Management Accounting: Calculation of Current Assets, Liabilities, Stockholders' Equity, and More

This article provides a detailed explanation of the calculation of current assets, liabilities, stockholders' equity, and other financial terms in management accounting. It includes examples and formulas for each term, along with their significance in financial analysis. The article also includes references for further reading.

MANGEMENT ACCOUNTING
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For A
Total current assets = Cash +contracts receivables + other assets
Contracts receivables = Total current assets – Cash - Other assets
¿ 893,868−225971−162847=$ 505,050
Some of the customers are given products or services on credit and these lead to contracts
receivables. Thus, this refers to the amount pertaining to the contract that ought to be received
from the clients for the services already provided (Damodaran, 2015).
For B
Total assets = Total current assets + Equipment
Equipment = Total assets - Total current assets ¿ 1180660−893868=$ 286,792
One of the non-current assets refers to equipment, This is a non-current asset since unlike current
assets the benefits from these assets are realised over several years of their useful life. Equipment
would refer to the machines and other tools used in the fulfilment of the contract (Arnold, 2015).
For C
Total current liabilities = Accounts payable +Line of credit +Accrued expenses +Income tax
payable +Current portion of notes payable +Deferred income taxes
Accounts payable = Total current liabilities-(Line of credit +Accrued expenses +Income tax
payable +Current portion of notes payable +Deferred income taxes)
¿ 571679−(85000+72495+ 46660+31747+78460)=$ 257,335
Businesses typically take raw materials and other supplies on credit which implies that the
payment for these would be made at a later date. Accounts payable represents the sum total of all
such payments which are due to the suppliers and creditors on a given data (Northington, 2015).
For D
Total stockholders’ equity = Common stock +Additional paid in capital +Retained earnings
Retained earnings ¿ 436496 – (62000+63862)=$ 310,634
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Retained earnings refer to the internal accruals of the firm and are also referred to also
cumulative surplus profit or loss since every year the surplus profit or loss from the income
statement is transferred into this account (Damodaran, 2015).
For E
Total liabilities and stockholders’ equity = Total liabilities +Total stockholders’ equity
¿ 744164+ 436496=$ 1,180,660
This essentially represents the sum total of the total liabilities and stockholder’s equity. This is
equal to the total assets of the business (Arnold, 2015).
Total assets = Total liabilities + Shareholders’ Equity
For F
Gross profit = Contract Revenues – Contract Costs
Hence, Contract costs = 5146862 – 614343 = $ 4,532,519
Contract costs are the direct costs which are incurred for obtaining contract revenue
(Northington, 2015).
For G
Provision for income tax = Income before provision for income tax – Net income = 266217-
150767 = $115,450
Provision for income tax is the provisioning that is done for payment of income tax to the
government based on the pre-tax income and applicable tax rates (Damodaran, 2015).
For H
Retained Earnings, Beginning Balance = Retained Earnings, Ending Balance – Net income =
310634 – 150767 = $159,867
The retained earnings at the beginning of the year is the retained earnings that the company had
at the closing of the last year accounts (Arnold, 2015).
References
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Arnold, G. (2015) Corporate Financial Management. 3rd ed. Sydney: Financial Times
Management.
Damodaran, A. (2015). Applied corporate finance: A user’s manual 3rd ed. New York: Wiley,
John & Sons.
Northington, S. (2015) Finance, 4th ed. New York: Ferguson
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