B120 Tma03 Essay

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B120 TMA03 Part I Question 1 a) The income statement's purpose is to show the financial position of a business by assessing its incomings and outgoings over a given period of time. The problem that arises from this statement in relation to Designer Labels is that this business has to purchase its merchandise well in advance of each season. This means that there will always be a significant amount held in assets. b) I note that although sales were down in 2012, the figure in comparison isn't such a large drop and the gross profit remains at a similar level to the previous year. I am concerned by the large leap in total expenses for the year 2012 and I see that although the majority of these totals have dropped, the ones that have increased have been by large amounts in the areas of wages and salary, maintenance and depreciation. These are all costs that are likely to increase again in the following year. I would be questioning whether the £60,000 rise in wages bill was due to recruitment of more staff or was it a general pay rise that will be repeated the following year? The second point I would look further into is how did the maintenance cost double? Again, is this a one off or a trend that is set to continue? Thirdly, I would look at the level of depreciation. Why has that jumped up and is this estimated to remain at this rate and for how long? Question 2 a) The purpose of a balance sheet is to provide a financial snapshot of the business and is focused on a particular point in time. It provides a more detailed insight into the assets and liabilities held by that business. It is useful to study in this scenario as it will give information to Kathryn about the equity owned by the business and therefore its value at that particular time. b) Although the equity figure as of 30th April increased by over £13,000 from the year 2011 to 2012 I

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