The purpose of completing this School Based Assessment for Principles of Accounts was having the opportunity of running a business with my classmates and applying accounting principles in a practical business environment. Another aim was to run the business as a team to make a profit and provide a stationery service to the St. Augustine Girls’ High School population.
Description of Entity
The business run by the form four Principles of Accounts students is the Business Student Co-operative (BSC). This co-operative is an ongoing concern inherited from the previous class. Students became members by purchasing shares which constituted the business’ capital. A sample of the share certificate will be later seen on page ___.
The BSC is a retailer of stationery and gift items. It is a monopoly because it is the only seller of stationery in the school as students cannot leave.
The target market for the business is the St. Augustine Girls’ High School population. Cash and credit purchases were made from Charrans and Mrs. Fawzia Ali. Sales conducted were mainly on a cash basis. The school’s bursar acted as the business’ banker.
The opening hours were 7:00am to 7:45am and 11:45am to 12:25pm. Closure of the business was on Public holidays, Sports Day and school activities. Sales conducted were kept in a sales record book.
In this SBA, two accounting periods were examined, Period 1 and 2. Period 1 ran from October 26th to November 27th, 2009 and Period 2 ran from January 11th to February 12th, 2010.
Statement of Performance
Profitability of the Business
From period 1 to 2, there was an increase in gross profit in the trading a/c from $103.59 to $327.31. This increase of $223.72 shows Period 2 was more profitable. The surplus figure from the Income and Expenditure and Appropriation a/c showed an increase. In Period 1, there was a surplus of $34.84 and Period 2 it was $261.56. There was an increase of $226.72. The surplus for Period 2 was approximately eight times larger.
After studying the gross profit from the Trading a/c and the surplus from the Income and Expenditure and Appropriation a/c for both periods, we can deduce that Period 2 was more profitable. A possible reason is in Period 1, it was Christmas season so more purchases of gifts were made. In Period 2, the sales were slower than Period 1, due to school activities. Although there were more sales in Period 1 than 2, Period 2 was more profitable as Cost of Good Sold was less.
Expenses of the Business
From Period 1 to 2, there was an increase in expenses as a percentage of sales. In Period 1 and 2 the expenses were 3% and 4% respectively, an increase of 1%.
Although there was a small increase in the expenses from Period 1 to 2, it did not affect the profitability, more profit was made. We can deduce that although there was an increase of 1%, Period 2 was more profitable.
Cost of Goods Sold
Period 1 to 2 had a decrease in the Cost of Goods Sold from $2166.41 to $1257.19, a decrease of $909.22 or 26.6%. It shows Period 2 was more profitable because the higher the Cost of Goods Sold, the lower the Gross Profit. The Gross Profit for Period 1 and 2 was $103.59 and $327.31 respectively.
For Period 1 and 2, the opening stock was $246.35 and $1342.25 respectively because the closing stock for Period 1 became opening stock for Period 2.
In Period 1 and 2, purchases were $3262.31 and $472.94. A drastic decrease of $2789.37 or 85.5%, because in Period 1 BSC was new so stocks was needed. In Period 2 purchases were $472.94 because of the large opening stock.
Only Period 2 had Returns Outwards of $452.35.
In Period 1 and 2, the closing stock was $1342.25 and $105.65, a large decrease of $1236.60 or 92.1%. In Period 1, we re-stocked 3 times and in Period 2 it was 2 times and a lower purchases figure which led to the closing stock being low.
After studying all aspects of the Cost of Goods Sold for both periods, it can be...