Financial Statement Analysis of Nazmul Haque Organization

This report analyses the financial statement of Nazmul Haque Organization for the month of May. It includes the trial balance, profit and loss account, and balance sheet. The report also highlights the main sources of income and expenditure of the organization.

Running head: ACCOUNTING AND INFORMATION SYSTEM
ACCOUNTING AND INFORMATION SYSTEM
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Introduction................................................................................................................................3
Financial Statement Analysis.....................................................................................................3
References..................................................................................................................................7
Appendix....................................................................................................................................8

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Introduction
The objective of the present report is to analyse financial statement that the company
prepares for month of May. The financial statement that is to be formulated is Nazmul Haque
organization which is majorly engaged in business of socks trading (Scott 2015). The
financial statements of the company are mainly prepared for the period ending at 31st May
and for this journal entries are passed by the business for every transactions it made during
that month. Furthermore, the business also passes the ledger accounts based on which Trial
Balance has been made by them. The organization’s financial statements that are prepared for
the month has been highlighted in the appendix section of this report.
Financial Statement Analysis
The trial balance for this business has been prepared based on the transactions that are
recorded in ledger accounts(Levy 2014). The main objective of preparing trail balance by the
organization is to test numerical accuracy of entries as well as figures that have been recorded
in entity’s account book. It has been reflected in the appendix section that the trail balance
has been made based on the accounting rules (Chalmers, Godfrey and Lynch 2012). Apart
from this, the match in trial balance also reflects that no error is there in the trail balance. The
trail balance prepared by the company highlights all income, expenditure, liabilities and
assets of the enterprise at the month end. The total sales of the enterprise that is generated is
reflected in Profit and loss account as well as in Trial Balance, which shows $9,829 for the
specific month. In fact, the main expenditure of the enterprise that has been directly related to
its commodity is the total cost of the product sold as reflected in company’s income statement
and trail balance is around $5,932 (Reid and Myddelton 2017). This expenditure is directly
related to manufacture of the commodities that are sold by the business enterprise. Moreover,

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the enterprise trail balance reflects that both the credit as well as debit side of trail balance
matches and thus the figure shown for the month is around $566,660.
According to Robinson et al. (2013),the entity’s profit and loss account reflects the
amount of profit or loss that the business has generated during a specific period. On the other
hand, the income statement of the company shows all incomes as well as expenses that the
business has incurred and earned during the whole month. In case of this organization, the
profit and loss account reflects several expenditure that are incurred during the month by the
business. It also shows that the company’s main source of income has been obtained through
sales of socks. Moreover, the entity also earns side income that is mainly related to the
interest income, which reflects to be around $706. It has been evident from the study that the
interest income that this entity earns is mainly related to investments made by the business
that is highlighted in enterprise balance sheet. The operating expenditure of the enterprise is
highlighted in the pie chart given below -
Figure 1: The chart reflecting expenditure of the entity for the May month
Source: (As created by author)

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The pie chart given above reflects that the main portion of operating expenditure has
been made up of rent that is generally considered as the company’s fixed expenses. The total
amount of rent that the enterprise pays during the month is $4,545. Another expenses that is
involved under operating expenses for the May month comprises of interest expenses, which
is reflected as $2,042. The expenses mainly occurred owing to loan that the company has
undertaken, which is also shown in entity’s balance sheet (Gipper, Lombardi and Skinner
2013). The main expenditure for the enterprise is interest expenses that is generally related to
debt servicing during the month. In addition to this, other expenses that is highlighted in
profit and loss account are Motor vehicle expenses and depreciation, which is highlighted to
be $531 and $306 respectively. Moreover, the business has incurred huge loss of around $2,
822 during the month owing to rise in expenses in business. The operating expenditure
mainly forms main part of business expenditure and hence the business can enhance it by
decreasing operating expenses.
The basic objective of making balance sheet of the enterprise is to highlight business
financial position for the May month. A bar diagram is also drawn in order to show the
present company’s current assets in better way.

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Figure 2; Chart reflecting current asset of organization for May month
Source: (As created by author)
The graph reflects that the current asset of organization depicts the expenses that are
of prepaid nature incurred during the month and thus prepaid rent as well as prepaid
advertisement is reflected as $22,727,27. The bank balance is highlighted to be favorable
during this month that is shown as $446, 140.78. In fact, the business total equity is shown as
$200,000 that represents capital of owner lees the total loss amount that is incurred during the
monthg by business (Robinson et al. 2015) Moreover, the total assets is highlighted to be
$546,344.85. It is also seen that liabilities side matches assets side according to accounts
matching concepts.

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References
Botzem, S., 2012. The politics of accounting regulation: Organizing transnational standard
setting in financial reporting. Edward Elgar Publishing.
Chalmers, K., Godfrey, J.M. and Lynch, B., 2012. Regulatory theory insights into the past,
present and future of general purpose water accounting standard setting. Accounting,
Auditing & Accountability Journal, 25(6), pp.1001-1024.
Gipper, B., Lombardi, B.J. and Skinner, D.J., 2013. The politics of accounting standard-
setting: A review of empirical research. Australian Journal of Management, 38(3), pp.523-
551.
Levy, J., 2014. Accounting for Profit and the History of Capital. Critical Historical
Studies, 1(2), pp.171-214
Reid, W. and Myddelton, D.R., 2017. The meaning of company accounts. Routledge.
Robinson, T.R., Henry, E., Pirie, W.L. and Broihahn, M.A., 2015. International financial
statement analysis. John Wiley & Sons.
Scott, W.R., 2015. Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.

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Appendix
Balance sheet

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Profit and loss

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Trial Balance