Financial statements, analysing business transactions and financial statement analysis

Jessica Smith started a new sole trader business called Tech Solutions on 1 January 2019. The business provides telecommunication services to start-up businesses who want to enhance their network and customer reach. Jessica has asked her accountant, Megan Brown, to complete financial statements and write a business report on the financial health of Tech Solutions in its first year of operation.

Next Step has the following account balances as at 31 May 2019;

Cash  $94,600

Accounts receivable $22,500

Fixtures and Fittings $30,000

Communication Server $55,000

Accounts payable $17,800

Bank Loan $25,000

Capital $106,000

Income $79,200

Expenses ($25,900)


The following transactions occurred in the last month of the financial year- June 2019.

June Transaction Description

1             Paid the business telephone bill $1,300.

2             Made a loan repayment of $5,000.

3             Received $6,600 payment for outstanding invoice (sent 15 May) from Ace Communications.

6             Paid $120 internet service provider account, outstanding from May.

9             Sent a $5,240 invoice for services performed during the first week of June for Jones Partners.

12           Megan paid $1,500 for a 5 star restaurant meal with friends from the business account.

13           Received $9,400 in cash from customers for services.

17           A water leak damaged some fittings which had to be immediately disposed with no salvage value. The original cost of the damaged fittings was $3,000.

18           Paid plumber $1,000 to to perform urgent repairs on building plumbing.

19           Megan injected $8,300 of her own cash into the business bank account.

20           With the exception of one $555 invoice (which remains outstanding) received payment from all remaining outstanding May invoices.

22           Received payment for the last outstanding May invoice.

25           Sent a $3,333 invoice for services performed on 23 June for Quick Marketing.

26           Advanced telecommunication infrastructure was purchased to improve the quality of PR services. The complete cost of the project was $23,500. $8,500 was paid from the business bank account and the balance was financed via a loan.

28           Sent a $7,530 invoice for services performed in the third week of June for Green Messenger.

29           Received half payment for invoice sent to Green Messenger.

30           Paid $7,000 in accounting fees for June.

30           Paid $14,000 in rent for the period 1 June 2019 to 31 December 2019.

30           Paid interest expense of $200 for June.



Part A: Worksheet

You are required to complete the worksheet in the ‘Assignment 2 Template’ for Tech Solutions. Using the sheet labelled ‘Worksheet’ identify the business transactions for June 2019 and construct an accounting worksheet.


Part B: Financial statements


Using the same Excel file that you used for Part A, you need to prepare the following financial statements of Tech Solutions from the accounting worksheet for the 2019 financial year:

  • Income statement.
  • Statement of changes in equity.
  • Balance sheet.

Assume expenses incurred up to 31 May 2019 consisted of: $200 for supplies, $12,000 for accounting fees, $700 for internet services, $10,000 for rent and $3,000 for advertising.


PART C: Ratio analysis


In the same Excel template that you used for Part A and B use the sheet labelled ‘Ratio Analysis’, to complete the following:

  • the table labelled ‘Ratio Figures’. You are required to use formulas only to transfer the figures needed from the statements into this table (do not type answers directly into this table).
  • the column labelled ‘formula’. You are required to provide the written formula for each of the ratio’s provided (first one completed for you as an example).
  • the column labelled ‘2019’. You are required to use formula only by pulling figures from the table completed above ‘Ratio Figures’ to show the ratio calculation. (Do not type ratio answer directly into the table).

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