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Caso de estudo-Dinheiro versus lucro

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Accounting - Case study - Cash versus profit

Case study - Cash versus profit

Stan Jones from Stan's CDs, DVDs Videos etc Pty Ltd is a friend seeking
some accounting advice. He is unable to distinguish between cash and
profit. Having recorded a significant profit for the period Stan is of the
opinion that he is entitled to buy a new four-wheel drive vehicle. In fact
he does buy the vehicle and has incurred the wrath of his bank manager. He
asks you to explain why the bank manager is unhappy. You ask for the
financial details of your friend. The reporting period runs from 1 January
to 30 June.

At 1 January opening balances appeared as follows:

1 Jan.
Bank
6 500

Debtors
5 400

Prepaid rent
2 000

Vehicles
30 000

Accumulated depreciation of vehicles

15 000

Creditors

6 000

Loan

10 000

Capital

12 900

OPENING BALANCES

Between January and June the following events occur:

Stan tells you that he has contributed:

* cash of $10 000

* a fax machine valued at $800 (no depreciation this period)

* depreciation on the new vehicle is 12% per annum on cost. The vehicle
is to be depreciated for the full reporting period

* there is $500 owing on wages

Prepare the following reports:

* Cash flow statement

* Profit and Loss statement (expenses not required to be classified)

* Balance sheet

The increase in the bank balance and net profit is different. Some items
only affect cash, others only affect profit whilst some affect both at
different amounts. State these items in the table below.

CASH
PROFIT
AFFECT BOTH AT DIFFERRENT AMOUNTS

What alternative actions did Stan have to buying the vehicle in this
period?

View the word document for solution to Case study - cash versus profit

What alternative actions did Stan have to buying the vehicle in this
period?

* postpone the purchase of the vehicle

* acquire the vehicle by leasing rather than buying

* pay a deposit and buy on credit

* buy a cheaper vehicle

View the text document for solution.

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