The following are Statement of Financial Position and Statement of Comprehensive Income of Lala Electronics Sdn. Bhd. Table 3: Statement of Financial Position and Statement of Comprehensive Income of Lala Electronics Sdn. Bhd. Lala Electronics Sdn. Bhd. Statement of Financial Position as at 31/12/2020 Non-Current Asset: RM RM Investment 270,000 Fixed Assets at cost 1,596,000 Accumulated Depreciation (857,000) Net Book Value 739,000 Current Asset: Cash 178,000 Account Receivable 678,000 Inventory 1,329,000 Prepaid Expenses 56,000 2,241,000 Total assets 3,250,000 Current Liabilities: Account Payable 148,000 Interest Payable 36,000 Income Taxes Payable 448,000 Other Accrued Liabilities 191,000 Total Current Liabilities 823,000 Long Term Liabilities: Bank Loan 631,000 Total Liabilities 1,454,000 Equity: Capital 782,000 Appropriate Profit (Retained Earnings) 1,014,000 1,796,000 3,250,000 Lala Electronics Sdn. Bhd. Statement of Comprehensive Income for the year ended 31/12/2020 RM RM Sales 3,992,000 (-) COGS (2,680,000) Gross Profit 1,312,000 (-) Selling, General and Administrative expenses (912,000) EBIT 400,000 (-) Interest Expense (85,000) EBT 315,000 (-) Income Taxes (114,000) Earnings after Taxes 201,000 (i) Calculate the cash conversion cycle for Lala Electronics Sdn. Bhd. (ii) Based on the answer in (i) above, justify your answer.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
The following are Statement of Financial Position and Statement of Comprehensive
Income of Lala Electronics Sdn. Bhd.
Table 3: Statement of Financial Position and Statement of Comprehensive Income of
Lala Electronics Sdn. Bhd.
Lala Electronics Sdn. Bhd.
Statement of Financial Position as at 31/12/2020
Non-Current Asset: RM RM
Investment 270,000
Fixed Assets at cost 1,596,000
Net Book Value 739,000
Current Asset:
Cash 178,000
Account Receivable 678,000
Inventory 1,329,000
Prepaid Expenses 56,000
2,241,000
Total assets 3,250,000
Current Liabilities:
Account Payable 148,000
Interest Payable 36,000
Income Taxes Payable 448,000
Other Accrued Liabilities 191,000
Total Current Liabilities 823,000
Long Term Liabilities:
Bank Loan 631,000
Total Liabilities 1,454,000
Equity:
Capital 782,000
Appropriate Profit (
Earnings
1,014,000
1,796,000
3,250,000
Lala Electronics Sdn. Bhd.
Statement of Comprehensive Income for the year ended 31/12/2020
RM RM
Sales 3,992,000
(-) COGS (2,680,000)
Gross Profit 1,312,000
(-) Selling, General and Administrative expenses (912,000)
EBIT 400,000
(-) Interest Expense (85,000)
EBT 315,000
(-) Income Taxes (114,000)
Earnings after Taxes 201,000
(i) Calculate the cash conversion cycle for Lala Electronics Sdn. Bhd.
(ii) Based on the answer in (i) above, justify your answer.
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