Reports for Accounting Firm Clients

You are working as an accountant in an accounting firm. The clients include sole traders, partnerships, and limited companies. Your firm has given you four separate cases to work on. Based on your client’s requirement you have been asked to prepare an individual report to the following clients.

Power Direct: A limited company wants you to prepare a cash budget and requires your expert advice. 20 marks

Pipa photography: Report on the characteristics and significance of various costs to her business.  15 marks

Sam’s Direct: Report on the feasibility of a new business venture. 35 marks

Ming’s Market Stall: Statement of Financial Position and Statement of Comprehensive Income to be presented to the bank. 30 marks

In the months where the cash balance is negative, Power Direct would like your expert advice on how the cash balance could be improved. Write a short report to Power direct stating:

1. Why it is important to have a strong cash balance for a company like Power Direct.(300 words
2. What are the precautionary measures that the Power Direct can follow in the months where cash balance could be negative. You need to suggest both cost management measures and funding measures to Power Direct. (350 words)

Pippa runs a photographic studio. Clients book a one-hour studio session and are entitled to receive two large photographs of their choice form the sitting. Pippa has provided the following information regarding her business:

1. The rent of the studio is £12,000 per annum.
2. Pippa employees two full-time photographers, each paid a salary of £22,000 per annum.
3. She employs one photographic technician for one day a week. He is paid £120 per day, £6,240 per annum.
4. Advertising costs are £550 per annum.
5. Electricity costs are £1,100 per annum plus £4 per client hour. Each sitting takes two hours.
6. Pipa works as a receptionist and general manager of the business and is paid £16,000 per annum.
7. Fixtures, fittings, and equipment originally cost Pippa £12,800 and will depreciate by £2,500 per annum.
8. Pippa expects to have 1,300 sittings per year; each sitting is charged at £80.

1. Identify Pippa’s fixed cost and calculate the total fixed cost she will incur each year.
2. Explain the characteristics of fixed and variable cost to Pipa and the importance of accurately identifying the fixed and variable cost to the business. (300 Words)
3. Comment on the level of fixed costs compared to variable costs and the implications of this for the business. (200 Words)

Sam’s Direct is in the business of manufacturing sports equipment. The owner, Sam is looking for a possibility to manufacture tennis racquets.  Sam is aware that, before investing in this venture, he needs to see if this is going to be profitable or not. He would like you to review his cost forecast and produce a feasibility study of this project to decide whether or not he should undertake this new project.

Sam has already done a great deal of research into the costs involved. Sam anticipates that the costs of producing tennis racquets would be:

- Racquet framing

- Racquet stringing

The machine requires one person to operate it. Four racquets can be framed every hour.

Staff who string racquets can string two racquets in an hour.

1. Start by explaining to Sam what the Break-even analysis is and how will this help him to make business decisions. (150 words/7 marks)
2. Calculate the break-even analysis for Sam (15 marks)
3. Calculate expected profit if Sam is able to sell 1,100 racquets (5 marks)
4. Provide your opinion about the feasibility of the project (150 words/ 8 marks)

Ming has been running market stalls in Greenwich and Camden for some years. The stall sells hats and fans to tourists visiting the historic Greenwich and Camden town. Ming wors on the stall for three days a week and employs her younger sister to run the stall for the remaining three days a week that the market is open. Her trial balance as at 31 March 2019 shown in the table: