18.7 (i) Show how the following figures misrepresent Groco’s physical activity:

Year 1

2 3

4

£000

£000

£000

£000 Sales per accounts 200 220 240 260 A suitable specific price index for these goods 100 110 115 120 ii) Kashko Ltd has the following cash outlays:

%

Year 1

2 3

£000

£000

£000 Cash outlays 300 350 400 General price index (average for year)

100 105 112 Show how the figures of outlays are misleading.

(hi) In their balance sheets as at the end of year 7 are shown:

X Co. Ltd Y Co. Ltd Land at cost £200,000 £200,000 X Co. Ltd purchased its land in year 1; Y Co. Ltd purchased its land in year 6. The price of land of this type in year 7 is twice the price in year 1, and 10 per cent greater than in year 6.

Show why the figures in the balance sheets distort comparison between the two balance sheets.