Evaluation of Financial Statements in Accounting Information System

This report evaluates the financial statements of 18770299 Yadgir Singh, providing an in-depth analysis of various books of accounts. The company's business involves trading shares and stocks. The report includes a trial balance, demonstrating the mathematical accuracy of the double-entry accounting system, and a profit and loss account, revealing a net loss of $2822 due to high operating expenses. A pie chart illustrates the distribution of operating expenses, with rent constituting the major portion. The balance sheet presents the company's financial position, highlighting assets and liabilities, with cash balance reported at $416,140.78. Current assets and liabilities are detailed, showcasing the application of the double-entry accounting system.

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

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Introduction:
The report is prepared for demonstrating the evaluation of financial statements
of18770299 Yadgir Singh for gaining an in depth knowledge related to several book of accounts.
It can be seen that business of company are involves in transactions that are related to usual
functioning of business. The main activities of company are to carry out the trading of shares or
stocks and engagement in trading activities. Several transactions in which the business is
involves is recorded and presented in the books of account by passing it as journal entries. The
section of appendix presents the various financial statements of.
Financial Statements evaluation:
The trial balance is prepared by company for serving the purpose of detecting any
mathematic errors that have been encountered in the system of double entry accounting. Trail
balance is considered to be balanced if the total credits equal to total debits which is indicative of
the fact that the ledgers are free from any mathematical errors or it can be any errors in
calculation. For the transactions that have occurred in the month of May for 18770299 Yadgir
Singh, trail balance is prepared. The amount of sales made by company is presented in the trial
balance and the total sales generated are recorded at $ 9829. On other hand, cost of goods sold
has a direct impact on product cost of goods which the business sells to customers. The total
amount of cost of goods sold is recorded at $ 5932. Furthermore, trial balance incorporates all
the items that are associated with business transactions during a particular time and in this case,
the statement is prepared for month of May. The item that is listed in preparation of trial balance
includes owner’s capital, liabilities, expenses incurred by business and assets. As presented in the

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section of appendix, the total amount of trial balance that makes the debit side equivalent to
credit side is recorded at $ 566660.
The profit and loss account is prepared for accounting the net loss or profit generated by
business during a particular time. Trail balance depicts the particulars that are required for
preparing the profit and loss account. Total amount of income earned and the loss that the
business incurs is summarized in the statement of profit and loss. It can be seen from the profit
and loss statement of 18770299 Yadgir Singh that the business has incurred loss of amount of $
2822 during that particular month. The reason that can be considered for incurring such loss is an
increase in operating expenses of business that is considerably huge and the amount stood at $
7425. The pie chart helps in analysis and classification of operating expenses that forms a part of
loss generated by business.
Depreciation
4%
Interest Expense
28%
Motor Vehicle Expenses
7%
Rent
61%
Operating Expenses
Depreciation Interest Expense
Motor Vehicle Expenses Rent
Figure 1: (Pie Chart presenting the expenses for Month of May)
Source: (Created by Author)

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The total amount of operating expenses that is incurred by business during that particular
month is depicted in the pie chart and the total amount incurred by business stood at $ 7,425. For
the operating expenses, the major proportion is attributable to the amount of rent that is paid by
organization. The total amount of rent that has been incurred is recorded at $ 4545. The expenses
incurred on rent are considered to be the fixed expenses of business and it accounts for about
61% of the total expenses incurred by company. On other hand, interest expense that is incurred
by business comprise of 28% of total operating expenses and the total amount of operating
expenses that are incurred in conducting the business operations is recorded at $ 2042.
Furthermore, the amount of interest expenses comprise of the loan taken by business that is
recorded under the liabilities section of balance sheet. Expenses incurred on motor vehicle and
depreciation expenses are some other forms of expenses that are incurred by business while
carrying out their operational activities. Depreciation is a method account that is used by
business for allocating the tangible assets cost over its useful life. It is the expenses that are
incurred by business for which there is not outflow of cash as it is a non cash expense.
Furthermore, expenses incurred by company on part of motor vehicle are the amount that is
incurred on maintenance of such assets. Total amount of depreciation that is attributable to
company is recorded at $ 306 along with the expenses that is incurred on motor vehicle at the
amount of $ 531.
The balance sheet is prepared for presenting the true financial position or financial
performance of company during a particular financial year. It summarizes the total of liabilities
and assets during any particular reporting period. In case of this particular organization,
preparation of balance sheet is done. All the assets that are possessed by business are reported
under the assets side and all liabilities attributable are reported under the liabilities side. Some of

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the most liquid assets possessed by business are incorporated under the current assets of
business. Total amount of cash reported under the bank balance is recorded at $ $ 416,140.78 as
presented by the balance sheet figures in appendix section. Some of the current assets of
company include accounts receivable and inventories.
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: (Bar Graph presenting Current Assets for month of May)
Source: (Created by Author)
The bar graph presented above depicts the total items that forms the current assets
includes interest receivable, accounts receivable, office supplies, inventories, prepaid rent and
prepaid advertising. Prepaid rent, prepaid expenses and prepaid advertisement are the items
under current assets that form the major proportion of current assets and the total amount stood at
$ 22,727.27. Total amount of inventory stood at $ $ 12,468.10 that forms a considerable part of
current assets of business. Total amount of liabilities on other hand is recorded at $ 833.26 which
is at negative value. Business loan taken by organization forms the major portion of liabilities for
which the amount stood at $ 350000. It can be seen from the appendix section that the

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accounting basis of preparation of balance sheet is double entry accounting system that equates
the total side of assets with that of liabilities.

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Reference list:
Libby, R., 2017. Accounting and human information processing. In The Routledge Companion to
Behavioural Accounting Research (pp. 42-54). Routledge.
Romney, M.B. and Steinbart, P.J., 2014. Accounting information systems. Pearson Higher Ed.

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Appendix:

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