"Accounting obligations: the balance sheet and the income statement"

Define a company's equity and liabilities structure, and explain in your own words what its three balance sheet categories represent: assets, equity, and liabilities.

Classify these balance sheet items as assets, equity, or liabilities: a van, a five-year bank loan, warehouse merchandise, capital contributed by partners, office computers, and a debt to a supplier.

Within assets, a distinction is made between non-current assets (items that remain in the company for more than a year) and current assets (those that turn into cash in less than a year). Classify these items of a company: an industrial warehouse, warehouse inventory, cash in the till, a patent, computers and the debts of some customers who will pay in three months.

Working capital is calculated as $FM = \text{current assets} - \text{current liabilities}$. A company has inventory worth $18.000\ \text{€}$, customers who owe it $12.000\ \text{€}$, cash of $6.000\ \text{€}$ and short-term debts of $25.000\ \text{€}$. a) Calculate its working capital. b) Interpret its sign.

A company presents these items: machinery $45.000\ \text{€}$, inventory $15.000\ \text{€}$, trade receivables $10.000\ \text{€}$, cash $5.000\ \text{€}$, share capital $30.000\ \text{€}$, reserves $12.000\ \text{€}$, long-term debts $18.000\ \text{€}$ and short-term debts $15.000\ \text{€}$. a) Arrange the items in the balance sheet by category (non-current and current assets; equity, non-current and current liabilities) and check that assets equal equity plus liabilities. b) Calculate the working capital and interpret it.

A gym took in $95.000\ \text{€}$ from its members' fees and had expenses of $70.000\ \text{€}$ in the year. a) Calculate the profit for the financial year: $Resultado = Ingresos - Gastos$. b) State whether the company has made or lost money and in which accounting statement it is recorded.

A logistics company has had this year: sales revenue of $260.000\ \text{€}$, purchases of $110.000\ \text{€}$, staff costs of $80.000\ \text{€}$, other operating expenses of $30.000\ \text{€}$, depreciation of $10.000\ \text{€}$ and debt interest of $4.000\ \text{€}$. a) Draw up the income statement calculating the operating profit and the profit for the financial year. b) Explain the difference between the two results.

A computer equipment trading company closed the month of December with a net profit of $45.000\ \text{€}$. However, on January 5, its current account balance is only $2.000\ \text{€}$ and it must face the payment of payroll ($22.000\ \text{€}$), social security contributions ($7.000\ \text{€}$), and the maturity of a bank loan installment ($18.000\ \text{€}$). Its usual commercial policy consists of granting its customers 90-day payment terms, while paying its suppliers in cash; in addition, in December it purchased a delivery van in cash for $35.000\ \text{€}$. a) Technically justify why a profitable company can find itself at imminent risk of insolvency/suspension of payments, identifying the specific transactions that have caused this liquidity squeeze. b) Design an immediate action plan to face that week's payments without resorting to staff layoffs, and propose two structural measures for managing the operating cycle to prevent the situation from recurring.

A bakery buys an oven for $12.000\ \text{€}$ with a useful life of six years and no residual value. a) Calculate the annual depreciation using the straight-line method: $A = \frac{\text{purchase price}}{\text{useful life}}$. b) Explain what depreciation represents and why it is an expense even though it is not paid every year.

The annual accounts include the balance sheet, the profit and loss account, and the notes to the accounts. Explain what information each document provides and why the law obliges companies to prepare them and file them at the Companies House / Commercial Registry.

The management team of an industrial company experiencing financial difficulties is debating two proposals before closing the financial year to avoid showing losses: 1) not to record the annual depreciation of machinery ($35.000\ \text{€}$) under the pretext that "it has been stopped for several months and has not worn out", and 2) to fully recognize as income for the year an advance payment of $80.000\ \text{€}$ made by a customer on account of an order that will be manufactured and delivered next year. a) Rebut both proposals by identifying which mandatory accounting principles and which aspects of the "true and fair view" principle would be violated in each case. b) Reasonably predict the equity, financial, and legal consequences this creative accounting would have for suppliers who decide to grant trade credit to the company based on these accounts, and for the directors who prepare them.