ACC1AIS - Financial Statement Analysis for Rohit Gauchan Company

This report presents a detailed analysis of the financial statements of Rohit Gauchan Company for the month of May. The analysis includes a review of the trial balance, profit and loss account, and balance sheet, highlighting key financial figures and ratios. The report identifies the company's sales revenue, cost of goods sold, and operating expenses, providing insights into its profitability and financial position. A pie chart illustrates the distribution of operating expenses, while a bar diagram showcases the composition of current assets. Despite generating sales revenue, the company incurred a loss for the month, primarily due to high operating expenses, particularly rent and interest expenses. The report concludes by emphasizing the importance of reducing operating expenses to improve profitability and financial performance. Desklib offers a wide range of study resources, including past papers and solved assignments, to support students in their academic endeavors.

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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ACCOUNTING AND INFORMATION SYSTEM
Table of Contents
Introduction......................................................................................................................................2
Analysis of the Financial Statements...............................................................................................2
Reference.........................................................................................................................................6
Appendix..........................................................................................................................................7

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Introduction
The main purpose of the assignment is to analyze the financial statement which are
prepared by the business for the month of May. The business for which the financial statements
are to be prepared is Rohit Gauchan Company which is engaged in the business involving
trading of socks. The financial statements are prepared for a period ending 31st May and for the
same the business passes journal entries for all the transactions the business was involved in
during the month. In addition to this, the business passes ledger accounts on the basis of which
Trial Balance is prepared by the business. The financial statements which are prepared for the
company for the month is shown in the appendix at the end of the assignment.
Analysis of the Financial Statements
The transactions which are recorded which are recorded in the ledger accounts are used
for preparing the trial balance of the business. The main purpose of the trial balance which is
prepared by the company is test the numerical accuracy of the entries and their figures which
have been recorded in the books of accounts of the company (Karaninak, Bykova and Ilysheva
2014).
As per the trial balance of the company which is shown in the appendix sections shows
that the trial balance is prepared according to the accounting rules and in addition to this, the trial
balance matches which shows that there is no error in trial balance. The trial balance shows all
expenses, income, assets and liabilities of the business at the end of the month. The sales of the
business which is generated is shown in both Trial Balance and Profit and loss account and the
same is shown as $ 9,829 for the month. The major expenses of the business which is directed
related to the product is the cost of good sold which is shown in the trial balance as well as the

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income statement is $ 5,932. The expenses are directly related to the production of the products
which is sold by the company. The trial balance of the business shows that debit and credit side
of the trial balance matches itself and the total figure is shown to be $ 566,660 for the month.
The profit and loss account of any business shows the profit or loss which the business
can generate during the period and the statement shows all the income and expenses which the
business earns and incur during the month (Madu 2013). In the case of the company, the profit
and loss account show numerous expenses which are incurred by the business during the month.
The major source of income for the business is through the sales of socks and the company also
earns side income which is related to interest income which is shown to be $ 706. The interest
income which the business earns is related to the investments which the business has made and
the investments is shown in the balance sheet of the company (Robinson et al. 2015). The
expenses for more vivid presentation is shown in a pie chart below which reflects the operating
expenses of the business during the month.
4%
28%
7%
61%
Operati ng Expenses
Depreciation Interest Expense
Motor Vehicle Expenses Rent
Figure 1: (Pie Chart Showing Expenses of the Company for the Month of May)

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ACCOUNTING AND INFORMATION SYSTEM
Source: (Created by Author)
As per the pie chart which is shown above, the major portion of the operating expenses is
made up of rent which is considered to be fixed expenses for the company. The amount of rent
which the business pays during the month is shown to be $ 4,545. The second major expense
which the operating expenses for the month consist of is interest expenses which is shown to be
$ 2,042 for the month. This expense arises due to the loan which the business has undertaken and
the same is shown in the balance sheet of the company (Levy 2014). The interest expense is
major expense for the business and the expenses is related to the debt servicing for the month.
The other expenses which is shown in the profit and loss account are depreciation and Motor
vehicle expenses which is shown to be $ 306 and $ 531 respectively. Due to the increased
expenses of the business, the company has incurred a loss which is shown as $ 2,822 for the
month. This is not a positive sign and the business can improve the same by reducing the
operating expenses of the company. The operating expenses forms the major part of the expenses
of the business.
The main purpose of preparing the Balance sheet of the company is show the financial
position of the business for the month of May (Boeckx, Dossche and Peersman 2014). The
balance sheet of the company is reflection of the financial position in terms of the assets and
liabilities which the business possesses during the end of the month. In order to present the
current assets of the company in a better manner, a bar diagram is developed portraying the same
which is shown below:

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Accounts
Receivable
Interest
Receivable
Inventory Office
Supplies
Prepaid
Advertising
Prepaid Rent
0.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
3921.05
705.65
12468.1
2960.91
22727.27 22727.27
Current Assets
Figure 2: (Chart Showing Current Assets of the Company for the Month of May)
Source: (Created by Author)
As per the graph which is shown above, the current assets of the company is shown
which depicts that the expenses which are of prepaid nature are incurred more during the month
and therefore both prepaid advertisement and prepaid rent is shown to be $ 22,727.27. The bank
balance is also shown to be favorable during the month which is shown to be $ 446,140.78
(Bobryshev et al. 2014). The total equity of the business is shown to be $ 200,000 which
represents the owner’s capital less the amount of loss which is incurred by the business during
the month. The total of the assets side is shown to be $ 546,344.85. The fixed assets of the
business comprise of Motor Vehicles and Office furniture (Damar, Meh and Terajima 2013). The
liabilities side also matches the assets side which is as per the matching concept in accounts.

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Reference
Bobryshev, A.N., Uryadova, T.N., Lyubenkova, E.P., Yakovenko, V.S. and Alekseeva, O.A.,
2014. Analytical and management approaches to modeling of the accounting balance sheet. Life
Science Journal, 11(8), pp.502-506.
Boeckx, J., Dossche, M. and Peersman, G., 2014. Effectiveness and transmission of the ECB's
balance sheet policies.
Damar, H.E., Meh, C.A. and Terajima, Y., 2013. Leverage, balance-sheet size and wholesale
funding. Journal of Financial Intermediation, 22(4), pp.639-662.
Karanina, E., Bykova, I. and Ilysheva, N., 2014. Management Accounting System and the
Balanced Scorecard: ReflectingEnterprise Risks. American Journal of Scientific and Educational
Research, (1), p.112.
Levy, J., 2014. Accounting for Profit and the History of Capital. Critical Historical Studies, 1(2),
pp.171-214.
Madu, B.C., 2013. Vision: The relationship between a firm's strategy and business
model. Journal of behavioral studies in business, 6, p.1.
Robinson, T.R., Henry, E., Pirie, W.L. and Broihahn, M.A., 2015. International financial
statement analysis. John Wiley & Sons.

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Appendix

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