Graded Discussion Board
Business Finance (ACC501)
Dear Students!
This is to inform that Graded Discussion Board (GDB) No. 01 will be opened on June 01, 2015 for discussion and last date for posting your discussion will beJune 03, 2015.
Topic/Area for Discussion
“Income Statement Analysis”
This Graded Discussion Board will cover Video lessons # 15.
Solution :
Topic to be tested:
- Basis of accounting
- Cash in hand Vs Profit
Learning Objective:
This discussion question will enable the students to understand the concepts of accrual and cash basis of accounting cash in hand verses net profit. Moreover, they will also think out of box regarding matching principal and realization principal.
Discussion question:
Suppose a newly established company i.e. ABC Limited provides consultancy services to its clients for Rs. 25,000 in its first accounting period, out of which Rs. 10,000 received immediately. While the remaining amount of Rs. 15,000 yet to be collected till the end of accounting period. During the same accounting period, company also incurred some expenses amounting to Rs. 8,000 out of which Rs. 6,000 paid to the creditors. On the basis of above information, the company’s accountant calculated a net profit of Rs. 4,000 for the period.
Another company XYZ Limited provides the consultancy services for Rs 30,000 to its clients and received the entire amount in the same accounting period. The company also incurred some expenses amounting to Rs. 15,000 and the entire amount yet to be paid at the end accounting period. On the basis of this information, the company’s accountant calculated a net profit of Rs. 15,000 for the period.
