2.1 What is Accounting Equation and explain why the accounting equation will always work?

2.1 What is Accounting Equation and explain why the accounting equation will always work? Also, provide an example with your explanation.

Business Finance Analytical report

TASK 1

 For each transaction, decide whether it should be included in the cash budget for the business; prepare a cash budget for the three months ending 31 March, 2022. (30 Marks)

  1. Anton invested £10,000 cash in the business on 1 January, 2022.
  2. Anton plans to make drawings of £800 per month for each personal expenditure.
  3. Anton purchases a computer for his personal use at a cost of £499 in January.
  4. Anton also purchased a computer in January for business purposes at a cost of £720 cash.
  5. He plans to buy a motor vehicle for £3,200 cash on 1 March, for business purposes.
  6. Sales estimates are as following: January = £4,200 February = £ 3,200 March = £2,950
  7. Sales are made 30% cash and 70% on one months’ credit.
  8. Purchases will be made for cash as follows: January = £ 2,800 February = £1,500 March = £1750
  9. Other expenses are estimated as follows:
  • Electricity £285 payable at the end of the quarter.
  • Telephone costs of £120 per month, payable at the end of each month by cash.
  • Fuel cost for motor vehicle estimated to be £65 per month, payable in the same month.

 TASK 2

2.1 What is Accounting Equation and explain why the accounting equation will always work? Also, provide an example with your explanation.

2.2 What benefits might a company gain from having its shares listed on a stock exchange?

2.3 Who do you think might be stakeholders in a large listed company like Marks and Spenser?

2.4 Is the profit that a business makes a reliable indicator of its cash balances? What are the differences between Profit and Cash?

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