ACC506 ATMC Task 2: Financial Analysis of Chalkboard Supplies Report

This report provides a financial analysis of Chalkboard Supplies, a business that supplies office furniture. The analysis includes the company's income statement and balance sheet, revealing a net loss due to high costs and lower revenue. The report examines financial performance, suggesting strategies to improve profitability, such as reducing costs and increasing sales volume. It also discusses depreciation methods, specifically the straight-line method for assets like vehicles and computers. Inventory methods, particularly the perpetual inventory method, are addressed, along with a discussion of internal control mechanisms like setting access levels and implementing cash controls. The conclusion highlights the importance of proper accounting practices and financial statement presentation for business growth. The report is based on the provided financial data and accounting policies of Chalkboard Supplies.

Running head: Financial Analysis Chalkboard 1
Financial Analysis Chalkboard

Financial Analysis Chalkboard 2
Table of Contents
Introduction.................................................................................................................................................3
A) Income Statement and Balance sheet...............................................................................................3
B) Financial Performance.....................................................................................................................5
C) Depreciation....................................................................................................................................5
D) Inventory Methods...........................................................................................................................6
E) Internal Control Mechanisms...........................................................................................................6
Conclusion...................................................................................................................................................7
References...................................................................................................................................................8

Financial Analysis Chalkboard 3
Introduction
Financial statements are termed as the basic reports which are prepared by the company for
satisfying the needs of the users of the financial statements. The financial statements are also
prepared to cater the needs of the management, suppliers, investors, shareholders and the
customers, so that they can make the decision of whether to expand the business, whether to
invest in the business, whether to buy the product or not. These statements are nothing but the
quantitative analysis of the company which is required for the future comparison. This report
presents the income statement of the Chalkboard Company.
A) Income Statement and Balance sheet
Income statement
(For the month ending 31st June 2018)
Particulars Amount
By Revenue 24260.64
Service revenue 300
Total Revenue 24560.64
Cost of Goods Sold 38209.6
Discount on sales 1655.64
Bad Debts expense 15
Depreciation Expense 17656
Insurance Expense 4580
Inventory Loss 1200
Interest Expense 2520
Supplies Expense 180
Wages Expense 2731
Total Expense 68747.24
Net Loss -44186.6
68747.24

Financial Analysis Chalkboard 4
Balance sheet
As at 31st June 2018
Particulars Amount Amount
Cash at Bank 44806.4
Accounts Receivable 300
Provision for Doubtful Debts 15
Supplies 2460
Inventory 23419
Prepaid Insurance 920
GST Paid 2205
Vehicles 48510
Accum Dep - Vehicles 7930
Computers 44462
Accum Dep - Computers 9726
167082.4 17671
Total 149411.4
Liabilities
B Dusty, Capital 67000
B Dusty, Drawings 12200
Net Profit 44186.6
Accounts Payable 92972
Loan Payable 42000
Interest Payable 2520
PAYG Tax Payable 152
Wages Payable 1154
56386.6 205798
Total 149411.4
The income statement as well as the balance sheet of the company depicts that the company is
facing losses due to the higher cost of goods sold and the lower revenue from the sales of the
operations and the services. The expenses are incurred in large number as can be observed from
the income statement. On the other hand the capital has been reduced by $12200. Moreover the

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depreciation has also been recorded on the assets. The value of the inventory is calculated using
the perpetual method. Overall the financial statements are depicting the unsatisfactory position.
B) Financial Performance
After breaking down the activities of the matter of the Chalkboard supplies it very well may be
seen that the organization is having the loss of $44186. There are sure systems that may be
considered while changing the situation of the association. The techniques could be decrease in
the expense of the products sold, decrease in the prepaid costs just as the work costs. The
organization can dodge the misfortunes by expanding the business volume and the assembling
inside instead of re-appropriating from the outsider sellers. The organization will likewise
embrace the strategy of the Just so as to maintain a strategic distance from the expense of the
basic stocks for superfluous purposes. This would spare the extra expenses and also the
organization would be useful by having the low intrigue expenses and outsider liabilities
(Amiram, Bozanic and Rouen, 2015).
C) Depreciation
Depreciation is a bookkeeping technique for assigning the expense of an unmistakable resource
over its helpful life and is utilized to represent decreases in esteem. Organizations devalue long
haul resources for both duty and bookkeeping purposes. For duty purposes, organizations can
deduct the expense of the unmistakable resources they buy as costs of doing business; in any
case, organizations must deteriorate these advantages as per IRS manages about how and when
the organization can take the conclusion. Straight-line deterioration, otherwise called the fixed or
equivalent portion devaluation strategy, is the easiest and most across the board type of
devaluation utilized by organizations. It is reasonable for resources that work consistently and

Financial Analysis Chalkboard 6
reliably over the life of the thing. The fixed strategy is direct, uncomplicated, straightforward and
easy to apply hence the company must use this depreciation method for the vehicles and for the
purpose of calculating for the computers the written down value method is suitable but it can
used straight line method as well (Grade Stack, 2015).
D) Inventory Methods
The inventory methods that is used by the Chalkboard is the perpetual inventory, however, the
other methods of the valuation of the inventory are periodic method, the LIFO, method as well as
the FIFO method (Crawford, Bontinck, Stephan, Wiedmann and Yu, 2018). The LIFO method
is known as the last in first out is the method where the inventory is calculated on the basis of
selling out the last stock and first and so on. The LIFO methods are used as at times it increases
the cost of the inventory as it can be seen on case of the Chalkboard as well. This is also
considered as the reasonable assumption therefore it can be taken into consideration by the
management (Choi, Choi, Myers and Ziebart, 2019). Under the FIFO method the company can
record the stock at the actual value which is running in the market. The inventory valuation
methods help the company record the stock at the true of its value.
E) Internal Control Mechanisms
Setting consent levels to defend information and physical resources is a standout amongst the
most standard controls organizations use since they are so natural to execute. In secret key
ensured territories, secure passwords and two-advance validation systems make it hard for
representatives to utilize others' login accreditations. Also, changing passwords as often as
possible empowers get to controls to stay resolute so that not all the people have the authority to
access the data and the chances of the manipulation can be avoided rigorously (Thi Xuan Mai,

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and Ottar Olsen, 2016). Apart from setting the passwords the company can also opt or the
auditing with the help of which the management assigns an auditor to talk about the performance
of the company. Since the cash accountability ensures that cash is accounted for, properly
documented and secured, and traceable to specific cash handlers. The company may also use the
cash controls in order to have supervision on how well the company is performing in terms of the
cash. Cash controls helps in increasing the authenticity and the security of the assets. The proper
review and reconciliation of the assets emerges as one of the solution to the problem of the
internal control mechanism (Thi Xuan Mai, and Ottar Olsen, 2016).
Conclusion
From the above analysis it can be concluded that the presentation of the financial statements is
necessary and it requires to be shared with the users of the financial statements. The company
must follow the proper accounting treatment for each transaction and this condition has been
fulfilled by the Chalkboards. The financial statements are prepared in accordance with the
necessary accounting policies and moreover the business will have the future growth only with
the help of the proper recording of each transaction.

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References
Amiram, D., Bozanic, Z. and Rouen, E., 2015. Financial statement errors: Evidence from the
distributional properties of financial statement numbers. Review of Accounting Studies, 20(4),
pp.1540-1593.
Choi, J.H., Choi, S., Myers, L.A. and Ziebart, D., 2019. Financial statement comparability and
the informativeness of stock prices about future earnings. Contemporary Accounting
Research, 36(1), pp.389-417.
Crawford, R.H., Bontinck, P.A., Stephan, A., Wiedmann, T. and Yu, M., 2018. Hybrid life cycle
inventory methods–a review. Journal of cleaner production, 172, pp.1273-1288.
Grade Stack, (2015) Written down value method [online] Available form
https://gradestack.com/Class-11th-Commerce/Depreciation-Provisions/Advantages-of-Written/
17609-3454-30209-study-wtw [Accessed on 22nd May 2019].
Thi Xuan Mai, H. and Ottar Olsen, S., 2016. Consumer participation in self-production: The role
of control mechanisms, convenience orientation, and moral obligation. Journal of Marketing
Theory and Practice, 24(2), pp.209-223.