Sage 50 For Dummies Three e-book Bundle by Jane Kelly

Author:Jane Kelly
Language: eng
Format: epub
Publisher: Wiley
Published: 2013-01-06T16:00:00+00:00

8. To practise preparing a Balance Sheet in the Vertical format, use this list of accounts to prepare a Balance Sheet for the Abba Company as of the end of May 2012:

9. Your Balance Sheet shows that your current assets equal £22,000 and your current liabilities equal £52,000. What is your current ratio? Is that a good or bad sign to lenders?

10. Suppose that your Balance Sheet shows that your current assets equal £32,000 and your current liabilities equal £34,000. What would your current ratio be? Is that a good or bad sign to lenders?

11. Your Balance Sheet shows that your current assets equal £45,000 and your current liabilities are £37,000. What is your current ratio? Is that a good or bad sign to lenders?

12. Your Balance Sheet shows that your Cash account equals £10,000, your Debtors account equals £25,000 and your current liabilities equals £52,000. What would your acid test ratio be? Is that a good or bad sign to lenders?

13. Suppose that your Balance Sheet shows that your Cash account equals £15,000, your Debtors equals £17,000 and your current liabilities equals £34,000. What would your acid test ratio be? Is that a good or bad sign to lenders?

14. Suppose that your Balance Sheet shows that your Cash account equals £19,000, your Debtors equals £21,000 and your current liabilities equals £37,000. What would your acid test ratio be? Is that a good or bad sign to lenders?

15. A business’s current liabilities are £2,200 and its long-term liabilities are £35,000. The owner’s equity in the company totals £12,500. What is the debt to equity ratio? Is this a good or bad sign?

16. Suppose that a business’s current liabilities are £5,700 and its long-term liabilities are £35,000. The owner’s equity in the company totals £42,000. What is the debt to equity ratio? Is this ratio a good or bad sign?

17. Suppose that a business’s current liabilities are £6,500 and its long-term liabilities are £150,000. The owner’s equity in the company totals £175,000. What is debt to equity ratio? Is this ratio a good or bad sign?

Answers to Have a Go Questions

1. The Furniture account is regarded as a fixed asset as furniture is kept in the business for more than 12 months.

2. Trade Creditors (Accounts Payable) are suppliers that the business owes money to. This account is classified as a current liability.

3. Owners capital can be described as the money invested in the business by the owners. When owners put money into the business, this act can be described as capital introduced. When money is taken out, it can be taken as drawings (if the business is a sole trader or partnership), or dividends if the business is a limited company.

4. The Land and Buildings account is part of fixed assets as land and buildings are kept in the business for a long period of time.

5. The Credit Cards payable account is money owed by the business to credit cards. This account is therefore a liability. As the debt is due to be repaid within 12 months, the account is considered a Current Liability account.

6. The Retained

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