Session 2Case studies and Solutions

Nursery ManagementUnderstanding and Managing Finance

Lemonade Stall

On the third car boot sale that you attend, you decide to pay your friend back entirely. In addition you purchase another 250 pens at 20p each. This time the entry fee is £10, but it rains and you only sell 50 of your pens at 50p each.

Construct a cash flow statement, profit & loss account and a balance sheet. for the third day.

The Cash Flow Statement –end of Day 2

Opening Balance: £ 80

Loan from friend: £ 30- (paid back)

Goods purchased: £ 30- (150 x 20p)

Entry Fee: £ 5-

Cash received: £ 50+ (100 x 50p)

Closing Balance: £ 65

Cash Flow Statement Day 3

Opening Balance: £ 65

Loan from friend: £ 20- (now paid back)

Goods purchased: £ 50- (250 x 20p)

Entry Fee: £ 10-

Cash received: £ 25+ (50 x 50p)

Closing Balance: £ 10

NOTE:

This could not have happened in this sequence, as the business did not have enough cash after paying back the loan!

NOTE:

This could not have happened in this sequence, as the business did not have enough cash after paying back the loan!

The Profit & Loss Account –End of Day 2

Sales: £ 50 (100 x 50p)

Cost of Sales: -£ 20 (100 x 20p)

Entry Fee: -£ 5

Net Profit: £ 25

Profit & Loss Account – Day 3

Sales: £ 25 (50 x 50p)

Cost of Sales: £ 10 (50 x 20p)

Gross Profit: £ 15

Entry Fee: - £ 10

Net Profit: £ 5

The Balance Sheet –End of Day 2

Assets:

Cash: £ 65

Stock: £ 20 (100 x 20p)

Total: £ 85

Liabilities:

Loan outstanding: £ 20

Retained profits: £ 65

Total: £ 85

Balance Sheet Day 3

Assets: Cash: £ 10

Stock: £ 60 (300 x 20p)Total: £ 70

* Opening Stock: 100 pensStock Purchased + 250 pensStock Sold - 50 pensClosing Stock: 300 pens

Liabilities:

Loan outstanding: £ 0

Retained profits: £ 70

Total: £ 70