Accounting & Information System: Financial Statement Analysis

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Added on 2023/06/11

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This report provides a detailed analysis of the financial statements of Saminul, focusing on key business transactions and their impact. The analysis includes a review of the trial balance, statement of profit and loss, and balance sheet. The trial balance, with a total debit and credit balance of $566660, verifies numeral accuracy. The statement of profit and loss reveals a loss of $2822, attributed to high operating expenses, particularly rent and interest. A pie chart illustrates the distribution of operating expenses. The balance sheet highlights liquid assets, including a bank balance of $416,140.78, and classifies current assets such as accounts receivable, inventories, and prepaid expenses, depicted in a bar diagram. The report concludes with an overview of current liabilities and equities, emphasizing the importance of double-entry accounting to ensure balanced financial statements.

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 Financial Statements.....................................................................................................2
Reference.........................................................................................................................................6
Appendix..........................................................................................................................................7

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ACCOUNTING AND INFORMATION SYSTEM
Introduction:
In this particular report, the analysis of financial statements of Saminul has been
demonstrated for evaluation of several items that are presented. The business of Saminul carries
out the transactions that are related to the wide-ranging business functions. Main activities of
business are to carry out stock trading activities. Recording of such transactions are done in the
form of journals in the books of account of company (Simkin et al. 2014). The appendix section
presents the various financial statements of company.
Financial Statements analysis:
The trial balance has been prepared that depicts all the transactions that have occurred by
carrying out the business activities during the month of May. Verifying the numeral accuracy of
trail balance is the main objective of preparing trail balance. In order to depict that whether the
financial statements are free from any human errors while preparation of trial balances the debit
side of such statement should be equal to credit side (Prasad and Green 2015). A sales of amount
$ 9,829 is generated by business as presented by the trail balance and the cost of goods stood at $
5932 that shows the business production cost. Moreover, some of the items that are incorporated
while preparing trial balance include liabilities, assets, expenses, and income and capital
contributed owner. As depicted in the appendix of trial balance statement, the total amount of
credit and debit balance stood at $ 566660.
The total amount of profit that the business earns during any particular reporting year is
presented in the statement of profit and loss. Al the income earned and expenses incurred by the
business are summarized in this statement by segmenting all the items of expenses and items of
income. Total amount of loss that has been incurred by activities of Saminul during a month as

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ACCOUNTING AND INFORMATION SYSTEM
depicted in the profit and loss statement shown in the appendix stood at $ 2822. The reason that
is attributable to this increase is loss is increase in operating expenses and the amount is
considerably higher at amount $ 7,425 compared to previous time period. The pie chart presented
below helps in explaining the analysis and classification business operating expenses (Laudon
and Laudon 2016).
Depreciation
4%
Interest Expense
28%
Motor Vehicle Expenses
7%
Rent
61%
Operating Expenses
Depreciation Interest Expense
Motor Vehicle Expenses Rent
Figure 1: (Pie Chart depicting Expenses of the Saminul for the May month)
Source: (Created by Author)
An amount of $ 7425 is incurred by operating activities of business of Saminul as
presented in the pie chart. However, the major amount of expenses that have been incurred by
business is in relation to rent paid and the total amount of rent paid stood $ 4,545. The total
amount of operating expenses comprises of 61% of total expenses that has been incurred by
business and such expenses are of fixed nature. Moreover, an interest expense of $ 2,042 has
been incurred by business that comprise of 28% of total amount of expenses incurred on
operations. Total amount of interest expenses comprise of the loan that is taken by the business

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ACCOUNTING AND INFORMATION SYSTEM
and the amount of loan taken is presented in the balance sheet of company. Some of the other
expenses of company include expenses incurred in motor vehicle and depreciation expenses.
Expenses attributable to depreciation happen in the normal course of business due to wearing and
tearing of the assets. Expenses attributable to depreciation are the expenses for which there is nit
outflow of cash by business (Collier 2015). In addition to this, the expenses that have been
incurred on motor vehicle are associated with the maintenance of business motor vehicle. Total
amount of expense that is attributable to depreciation and motor vehicles is recorded at $ 306 and
$ 531.
The balance sheet or the statement of financial position is the most crucial financial
statement that the business prepares for presenting the total amount of assets and total amount of
liabilities. In case of Saminul, the balance sheet is prepared on monthly basis and the most liquid
assets that are possessed by business are presented in the balance sheet. Such liquid assets
comprise of investment and bank balance that and the total amount of cash at bank stood at $
416,140.78 and this amount is the availability of liquid cash that is used whenever it is required
by company. Some of the items that are included in the current assets of business are accounts
receivable and inventories (Stenfelt et al. 2016). The bar diagram presented below depicts the
current assets classification.

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ACCOUNTING AND INFORMATION SYSTEM
Accounts
Receivable Interest
Receivable Inventory Office
Supplies Prepaid
Advertising Prepaid Rent
3921.05
705.65
12468.1
2960.91
22727.27 22727.27
Current Assets
Figure 2: (Chart depicting Current Assets of Saminul for May month)
Source: (Created by Author)
The above bar chart presents the total number of items that is presented under the current
assets of Saminul. Such items comprise of interest receivable, accounts receivable, office
supplies, inventory, prepaid rent and prepaid advertising. Amount of prepaid expenses are also
incorporated in the amount of current assets that stood at $ $ 22,727.27 and items under prepaid
expenses includes prepaid rent and advertisement expenses. The significant item that is involved
in the current assets is the amount of inventories and the total amount of inventories stood $
12,468.10. Total amount of current liabilities is negative as presented in the balance sheet and the
amount stood at $ 833.26. The significant items contributing to major portion of current
liabilities include loan of amount $ 3, 50,000. In addition to this, total amount equities that are
listed in the balance sheet stood at $ 197,178.11. Preparation of balance sheet should be done on
the principle of double entry accounting and this is indicative of the fact that the total amount of
liabilities side should be equal to total amount of assets.

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ACCOUNTING AND INFORMATION SYSTEM
Reference list:
Abdallah, A.A.J., 2014. The impact of using accounting information systems on the quality of
financial statements submitted to the income and sales tax department In Jordan. European
Scientific Journal, ESJ, 9(10).
Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for decision
making. John Wiley & Sons.
Laudon, K.C. and Laudon, J.P., 2016. Management information system. Pearson Education
India.
Prasad, A. and Green, P., 2015. Organizational competencies and dynamic accounting
information system capability: impact on AIS processes and firm performance. Journal of
Information Systems, 29(3), pp.123-149.
Simkin, M.G., Norman, C.S. and Rose, J.M., 2014. Core concepts of accounting information
systems. John Wiley & Sons.
Stenfelt, J., Kopplin, D. and Mattsson, H., Telefonaktiebolaget LM Ericsson, 2016. Method and
system for correlating authentication, authorization and accounting sessions. U.S. Patent
9,380,460.