Accounting Guidance for Pomelle Ltd — Cost Control
Question 1
Pomelle Ltd is a retail company currently facing rising operating costs and declining profits. As the company’s accountant, you have been asked by management to guide on how Financial Accounting and Management Accounting information can be used to address these challenges.
Required:
Using relevant accounting concepts and terminology, explain how each type of accounting can assist the company in making informed decisions. Provide at least two practical examples for Financial Accounting and two for Management Accounting to support your answer.
Question 2
The following balances are taken from the books of Emilio Ltd for December 2025:
| Item | $ |
|---|---|
| Cash at Bank | 54,000 |
| Trade Receivables | 65,000 |
| Opening Inventory | 11,400 |
| Machinery | 250,000 |
| Accumulated depreciation | 25,000 |
| Trade payables | 40,000 |
| Accruals | 23,600 |
| Loan | 24,000 |
| Purchases | 194,000 |
| Sales | 450,000 |
| Salaries expense | 25,600 |
| Depreciation expense | 25,000 |
| Administrative expenses | 5,000 |
| Carriage inwards | 1,450 |
| Capital | ? |
Required:
Prepare a Trial Balance for Emilio Ltd as at December 2025.
Question 3
Emma Ltd, a newly established company, began operations in January 2025. The business specialises in selling eco-friendly office supplies, targeting both corporate clients and walk-in customers.
The company has kept a record of its transactions since its inception and now wishes to prepare its financial statements for review. The following transactions have been extracted from the books of accounts of Emma Ltd:
- Started business with capital of $2,000,000 cash.
- Opened a business bank account and deposited $700,000 cash.
- Bought furniture for $54,200 for cash.
- Emma Ltd bought goods worth $154,600 from Annaya Ltd.
- Sold goods to Ash Ltd for $300,000 on cash terms.
- Emma Ltd bought office equipment on credit from Goody Wood Furnishings Ltd for $600,000.
- Emma Ltd paid the company a monthly rent $150,000 in cash.
- Emma Ltd sold goods worth $100,000 to Alexa Ltd on credit.
- Emma Ltd returned $4,600 worth of goods to Annaya Ltd as they were defective.
- Alexa Ltd returned $2,000 worth of goods to Emma Ltd as they were the wrong size.
Required:
Prepare the journal entries for the above transactions.
Question 4
June Ltd is a medium-sized retail company that specialises in lifestyle and household products. Over the past year, the company has expanded its operations by opening two new outlets and investing in modern equipment to improve efficiency. While sales have grown steadily, management is concerned about rising operating expenses and their impact on profitability.
As part of the year-end process for 31 October 2026, the finance team has prepared the trial balance and gathered additional information for adjustments. You have been engaged as the company’s trainee accountant to assist in the preparation of the Income Statement and the Statement of Financial Position.
The following account balances were extracted from the books of June Ltd for the year ended 31 October 2026:
June Ltd
Trial Balance as at 31 October 2026
| Account | Debit ($) | Credit ($) |
|---|---|---|
| Cash at Bank | 115,000 | |
| Trade receivable | 135,600 | |
| Other Payables | 24,590 | |
| Inventory (01 November 2025) | 80,200 | |
| Cash in Hand | 39,800 | |
| Premises | 1,500,000 | |
| Accumulated depreciation Premises | 300,000 | |
| Plant and Equipment | 450,000 | |
| Accumulated depreciation Plant and Equipment | 180,000 | |
| Trade payable | 107,910 | |
| Administrative expense | 38,000 | |
| Insurance expense | 56,000 | |
| Utilities expense | 43,500 | |
| Share Capital | 1,500,000 | |
| Sales | 1,500,000 | |
| Sales returns | 18,000 | |
| Office Repairs | 34,600 | |
| Purchases | 569,000 | |
| Salaries and Wages | 432,000 | |
| Marketing expense | 100,800 |
| | 3,612,500 | 3,612,500 |
Additional Information:
a. Utilities amounting to $3,500 were outstanding as at 31 October 2026.
b. The insurance expense recorded includes a prepayment of $6,500 relating to November 2026.
c. The closing inventory on 31 October 2026 was valued at $132,000.
d. Irrecoverable debts to the value of $27,000 are to be written off.
e. Depreciation is to be provided on the Premises at 10% of the cost.
f. Depreciation on Plant and Equipment for the year amounts to $45,000.
Required:
i. Prepare an Income Statement for the year ended 31 October 2026.
ii. Prepare a Statement of Financial Position as at 31 October 2026.
Accounting Assignment Answers: Experts Answer on Above Accounting Questions
How financial accounting and management accounting help for Pomelle Limited?
Both financial accounting and management accounting have a significant role to play in allowing managers to take relevant decisions in enhancing their performance. Pomelle Ltd can benefit from utilising financial accounting in terms of understanding about its profitability performance, assets and liabilities and also with the trends with respect to gross profit and net profit margin. This will help in taking relevant decisions related to growth and overall performance of the organisation. Management Accounting is helpful in providing information to the management that supports their decisions. It provides information about costing, variance analysis, budget and marginal contribution and thereby allows management to take relevant decisions that can help in achieving better growth and performance of the organisation.
How each assists Pomelle with rising cost and falling profit
With financial accounting data, it is possible for the management to identify the profit margin including gross profit, operating profit and net profit which will help them in identifying the factors that contribute towards lower profit performance. As for example, if a financial statement shows rising COGS, then management can renegotiate contracts with suppliers or adjust pricing. With management accounting, it becomes possible for the management to identify the direct and indirect cost, and they can also identify unprofitable SKUs or stores. This will allow the management to make rational decisions with the identified SKUs that contributed towards lower profitability.
Recommended plan for Pomelle Ltd
It is recommended to continue SKU profitability using contribution margin to stop loss making outlets. It is also recommended to target the cost lines that are eroding its margin. Also make use of budget and variance reports to perform corrective actions early.
Trial balance for Emilio Ltd as at December 2025
| Item | $ |
|---|---|
| Cash at Bank | 54,000 |
| Trade Receivables | 65,000 |
| Opening Inventory | 11,400 |
| Machinery | 250,000 |
| Accumulated depreciation | 25,000 |
| Trade payables | 40,000 |
| Accruals | 23,600 |
| Loan | 24,000 |
| Purchases | 194,000 |
| Sales | 450,000 |
| Salaries expense | 25,600 |
| Depreciation expense | 25,000 |
| Administrative expenses | 5,000 |
| Carriage inwards | 1,450 |
| Capital | 68850 |
Total Debits: 631450, Total credits: 562600, so capital = 68850
| Disclaimer: This answer is a model for study and reference purposes only. Please do not submit it as your own work. |
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