Poa Sba – College Essay Example

31. This increase of $223. 2 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. %, 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 proven that Period 2 was more profitable as there was a lower Gross Profit.

Interpretation of each Ratio Gross Profit Percentage

This represents the amount of Gross Profit for every $100 of sales. It is sed to test the profitability of sales. The Gross Profit Percentage of 4. 6% in Period 1 means that for every $100 of sales, a Gross profit of $4. 60 was made before any expenses paid. The Gross Profit Percentage of 20. 7% in Period 2 means that for every $100 of sales, a Gross Profit of $20. 70 was made before any expenses paid. A larger Gross Profit was made in Period 2. Return on Capital Employed- This illustrates what is

important is not simply how much profit has been made, but how well the capital has been employed. Period 1 had a Return on Capital Employed being 0. 7% and in Period 2 it was 5. %. The results show that Period 2 had a higher Return on Capital Employed meaning that the capital of Period 2 had been used up better. Current Ratio- This compares assets which becomes liquid within approximately 12 months with liabilities due for payment in the same period. It also indicates if there are sufficient short term assets to meet the short-term liabilities. In Period 1, the current ratio was 5:1, meaning that current assets can cover the current liabilities 5 times. In Period 2, the current ratio was 1298:1, meaning that current assets can cover current liabilities 1298 times.

For period 2 the current liabilities were only $3 which led to a very high current ratio. Comparisons Sales The total Sales for Period 1 and 2 was $2270. 00 and $1584. 50. In Period 1, the Sales were higher. There was a slight decrease of approximately 30. 2%. This is because the BSC was newly opened so there were lots of interested customers. The higher sales were because our business did not only sell stationary but also gifts which was in demand. The high sales were because of the Christmas season around the time of Period 1.

Sales in Period 1 and Period Purchases

The total Purchases for Period 1 and 2 was $3262. 31 and $472. 94. In Period 1, it was higher. There was a drastic decrease of approximately 85. 5%. In Period 1, the business was new and

stock needed to be purchased. The purchases in Period 1 were greater than Period 2 because the stock turnover was higher. A lot of sales were conducted in Period 1 so more purchases were made.

Suggestions and Recommendations

The business was successful, it made a fairly good profit. However, more profits could be made by having another branch of BSC in the school like one upstairs and downstairs making it more convenient for the customers. We would gain more customers helping us make additional profits. I would recommend we have special offers to attract potential customers. There can be an offer like buy a pen and get one free! Such offers would attract more customers resulting in additional sales generating more profits. At the end, more profits would be made.

Conclusion

On completing this S. B. A. I was given a better perception of running a business and how recordings of transactions are done ensuring the proper balancing of each account. This S. B. A. was a great privilege as I have better knowledge on running a business along with my classmates. Furthermore, it was seen that operating a business is very profitable once all expenses are managed properly. In conclusion, I have learned that accounting principles are very valid and important in making a business successful. I also learned how to utilize theory taught and put it to practical use when doing the accounting for the Business Student Co-operative.