Accounting, Maths and Computing for Business Studies V11 Home Study

By Clive W. Humphris

An enhanced eBook published in full colour. With EXTENSIVE FREE page and STEM online INTERACTIVE CONTENT enabled with your eBook receipt, explored by inserting any values that could occur in a real situation into hundreds of menu driven topics thereby bringing the topic or any other textbook examples to life.

Full colour graphics that are redrawn for every input change will make your learning experience more enjoyable and effective as it encourages experimentation of real world situations where almost any practical value is accepted.

Interactive Technology when used in the classroom can motivate passive students by encouraging their active participation where STEM subjects are ideally suited to mobile interactive technology on their digital devices.

Students who struggle to be fully engaged in normal classroom activity can often achieve the unexpected once sat in front of a digital screen where they can learn without the embarrassment of full class exposure.

For each topic group students can TEST THEIR UNDERSTANDING by considering an open question whereby their ease of answering will provide an indication of personal progress.

• Language: English
• Publisher: Clive W. Humphris
• Release date: Oct 30, 2012
• ISBN: 9781301848003

Clive W. Humphris

Clive W. Humphris M0DXJ: Ex Technology Teacher. Software Developer, Author and Director of eptsoft limited. Married with two children and four grandchildren.Apprentice Instrument Maker at Marconi’s with Senor Technical Management roles in Radio Rentals and Alcatel Business Systems before starting eptsoft providing educational software to schools colleges and universities worldwide since 1992.Interests outside of developing digital products for eptsoft, include Running, Walking and Reading.

Book preview

AccountingHomeStudy600

Table of Contents

Introduction

Accounting Tools

Financial Accounts

Ratio Analysis

Workforce Performance and Productivity

Personal Finance

Number Systems

Number Conversion

Number Types

Roots

Percentages

Ratios

Fractions

Laws

Algebra 0

Algebra 1

Algebra 2

Mathematical Rules

Powers and Indices

Simplifying

Linear Equations

Graphing

Data Analysis

Computer Hardware

Data Structures

Data Files

Computer Systems

Data Handling

System Development

Computer Programming

Binary Numbers

Binary Arithmetic

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Accounting, Maths and Computing for Business Studies V11 Home Study

by Clive W. Humphris

Portable Learning, Reference and Revision Tools.

Copyright by eptsoft limited 2018

All rights reserved.

Acknowledgement

Our thanks and appreciation goes to John D. Ransley MIEE from Whitbourne in Worcestershire for all his help and expert guidance in developing this eBook and additional app content.

Introduction

An enhanced eBook published in full colour. Now including extensive interactive content enabling exploration by inserting any values that would occur in a real situation whereby the graphics are redrawn to reflect those changes.

Calculations can be also tested against any standard subject textbook to compare the results.

Interactive Technology when used in the classroom can motivate passive students by encouraging their active participation where STEM subjects are ideally suited to Mobile Interactive Technology.

Students are more likely to be comfortable with technology they understand i.e. their phone and can interact with, often preferring 'Learning-by-Doing' over traditional pencil and paper methods.

Full colour graphics that are redrawn for every input change will make the learning experience more enjoyable and effective as it encourages experimentation of real world situations as almost any practical values are accepted.

Students who struggle to be fully engaged in normal classroom activity can often achieve the unexpected once sat in front of a digital screen where they can learn without the embarrassment of full class exposure.

Mobile Interactive Technology can bring any STEM textbook to life by inserting printed values from the book into their mobile device and comparing the results.

Colourful visual presentation assists the learning process as students will more likely remember, thereby increasing their personal confidence as they believe they are learning more as a result. Knowing the content is on their phone encourages them to dip-in in a spare moment more than open a traditional textbook.

Conclusion: Students will spend more time engaged with the Mobile Interactive Technology than with a traditional textbook.

ACCOUNTING TOOLS.

Interactive Content!

Students frequently struggle with the concept of Supply and Demand. We make this much easier to understand by enabling you to play with the figures and see how various value relationships impact upon one another.

Open the interactve content on the Table of contents to fully explore using your own values.

ACCOUNTING TOOLS: Breakeven Chart.

AccountingTools1

THE BREAKEVEN CHART is a graphical measurement of how a business is performing. It shows if a business has sufficient income (revenue) from sales to cover its costs. On the horizontal scale are units of output, this can represent multiples (000s) or individual products. The vertical scale is for revenue both income from sales and outflows through costs. The break-even point determines how many units must be sold to cover the fixed cost, thereafter the business makes a profit. The more units that are sold the wider the gap between total cost and sales therefore the more profit. Here you can explore adjustments to all the values that make up the breakeven calculation and see their individual or combined effect on the breakeven point.

SALES REVENUE comes from making sales for an individual product the sales revenue increases the more units of output there are. The break-even chart does not usually allow for quantity discounts.

FIXED COSTS are shown as a straight line parallel with the x axis. Fixed costs could be buildings i.e. a shop, plant and machinery and are those costs that are present even if no products are made or sold. Fixed costs can change over time but generally for our purposes are considered to be static.

VARIABLE COSTS increase in relation to sales. Raw materials or packaging for example the more the business sells, so the more materials are required to produce the products. A computer software company has to buy blank CDs the more sales the more CDs required, similarly for distribution.

Break-even charts are often constructed before sales are made and can be used to decide a sales price with the objective of finding how many units must be sold before a profit is made. Generally when drawing the break-even charts a number of assumptions have to be made. How many units would it be reasonable to sell? Prices will remain fixed for the foreseeable future while these sales are made. Both fixed costs will remain so and variable costs will not increase per unit.

TOTAL COSTS are the sum of fixed and variable costs and will increase in line with sales, but, in a profitable business at a lower rate. Businesses with low fixed costs will show a total costs line that is closer to being parallel to the sales revenue to one where there is a high fixed costs, but very low variable costs.

MARGIN OF SAFETY is the difference in units of output between the ideal and the actual. It shows how the break-even point can increase (sales fall or costs increase) and still make a profit, albeit a smaller one.

Begin with some textbook examples and adjust each of the variables up and down by a small amount to see the effect of those changes. In practice changes will be relatively tiny as you will not be able to alter the costs a great deal or the amount you can expect to charge for your products, but nevertheless can make a significant effect on the profitability of the business.

ACCOUNTING TOOLS: Price Elasticity of Demand PED.

AccountingTools2

The concept of the demand curve is the quantity of a good available will depend on the price the consumer is willing to pay and also their ability to buy i.e. would be prepared to pay if the money was available. The curve DD therefore shows the amount of a good consumers would be willing to buy for variations in price.

The demand for a good will largely depend on the following factors. The price, available spending power of the consumer, the demand for an alternative product and whether the consumer likes and therefore wants the product.

The figures shown are for illustration only and would be collected for a particular business or industry over time. For example if the good were a tin of beans the supermarkets would be able to construct a demand curve from their previous sales statistics. Lowering the price and many more tins would be required, as consumers will buy more for less money. Increasing the price and other more expensive products begin to compete for the same buying power and sales of beans will fall.

From the demand axis a shortage of beans will push up the price, similarly a glut will force prices down as competitors try to offload their stock.

Price elasticity calculations enable the supply and demand figures to be measured and assumptions made on those values. Elasticity measures the responsiveness of one graph axis to changes in the other. For a simple straight line (shown later) whatever changes there are on either price or demand a corresponding change will occur in the other. Only the slope of the line will determine the amount of change. A flatter line will show a smaller inverse price change than for a steep line where a small change in demand will have a dramatic effect on price.

For a sweeping demand curve as shown, the upper part is much steeper than further down to the right and will show a change in the Price Elasticity of Demand PED for different sections of the curve. For a straight line, the relationship is directly and inversely proportional between demand and price. For all textbook demand curves as one increases the other falls, although this might not apply to every product.

When the calculated figure for PED of less than one then the price is said to be inelastic i.e. demand will always be there even as prices increase, examples would be necessities such as food, petrol, heating etc. As the PED becomes greater and more than one the price is said to be elastic and applies to non-essential items, luxury goods. Elastic goods are often more expensive items, jewellery for example."

Note that a price change from £250 to £260 is 4% whereas the same increase from £50 to £60 is 20%.

ACCOUNTING TOOLS: Price for Shifts in Demand.

AccountingTools3

When the demand for a product increases the result is that prices also tend to increase. Therefore price increase is a direct result of increase in demand.

Increase in demand is shown by shifting the demand curve to the right and to the left for a reduction in demand.

This shift raises or lowers the price that can be obtained from the consumer. Also shown is the supply curve that has a direct relationship to both supply and price changes. Increase in demand effectively causes an extension in the supply of that good.

Shifting line D1-D1 to the left causes a contraction in supply.

Where the price remains the same and there is an increased demand (D1-D1 to the right) the effect is to show that demand only increases at the rate sufficient to maintain sales.

ACCOUNTING TOOLS: Effect of Price and Supply.

AccountingTools4

Supply is the amount of a good that producers are prepared to sell at a given price and depends upon a number of factors. The price cost of production, the availability of alternative goods that produce the same result, the overall availability of the same or similar goods at that time.

Moving along the supply curve shows that as demand increases, there is also a price increase, similarly as the price increases so the demand increases. This is opposite to the effect of the demand curve where price is inversely proportional to supply.

The term expansion in supply is often used to refer to an increase in price as a result of an increase in demand.

ACCOUNTING TOOLS: Changes in Demand for Shifts in Supply.

AccountingTools5

Changes in price do not shift supply curves, this only occurs if there is an increase or decrease in costs, a change in the amount of available goods or other production side effects.

Changes to the right of the supply curve are shown as a positive value and those to the left are negative, this is for the diagram interactive purposes only. Note the line S1-S1 appears to be above and below the original S-S line. This only appears so, it shifts right and left.

Shifting the supply curve is to show more or less is supplied at a given price. A change in taxes or subsidies will effect the position of line S1-S1. An increase in tax resulting in line S1-S1 moving left, similarly an increased subsidy will shift the line S1-S1 to the right.

ACCOUNTING TOOLS: Excess Supply or Demand and Market Price.

AccountingTools6

Overlaying the demand line D-D with that for the Supply S-S we can see there is a point in the middle where the crossover indicates that all of the good demand has been satisfied with an equal amount of supply and in theory this will result in a market price of 'P'.

However, rarely is it like this and there will be times when there is excess supply and others when there is excess demand. Adjusting the sliders will show the price changes for a greater or lesser amount of over capacity for supply or demand."

Where there is excess supply there is pressure to reduce prices towards point 'P'. Similarly where there is excess demand companies will be forced to increase prices as there will be a shortage of products available.

The equilibrium price is point P where the amount consumers want to buy equals the amount producers are prepared to sell at.

Equilibrium prices can change if there is a corresponding change in either supply and demand that shift lines D-D or S-S to the right or left as explained in previous topics.

Note excess supply or excess demand can never cross the equilibrium market price 'P'.

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FINANCIAL ACCOUNTS: Trading Account.

Interactive Content!

The Trading Account shows the gross profit (or loss) that the company has made. Profit is the money made by the business and is the sales income (sales revenue) less all expenses (cost of goods sold). The Trading Account is normally shown as the top section of the Profit and Loss Account. Here we are treating it separately as it allows us to build up the accounts for each section.

One of the most important uses of both the Trading and The Profit and Loss accounts is being able to compare the business financial results obtained with those expected. Note that taxes i.e. VAT are excluded as these have to be paid and do not form any part of the business profits.

Gross Profit is calculated in the Trading Account and is the amount left from the sales after the cost of goods sold (i.e. cost of those sales) has been subtracted during the period. Beginning with the total sales turnover for the given period, say the last financial year, from which is subtracted the cost of the goods sold, made up of opening stock and any new stock bought less any unsold stock at the end of the year.

Closing stock is valued at what it could be sold for and becomes the opening stock for the next financial period. The Trading Account may also list any other items of expenditure that can properly be allocated to costs connected with the purchase, manufacturing of goods for example. Try adjusting the figures to show how the total cost of goods sold is greater than the sales turnover. Gross profit then becomes a loss.

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FINANCIAL ACCOUNTS: Profit and Loss Account.

At the end of every trading year a business prepares final accounts of which the Profit and Loss is usually the most visible reflection of the business activity. These accounts provide a financial summary of all the trading activity during the year. The profit and loss accounts show the net profit (or loss) made. The trading account and profit and loss account are often combined as one trading and profit and loss account so that both the gross and net profit can be displayed together.

Making a profit is the objective for most businesses and is a measure of performance. The profit and loss account shows all the business transactions over the previous year. Gross Profit (calculated from the previous Trading account) is the sales turnover less the cost of obtaining those sales

The profit before tax or Operating Profit is calculated in the Profit and Loss Account and is what remains after all other costs used up in the period have been deducted from the Gross Profit.

It is usual to show the appropriation of the profit before tax as part of the Profit and Loss account. Here we keep these separate for the following topic.

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FINANCIAL ACCOUNTS: Appropriation Account.

The appropriation account shows what has been done with the total funds available to the company or organisation at the end of the tax year. It shows the division of total funds between tax payments, distribution to shareholders as dividends and the retained profit (reserves) by the company.

The appropriation account forms part of the final year accounts and is presented along with the Trading account, Profit and Loss account. Often these three accounts are shown linked together where the financial position of the company can be clearly seen from sales income to final retained profits on one continuous table of figures.

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FINANCIAL ACCOUNTS: Balance Sheet.

The balance sheet is one of a set of financial accounts that limited companies and PLCs have to produce each year. It shows the organisations assets and liabilities at any one point in time. Usually the end of the financial year.

There are two sections