimed that up to 80% of partnerships fail.

Partnerships, like having too many chefs in the kitchen, can also become too fraught with friction
and stress to be worthwhile. Unfortunately, when relationships fail or are ended amicably, the
former partnership is usually scarred. Many ex-partners seldom, if ever, communicate with one
another.
  Sharing the Profits and Burdens

In addition to jointly operating the company, making decisions, and sharing the blame for
problems and debts, partners share business profits. You had two or three partners who were in
charge of funding the company, but all profits were split equally. Earnings must be reinvested in
the company or divided among partners. You are solely responsible for determining what to do
with your income as a sole proprietor.

6. 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)

A. Cash payments for equipment

B. Cash receipts from sales of goods

C. Cash dividends paid to shareholders

D. Cash payments to employees

E. Cash payments to lenders for interest on loans

Answer:

Cash Flow from Operating Activity :

1. Cash receipts from sales of goods

2. Cash payments to employees

Cash Flow from Investing Activities:

1. Cash Payment for equipment

Cash Flow from Financing Activities

1. Cash dividends paid to shareholders

2. Cash payments to lender for interest on loans
 7. Prepare Indirect Method of cash flow statement( 10 Marks)

Liability 2017 2018 Asset 2017 2018

Share capital 200000 250000 Cash/Bank 30000 42000
Creditors(CL) 70000 40000 (CA) 120000 115000
Profit and loss 12000 23000 Debtors(CA) 80000 90000
a/c Stock(CA) 52000 66000
land

282000 313000 282000 313000

 Rubrics
10pts The presentation materials are complete,
presentable and free from grammatical and
spelling errors
5-7Pts The presentation materials are lacks few
details but presentable and free from
grammatical and spelling errors
2-4pts The presentation materials are lacks major
details and not much presentable and with
grammatical and spelling errors
0-1pts The presentation shows little information of
the project.
General Instructions:
1. Required parts should be complete; all figures, tables and diagrams are clearly and logically
identified and strongly support the text.
2. All paragraphs should be well organized; use of sections is logical.
3. The report should include a professional cover page and index. Proper font type (choose
either Times New Roman or Arial for the entire document), black color and size 12 are
applied with appropriate margins. Choose line spacing 2. Make all subheadings bold.
4. All sources should be correctly and thoroughly documented; appropriate citation forms should
be utilized throughout.
5. Try to put the exact details and avoid unnecessary explanations.(Don’t copy paste from
internet.)
6. Last date of submission will be 1st May 2021.
7. There should be a maximum of only 4 students in a group. Ensure that each of the members
in a particular group are aware of the concept of your project. It should be a detailed one.
8. Specify the name of the members in the front page.
9. Use the cover page given. For group project, marks will be different for each student based
on their performance or knowledge in presentation.
10. Soft copy of the word file of the project should be submitted on the moodle on or before 1st
MAY2021 after which no marks will be awarded.