a) Prepare a Statement of Profit or Loss (or `Income Statement`) for Augax Ltd for the year ended 30 June 2020 and a Statement of Financial Position (or `Balance Sheet`) as at that date.

The following information concerns Augax Ltd in relation to its year ended 30 June 2020:

Trial balance as at 30 June 2020:	Dr £	Cr £
Inventory as at 1 July 2019	50,418
Wages & salaries	126,407
Trade payables		70,881
Business rates	27,974
Utilities	21,584
Purchases	505,626
Trade receivables	92,400
Sales		1,053,388
Fixtures & fittings: at cost	440,160
IT equipment: at cost	188,160
Fixtures & fittings: accumulated depreciation at 1 July 2019		109,800
IT equipment: accumulated depreciation at 1 July 2019		70,920
Dividends paid	41,960
Cash at bank	1,592
5% loan notes 2030-2032		161,000
Loan note interest paid	4,025
Bad debt expense	10,918
Share premium		33,000
Allowance for doubtful debts at 1 July 2019		1,861
Premises: at cost	675,700
Premises: accumulated depreciation at 1 July 2019		175,682
Ordinary shares of 10p each		139,000
3% irredeemable preference shares of £1 each		61,000
Commissions received		8,766
Directors` remuneration	84,270
Retained profits at 1 July 2019		385,896
	2,271,194	2,271,194

In addition to the above trial balance you ascertain the following information:
1. The inventory was counted at 30 June 2020 and was valued at a cost of £54,909.

2. Depreciation needs to be charged at the following rates per year:

Premises: Fixtures & fittings: IT equipment:

(straight-line) 2% (reducing balance) 25% (straight-line) 20%

3. The amount shown for business rates on the trial balance includes a payment of £6,180 which represents twelve months` business rates to 31 August 2020.
4. Utilities charges incurred for which no invoices have yet been received amount to a total of £7,842.
5. The audit fee for the year has been agreed at £18,000 and this needs to be provided for.
6. The allowance for doubtful debts is to be set at 3% of trade receivables.
7. The interest on the loan notes is paid in two instalments each year, and the second instalment needs to be accrued.
8. The corporation tax charge on this year`s profit is estimated to be £27,000.

Required:

1. a) Prepare a Statement of Profit or Loss (or `Income Statement`) for Augax Ltd for the year ended 30 June 2020 and a Statement of Financial Position (or `Balance Sheet`) as at that date.

(38 marks)

2. b)  There are many possible different groups of users of financial statements. For example, the suppliers of a company may be interested in using its financial statements to assess that company`s ability to pay for its goods. Identify three other potential user groups (in addition to suppliers) and briefly outline why they would be interested in financial statements.

(6 marks)

3. c)  Explain, using at least two examples, why the increase (or decrease) in a company`s cash during the year will nearly always be different to the profit (or loss) that it reports for that year.