COURSE CODE: ACC117/106/100

DECLARATION FORM OF GROUP ASSIGNMENT

NAME STUDENT ID

WAN MUHAMMAD AMIR BIN WAN KAMALRUZAMAN 2022493282

ZAINUL MUTTAQIN BIN ABDUL SAMAT 2022896122

MUHAMMAD DANIAL BIN SHAHUL IKRAM 2022876862

MUHAMMAD IMRAN SIDDIQ BIN MOHAMAD ZACKIR 2022610182

RAKESH
MUHAMMAD IKRIMAH BIN MASDINIZAM 2022489292

GROUP: 2

DECLARATION: We declare that the assignment here submitted is original and no part of
this assignment has been copied from other person's work except when due
acknowledgement is made in the text and all members of the group have read and checked
all parts of the piece of work, irrespective of whether they are contributed by individual
members or all members as a group, here submitted are original except for source material
explicitly acknowledged.
Signature of group leader:

Submission Date: 29 January 2023

DISCLAIMER: A lecturer has a right not to mark this assignment if the above declaration has
not been signed. If the above declaration is found to be false, no mark will be rewarded for this
assignment.

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 ACC117/106/100
GROUP PROJECT 2
(SEMESTER OCT 2022-FEB 2023)

PREPARED BY:

NAME STUDENT ID

WAN MUHAMMAD AMIR BIN WAN KAMALRUZAMAN 2022493282

ZAINUL MUTTAQIN BIN ABDUL SAMAT 2022896122

MUHAMMAD DANIAL BIN SHAHUL IKRAM 2022876862

MUHAMMAD IMRAN SIDDIQ BIN MOHAMAD ZACKIR 2022610182

RAKESH
MUHAMMAD IKRIMAH BIN MASDINIZAM 2022489292

GROUP: 2

PREPARED FOR:

ALYA SOFEA BINTI SA’DON

DEADLINE OF SUBMISSION:
29 JANUARY 2023

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 INTRODUCTION TO FINANCIAL ACCOUNTING /
INTRODUCTION TO FINANCIALACCOUNTING AND REPORTING / ACCOUNTING
(ACC117 / ACC106 / ACC100)

GROUP PROJECT 2 (15%)

COURSE LEARNING OUTCOME:

This assignment is design to enhance students’ teamwork through analysing financial
statements using simple financial ratios for sole proprietorship business (C4).

INSTRUCTIONS TO ALL STUDENTS:

1. Form a group with a maximum of 4 members.

2. Answer all questions.

3. Submit the answers in a proper report format including the declaration and cover page
with the details required. Only the group leader needs to submit the assignment on behalf
of the group.

4. If the answers found similar or the same with the other group(s), a penalty will be imposed
on all groups involved.

5. The deadline for submission is on 29 January 2023.

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QUESTION
Study the following financial statements for two very similar enterprises owned by Puan Khairiah
thatare located in the city center of Perak and then answer the questions which follow.
Statement of Profit or Loss for the year ended
31 December 20x9
FARMASI TAPAH FARMASI SERI ISKANDAR
RM RM RM RM ‘000
‘000 ‘000 ‘000
Sales 2,880 5,320
Less: cost of sales (2,240) (3,664)
Gross profit 640 1,656

Less: expenses
Depreciation (35) (184)
Other expenses (509) (1,108)
Net profit 96 364

Statement of Financial Position as at

31 December 20x9

FARMASI FARMASI
TAPAH SERI ISKANDAR
RM RM
’000 ’000
Non-current assets
Shophouse at carrying value 72 320
Office equipment at carrying value 34 244
106 564

Current assets
Inventory 224 316
Accounts receivable 422 191
Prepaid expenses 2 -
Bank 6 36
760 1,107

Financed by:
Owner’s equity
Opening balance 334 460
Add: Net profit 96 364
Less: Drawings (112) (118)
318 706

Non-current liabilities 50 153

Current liabilities
Accounts payable 380 245
Accrued expenses 2 -
Short-term loan 10 3
760 1,107

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Additional information:
1. 10% of the sales were cash sales.
2. The net purchase incurred during the year were RM2,080,000 and RM3,700,000 for
Farmasi Tapah and Farmasi Seri Iskandar respectively.
3. Assume a year has 365 days.

Required:
a. Compute the following ratios for both businesses:

i. Current ratio
ii. Quick ratio
iii. Inventory turnover ratio
iv. Accounts receivable collection period
v. Gross profit
vi. Net profit margin

(30 marks)

b. Based on your above answer in (a):

i. Interpret each of the accounting ratios for both businesses.

(12 marks)

ii. State which business has difficulty in paying its short-term obligations without
using its inventory and give ONE (1) impact on business when it has liquidity ratio
less than 1.
(2 marks)

c. Identify which business seems to be the most efficient in using its capital to generate
the profit. Justify your opinion.
(6 marks)

(Total: 50 marks)

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 RATIO FARMASI TAPAH FARMASI SERI ISKANDAR

i. Current
Ratio 𝐶𝑈𝑅𝑅𝐸𝑁𝑇 𝐴𝑆𝑆𝐸𝑇𝑆 𝐶𝑈𝑅𝑅𝐸𝑁𝑇 𝐴𝑆𝑆𝐸𝑇𝑆
𝐶𝑈𝑅𝑅𝐸𝑁𝑇 𝐿𝐼𝐴𝐵𝐼𝐿𝐼𝑇𝑌 𝐶𝑈𝑅𝑅𝐸𝑁𝑇 𝐿𝐼𝐴𝐵𝐼𝐿𝐼𝑇𝑌

654,000 543,000
= 392,000 = 248,000

= 1 .67 : 1 = 2 .19 : 1

ii. Acid
Test / 𝐶𝑈𝑅𝑅𝐸𝑁𝑇 𝐴𝑆𝑆𝐸𝑇𝑆−𝐼𝑁𝑉𝐸𝑁𝑇𝑂𝑅𝑌−𝑃𝑅𝐸𝑃𝐴𝑌𝑀𝐸𝑁𝑇𝑆 𝐶𝑈𝑅𝑅𝐸𝑁𝑇 𝐴𝑆𝑆𝐸𝑇𝑆−𝐼𝑁𝑉𝐸𝑁𝑇𝑂𝑅𝑌−𝑃𝑅𝐸𝑃𝐴𝑌𝑀𝐸𝑁𝑇𝑆
Quick 𝐶𝑈𝑅𝑅𝐸𝑁𝑇 𝐿𝐼𝐴𝐵𝐼𝐿𝐼𝑇𝐼𝐸𝑆 𝐶𝑈𝑅𝑅𝐸𝑁𝑇 𝐿𝐼𝐴𝐵𝐼𝐿𝐼𝑇𝐼𝐸𝑆
Ratio
654,000−224,000−2,000 543,000−316,000−0
= =
392.000 248,000

428,000 227,000
= = 248,000
392,000

= 1 .09 : 1 = 0 .92 : 1

iii.
Inventory 𝐶𝑂𝑆𝑇 𝑂𝐹 𝑆𝐴𝐿𝐸𝑆 𝐶𝑂𝑆𝑇 𝑂𝐹 𝑆𝐴𝐿𝐸𝑆
Turnover 𝐴𝑉𝐸𝑅𝐴𝐺𝐸 𝐼𝑁𝑉𝐸𝑁𝑇𝑂𝑅𝑌 𝐴𝑉𝐸𝑅𝐴𝐺𝐸 𝐼𝑁𝑉𝐸𝑁𝑇𝑂𝑅𝑌

Opening Inventory = COGS + closing inventory-net Opening Inventory = COGS + closing

purchase inventory-net purchase

Opening Inventory= 2,240,000 + 224,000 – 2, Opening Inventory= 3,664,000 + 316,000 –

080,000 3,700,000

2,240,000 3,664,000
=1 =1
(384,000+224,000) (280,000+316,000)
2 2

= 7 times = 12 times

iv.
Average 𝐴𝐶𝐶𝑂𝑈𝑁𝑇 𝑅𝐸𝐶𝐸𝐼𝑉𝐴𝐵𝐿𝐸 𝐴𝐶𝐶𝑂𝑈𝑁𝑇 𝑅𝐸𝐶𝐸𝐼𝑉𝐴𝐵𝐿𝐸
x 365 days x 365 days
Collection 𝐶𝑅𝐸𝐷𝐼𝑇 𝑆𝐴𝐿𝐸𝑆 𝐶𝑅𝐸𝐷𝐼𝑇 𝑆𝐴𝐿𝐸𝑆
Period 422,000 191,000
= 2,592,000 x 365 days = 4,788,000 x 365 days

= 59 days = 15 days

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v. Gross
profit 𝐺𝑅𝑂𝑆𝑆 𝑃𝑅𝑂𝐹𝐼𝑇 𝐺𝑅𝑂𝑆𝑆 𝑃𝑅𝑂𝐹𝐼𝑇
x 100% x 100%
margin 𝑆𝐴𝐿𝐸𝑆 𝑆𝐴𝐿𝐸𝑆

640,000 1,656,000
= 2,880,000 x 100% = 5,320,000 x 100%

= 22.22 % = 31.13 %
vi. Net
profit 𝑁𝐸𝑇 𝑃𝑅𝑂𝐹𝐼𝑇 𝑁𝐸𝑇 𝑃𝑅𝑂𝐹𝐼𝑇
x 100% x 100%
margin 𝑆𝐴𝐿𝐸𝑆 𝑆𝐴𝐿𝐸𝑆

96,000 364,000
= 2,880,000 x 100% = 5,320,000 x 100%

= 3.33 % = 6.84 %

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b. (i) Based on your answer above interpret each of the accounting ratios for both
businesses
RATIO FARMASI TAPAH FARMASI SERI ISKANDAR
i. Current For every RM1 of its current liabilities, For every RM1 of its current
Ratio the business has RM1 .67 of its liabilities, the business has RM2 .19
current assets to repay back the of its current assets to repay back
obligation. the obligation.
ii. Acid Test For every RM1 of its current liabilities, For every RM1 of its current
/ Quick the business has RM1 .09 of its liabilities, the business has RM0 .92
Ratio current assets to repay back the of its current assets to repay back
obligation. the obligation.

iii. The business replaced its inventories The business replaced its
Inventory 7 times within an accounting period. inventories 12 times within an
Turnover accounting period.

iv. Average The business takes 59 days to collect The business takes 15 days to
Collection debts from its account receivable. collect debts from its account
Period receivable.

v. Gross For every RM 100 of sales, RM22 .20 For every RM 100 of sales, RM31
profit was made before any expenses were .13 was made before any expenses
margin paid were paid

vi. Net For every RM 100 of sales, RM3 .33 For every RM 100 of sales, RM6 .84
profit was made after expenses were paid was made after expenses were paid
margin

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ii) State which business has difficulty in paying its short-term obligations without using its
inventory and give ONE (1) impact on business when it has liquidity ratio less than 1.

The business who has a difficulty in paying its short-terms obligation without using its
inventory is Farmasi Seri Iskandar. It is because, Farmasi Seri Iskandar has negative balance
when the balance of they current assets without the inventory minus to current liabilities. In
addition, one effect on the business when the liquidity ratio is below 1 is that the company
will face bankruptcy because the lack of ability to pay debt obligations, or current liabilities,
without having to raise external capital or take loans.

c. Identify which business seems to be the most efficient in using its capital to generate
the profit. Justify your opinion.

FARMASI TAPAH FARMASI SERI ISKANDAR

Capital Employed = owner’s equity + non- Capital Employed = owner’s equity + non-
current liabilities current liabilities

Capital employed = 318,000 + 50,000 Capital employed = 706,000 + 153,000

= RM368,000 = RM859,000
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
Return On Investment = 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑 x 100 Return On Investment = 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑 x 100
96,000 364,000
= x 100 = x 100
368,000 859,000
= 26.09% = 42.37%

Farmasi seri Iskandar has higher percentage in return on investment which is 42.37 % while
Farmasi Tapah has 26.09 %

The most efficient in using its capital to generate income is Farmasi Seri Iskandar. It is
because, Farmasi Seri Iskandar has higher Net profit Margin which is they get a net profit of
RM42.37 for every RM1 of capital used while Farmasi Tapah only has a net profit of RM26.09
for every RM1 of capital used.

In conclusion, Farmasi Seri Iskandar has higher ratio to generate their income rather than
Farmasi Tapah has lower ratio to generate their income.