Accounting and Financial Statement Analysis Homework Solution

This accounting assignment solution covers the preparation and analysis of financial statements, including an income statement and balance sheet for January 2014. It depicts the accounts affected by transactions, calculates profit before tax and profit, and details the retained earnings. The assi...Read More

Running head: ACCOUNTING
Accounting
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Exercise 1:..................................................................................................................................2
1. Depicting the accounts affected by the transactions in January:............................................2
2. Preparing income statement for January:...............................................................................2
3. Preparing Balance sheet for January:.....................................................................................3
Exercise 2: Considering the ethical condition for management to hold the meeting and plan
for the advance to improve financial statements that will be creditors and investors:..............4
Reference and Bibliography:......................................................................................................7

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Exercise 1:
1. Depicting the accounts affected by the transactions in January:
Inventory
Cash
Operating expenses
Interest expenses
Depreciation expense
Net sales
Accounts receivables
Accounts payable
Cost of goods sales
The above table mainly depicts the relevant account that could be affected by the
transactions in January.
2. Preparing income statement for January:
Income statement for January 2014
Particulars Amount Amount
Net sales 17,800
Cost of goods sales 8,750
Gross profit 9,050
Operating expenses 500
Interest expenses 1,500

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Depreciation expense 350
Rent 200
Total expenses 2,350
PBT 6,700
Tax expenses 2,010
Profit 4,690
Retained earnings 5,040
Retained earnings of Dec 3,510
Total retained earnings 8,550
3. Preparing Balance sheet for January:
Balance Sheet for January 2014
Particulars Amount Amount
Inventory 4,500
Cash 14,450
Accounts receivables 7,600
Prepaid rent 400
Current assets 26,950
Building equipment 88,000 88,000
Total assets 114,950
Notes payable 600
Accounts payable 5,800
Current liabilities 6,400
Long term debt 55,000 55,000

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Total liabilities 61,400
Net assets 53,550
Capital 45,000
Retained earnings 8,550
Total equity 53,550
Exercise 2: Considering the ethical condition for management to hold the meeting and
plan for the advance to improve financial statements that will be creditors and
investors:
After considering the overall scenario, it is ethical for the management to hold the
meeting, where relevant planning of advancements could be conducted to improve its overall
financial statement. This relevant meeting would eventually help in developing a strategy,
which could help in distributing financial benefits to the creditors and investors (Khairi and
Baridwan 2015). The relevant proposal or idea that is presented in the case mainly indicates
the measures that could be used in controlling the unusually low cash position of the
company.
1. The first idea regarding discount provided to customers for immediate payment is relevant
measure, which could directly help in improving the cash position of the company. This idea
is mainly considered to be both ethically and generally viable for the business, which could
help in improving liquidity conditions in the organisation.
2. The second idea regarding selling the account receivables to financing Agencies for
immediate cash is also an adequate decision, which might help in improving liquidity
conditions and cats position of the organisation. The idea is ethically sound, where no
violations on both ethical and accounting issues are conducted.

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3. The relevant idea for presenting the overall balance sheet presentation of cash is relatively
not an adequate suggestion. The idea is not an adequate suggestion system, as it is using
unethical measures to add unused line of credit in the balance sheet. This relevant edition of
unused credit balance is relatively violating the accounting rules and business ethics.
Therefore, the idea cannot be implemented by the organisation at it violates business and
accounting issues.
4. The suggestion 4 could eventually help in generating higher cash flow as all the relevant
notes receivable will be en-cashed by the organisation. This relevant move could eventually
help in improving the financial condition of the business, while it might hamper business
operations. This relevant enforcement that needs be implemented by the company would
directly project the financial position to the investors and creditors, which might increase
concern among the stakeholders.
5. This overall process could improve only the financial accounting system, whereas both the
cash position and business performance of the organisation will not be improved. The overall
marketable value will only boost the balance sheet, while hampering overall ability of the
organisation to support it financial activities.
6. The relevant stoppage of payment to supplier for December will increase cash for the
business only for short duration, which might increase concern among the suppliers and
might hamper the credit facility provided to the organisation. Therefore, the suggestion could
create both business and accounting issues in future for the organisation. Hence, this
suggestion should not be accepted.
7. The overall suggestion 7 is relatively depicting the unethical measure that could be
conducted by organisation for inflating their balance sheet. This relevant suggestion directly
increases the unethical measures that it should be conducted by the organisation manipulating

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the investors and creditors regarding its current financial condition. Therefore, the suggestion
should not be accepted by the organisation as it creates both business and accounting issues.