Materiales cerdayana

also need help building the income statement and the balance sheet

MATERIALES CERDANYA ... I really must change accountant. I didn't understand a word he was saying!!! And on top of that, after the great month we've just had, how is it possible that we don't have enough cash to share out the dividend we have always paid out to our partners. What explanation am I going to give them? They'll be waiting for their cheque and unless a miracle happens, we won't even be able to pay taxation. I've never been good at numbers, but I think I have no other option but to sit down and go over the accounts. What did the accountant say about the difference between expenses and payments?...I just can't remember..." Materiales Cerdanya is located in Puigcerd. The company sells all kinds of construction materials, such as bathroom fixtures, ceramics, wall tiles, floor tiles, various types of mortar and arids (sand, gravel...), heating systems, garden accessories, gates and locks, etc. They also hire out construction equipment, such as cement mixers, dumpers, containers, etc. The company caters to two kinds of customers. On the one hand, the refurbishment market which encompasses private customers who want to renovate their homes and who purchase directly from Materiales Cerdanya as well as small time firms (bricklayers, plumbers...). On the other hand, they also sell to larger construction companies which are involved in real estate development in the area, building new second residences. Strong growth in recent months in the second residences sector in the area has multiplied the orders received from construction companies which now account for a greater percentage of Materiales Cerdanya's turnover. Until last term, the company's economic and financial situation had always been excellent but lately the situation has begun to worry Pere Guix the company manager and main shareholder along with two local architects. These two partners do not directly intervene in management, which they have delegated entirely to Mr. Guix, but just "channel" orders from their customers to Materiales Cerdanya, and in turn each of them receives a monthly dividend of 2,000 . Mr. Guix made the above comments after coming out of a meeting with his accountant. Fortunately, it snowed that afternoon, and Mr. Guix, who had always regarded accounting as a useless and boring affair, had no other alternative but to close himself in his office and go over the month's accounts. 1. He managed to work out the sales figure without too much difficulty, given that he only had to add up all the invoices issued during the month. These added up to 65,000 , of which 80 percent were to construction companies, which pay within 30 days. The rest was sold in cash to private customers and small specialised workers. 2. One of the construction firms with which Materiales Cerdanya does regular business with had filed a suspension of payments application with the court of Puigcerd. At the time of this incidence, their outstanding payments to the company were 7,500 . "They've really got us into a mess!", muttered Mr. Guix, just don't want to have anything more to do with them". Going through the invoices received from suppliers, Mr. Guix calculated that purchases of materials and goods during the month amounted to 50,000 , half of which were paid in cash and the other half are overdue within 60 days. 3. 4. In addition, based on the documents prepared by his adviser, he worked out that the company's commercial and administrative personnel expenses added up to 24,000 , and that these were liquidated at the end of the month. Added to these expenses are the company's Social Security payments (30% on salaries) which are overdue next month. 5. When he checked the company's current account statement he observed that the company's general expenses (electricity, water, insurance, counselling, telephone...) had been paid by bank order. The total amount paid this month was 2,700 6. Furthermore, he came across a bank statement at the bottom of the drawer hidden amongst this year's holiday brochures and he figured out that 2,000 had been amortised this month from the short term bank loan that was entered on the initial balance sheet, and that 1,000 had been paid out as interest on the loan. 7. He also remembered that in the middle of the month he had gone to a notary public to sign the sale of the land property that the company had in Bellver de Cerdanya. After ruling out the possibility of opening up a point of sale in that area, there was no point in hanging onto this investment. The land, which was accounted for on the initial balance sheet, was sold at a very good price (93,000 ). Although we've only received thirty five percent so far, we landed a good deal". 8. What's more, the company's fixed income securities, which are accounted for on the balance sheet, have yielded some income, though, with current interest rates, it's practically nothing" said Mr. Guix to himself, but we really should assign this amount of 200 which appears on the bank statement to one account or another...". 9. Rentals of machinery belonging to the company added up to 2,500 this month. This amount had been paid in cash. 10. On the other hand, when he went over the current account statement he saw that 21,000 had been paid into the account whereas 28,000 had been paid out. "These must be payments to suppliers and payments by customers from previous months" he imagined 11. "I can't go on any more, I'm exhausted" he said to himself, while he looked out the office window. His eyes fell upon the containers and new cement mixers they had been purchased at the beginning of the month, "they cost us quite a bit of money, around 3,000 . I hope we'll be able to rent them out without too much difficulty. Fortunately we have deferred payment for 90 days". After having spent the entire afternoon going through papers, Mr. Guix went out of his office to stretch his legs. While he was walking through the warehouse, he thought to himself: "Just what I needed, as if I didn't have enough worries on my mind. So it now seems that I even have to learn accounting...." Notes: Machinery and equipment is amortised over 10 years. b) The industrial bay is amortised in 50 years. c) Total remaining stocks of materials and goods amount to 24,000 . Annex 1 Materiales Cerdanya initial balance sheet (in ) Fixed assets Equity Capital Reserves Land Industrial bay Equip. &machinery Fixed income securities 42,000 29,000 12,000 5,000 80,000 22,000 Short term liabilities Working capital Goods and materials Customers and accounts receivable Banks, current accounts 22,000 36,000 16,000 Short term loan Suppliers and accounts payable 25,000 35,000 TOTAL 162,000 162,000 ASSETS LIABILITIES Land Industrial Equipment Fixed bay and income machinery securities Customers and accounts receivable Banks, current accounts Capital Reserves Short term loan Suppliers and accounts payable P&L + Novo - 10 11 12 13 14 15 16 Total MATERIALES CERDANYA ... I really must change accountant. I didn't understand a word he was saying!!! And on top of that, after the great month we've just had, how is it possible that we don't have enough cash to share out the dividend we have always paid out to our partners. What explanation am I going to give them? They'll be waiting for their cheque and unless a miracle happens, we won't even be able to pay taxation. I've never been good at numbers, but I think I have no other option but to sit down and go over the accounts. What did the accountant say about the difference between expenses and payments?...I just can't remember..." Materiales Cerdanya is located in Puigcerd. The company sells all kinds of construction materials, such as bathroom fixtures, ceramics, wall tiles, floor tiles, various types of mortar and arids (sand, gravel...), heating systems, garden accessories, gates and locks, etc. They also hire out construction equipment, such as cement mixers, dumpers, containers, etc. The company caters to two kinds of customers. On the one hand, the refurbishment market which encompasses private customers who want to renovate their homes and who purchase directly from Materiales Cerdanya as well as small time firms (bricklayers, plumbers...). On the other hand, they also sell to larger construction companies which are involved in real estate development in the area, building new second residences. Strong growth in recent months in the second residences sector in the area has multiplied the orders received from construction companies which now account for a greater percentage of Materiales Cerdanya's turnover. Until last term, the company's economic and financial situation had always been excellent but lately the situation has begun to worry Pere Guix the company manager and main shareholder along with two local architects. These two partners do not directly intervene in management, which they have delegated entirely to Mr. Guix, but just "channel" orders from their customers to Materiales Cerdanya, and in turn each of them receives a monthly dividend of 2,000 . Mr. Guix made the above comments after coming out of a meeting with his accountant. Fortunately, it snowed that afternoon, and Mr. Guix, who had always regarded accounting as a useless and boring affair, had no other alternative but to close himself in his office and go over the month's accounts. 1. He managed to work out the sales figure without too much difficulty, given that he only had to add up all the invoices issued during the month. These added up to 65,000 , of which 80 percent were to construction companies, which pay within 30 days. The rest was sold in cash to private customers and small specialised workers. 2. One of the construction firms with which Materiales Cerdanya does regular business with had filed a suspension of payments application with the court of Puigcerd. At the time of this incidence, their outstanding payments to the company were 7,500 . "They've really got us into a mess!", muttered Mr. Guix, just don't want to have anything more to do with them". Going through the invoices received from suppliers, Mr. Guix calculated that purchases of materials and goods during the month amounted to 50,000 , half of which were paid in cash and the other half are overdue within 60 days. 3. 4. In addition, based on the documents prepared by his adviser, he worked out that the company's commercial and administrative personnel expenses added up to 24,000 , and that these were liquidated at the end of the month. Added to these expenses are the company's Social Security payments (30% on salaries) which are overdue next month. 5. When he checked the company's current account statement he observed that the company's general expenses (electricity, water, insurance, counselling, telephone...) had been paid by bank order. The total amount paid this month was 2,700 6. Furthermore, he came across a bank statement at the bottom of the drawer hidden amongst this year's holiday brochures and he figured out that 2,000 had been amortised this month from the short term bank loan that was entered on the initial balance sheet, and that 1,000 had been paid out as interest on the loan. 7. He also remembered that in the middle of the month he had gone to a notary public to sign the sale of the land property that the company had in Bellver de Cerdanya. After ruling out the possibility of opening up a point of sale in that area, there was no point in hanging onto this investment. The land, which was accounted for on the initial balance sheet, was sold at a very good price (93,000 ). Although we've only received thirty five percent so far, we landed a good deal". 8. What's more, the company's fixed income securities, which are accounted for on the balance sheet, have yielded some income, though, with current interest rates, it's practically nothing" said Mr. Guix to himself, but we really should assign this amount of 200 which appears on the bank statement to one account or another...". 9. Rentals of machinery belonging to the company added up to 2,500 this month. This amount had been paid in cash. 10. On the other hand, when he went over the current account statement he saw that 21,000 had been paid into the account whereas 28,000 had been paid out. "These must be payments to suppliers and payments by customers from previous months" he imagined 11. "I can't go on any more, I'm exhausted" he said to himself, while he looked out the office window. His eyes fell upon the containers and new cement mixers they had been purchased at the beginning of the month, "they cost us quite a bit of money, around 3,000 . I hope we'll be able to rent them out without too much difficulty. Fortunately we have deferred payment for 90 days". After having spent the entire afternoon going through papers, Mr. Guix went out of his office to stretch his legs. While he was walking through the warehouse, he thought to himself: "Just what I needed, as if I didn't have enough worries on my mind. So it now seems that I even have to learn accounting...." Notes: Machinery and equipment is amortised over 10 years. b) The industrial bay is amortised in 50 years. c) Total remaining stocks of materials and goods amount to 24,000 . Annex 1 Materiales Cerdanya initial balance sheet (in ) Fixed assets Equity Capital Reserves Land Industrial bay Equip. &machinery Fixed income securities 42,000 29,000 12,000 5,000 80,000 22,000 Short term liabilities Working capital Goods and materials Customers and accounts receivable Banks, current accounts 22,000 36,000 16,000 Short term loan Suppliers and accounts payable 25,000 35,000 TOTAL 162,000 162,000 ASSETS LIABILITIES Land Industrial Equipment Fixed bay and income machinery securities Customers and accounts receivable Banks, current accounts Capital Reserves Short term loan Suppliers and accounts payable P&L + Novo - 10 11 12 13 14 15 16 Total