Financial Statement Analysis of Sandra Shop and Partnership Appropriation Account

Answer to the Question 1 (a)

 Even if the total of the debit entries equals to the credit entries in the trial balance it cannot be said that the trial balance is not error free as due to the following reasons a trail balance will not be correct even both the debit and credit sides of the trial balance matches equally:

Due to the error of commission a trial balance will not be correct even though both the debit and credit side matches. This can be explained with an example, for instance if instead of debiting one debtor the accountant recorded a debit entry in the name of another debtor so in this case even though the trial balance matches it cannot be said that it reflects the correct financial records of the company.

This happened when the accountant does not post an entire transaction, if the entire transaction is not recorded then both the debit and credit side will not be affected and for that reason the trial balance will be matched but it cannot be said that the trial balance is correct.

The errors of principle are another factor for which the debit and credit side will tallied but the trial balance will be considered as incorrect (Kuter Gurskaya and Bagdasaryan 2019). 

When there is no agreement made between the partners then in that case the profit will be distributed among the partners as per their capital ratio.

To

The managing director of plc

Subject Analysis of financial ratios of delta plc

From the analysis of the various profitability ratios, liquidity ratios and the efficiency ratio it can be said that delta plc performed better than its competitor horizon ltd in terms of profitability ratios and the liquidity ratios except a few ratios like the gross margin ratio, and in quick ratios, however in terms of efficiency ratios the performance of horizon plc is better than the delta plc, particularly in terms of asset turnover and day’s inventory outstanding. From these ratios it can be said that delta failed to generate more revenue from its asses in comparison to horizon ltd and also the inventory outstanding of delta is more than horizon plc which means delta plc takes more time to convert its inventory in to sales than horizon ltd which means that the management is less efficient in terms of converting its inventory to sales if compared with horizon.

Another factor that may create an adverse effect on delta plc is that it takes more time to repay its debt than horizon plc which will create a more positive impact for horizon plc among the suppliers as suppliers will provide more credit to horizon as they repay their dues in comparison to delta plc. From the ratio analysis it can be recommended to delta plc is that they should give emphasis on improving their efficiency ratios and should try to maintain the same profitability and liquidity ratios in the future.

The major limitation of the cash flow statement is narrated below

Since the cash flow statement does not consider the non-cash transactions made by the organisations so it cannot be possible to ascertain the net income from the cash flow statement. So, a major limitation of cash flow statement that it cannot present the net income earned by the organisation.

From the cash flow statement only the cash balance at the end of the financial period can be ascertained but it cannot be used as a tool to ascertain the actual liquidity or solvency position of the business from the cash flow statement.

It is not possible to assess the profit earning capacity of the company from the cash flow statement as it does not consider expenses or revenue (Soboleva et al 2018).

A parent company is required to prepare a consolidated financial statement when it acquires more than 50% of the ownership control of the subsidiary company to integrate all the financial transactions in a single financial statement so that it can be easier for the stakeholders to get an overview of the entire financial condition of the consolidated business entity (Strazzacappa 2019). 

References 

Kuter, M., Gurskaya, M. and Bagdasaryan, R., 2019. The correction of double entry bookkeeping errors in the late 14th century. CONTABILITÀ E CULTURA AZIENDALE.

Soboleva, Y.P., Matveev, V.V., Ilminskaya, S.A., Efimenko, I.S., Rezvyakova, I.V. and Mazur, L.V., 2018. Monitoring of businesses operations with cash flow analysis. International Journal of Civil Engineering and Technology, 9(11), p.2034.

Strazzacappa, A., 2019. Consolidated Financial Statements. The identification of group’s boundaries for control purposes: a comparison between IAS/IFRSs versus US GAAPs (Bachelor's thesis, Università Ca'Foscari Venezia).