projectoneFINAL

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Southern New Hampshire University *

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317

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Accounting

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Jun 21, 2024

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Project One Analysis Charlotte De La Cruz Southern New Hampshire University ACC 317: Intermediate Accounting July 29, 2023

Project One Analysis The financial components included in the current assets and current liabilities are located on the Batters Up Balance sheet. Current assets of Batters Up include cash, accounts receivable, prepaid rent, prepaid insurance and merchandise inventory. Current liabilities include accounts payable, wages payable and interest payable. Current assets are resources that a business owns that are expected to be used or converted into within a year. Current liabilities are short term financial obligations that are due within one year. The ratio of current assets and liability is a liquidity ratio that measures the ability to pay debt obligations. The balance sheet is arranged a manner that provides a clear picture of a company’s financial position. The assets are listed on the left in order of liquidity. The current liabilities are listed in order of maturity, with the shortest-term liabilities listed first followed by long term debt. The same asset or liability can have both short term and long-term components. An example would be a company’s building and equipment that are used for their operations. The building and equipment are considered as long-term assets because they are expected to be held for greater than a year. The land on which the building and equipment are located can be considered as a short-term asset and sold within a year. Another example is inventory. Some inventory can be considered short term and other inventory can be considered long-term depending on what sort of shelf life it has. Current assets and current liabilities can be used as tools to measure variances in data. One method is to use trend analysis which includes analyzing the historical data for a company and identifying any changes in financial statements over time. Variances in data can also be analyzed by comparing the financial data of a company to similar

companies in the same industry. This is called comparative analysis. Comparative analysis can also compare statements from different time periods in order to determine the profitability of the business. Another way to detect variances in data is ratio analysis. By calculating different ratios like liquidity and debt to equity you can compare these ratios against the companies’ historical data or industry averages to compare a company’s financial position quarterly or annually. Lastly, variances can be detected by evaluating the cashflows for a company and identifying any abnormal patterns. Business intelligence software can collect, process and compare asset and liability data and assist in analyzing trends or variances over time. Footnotes for current assets and liabilities provide additional information about the data provided. Data doesn’t paint the entire financial picture, and footnotes provide explanation about the nature and timing of the items listed under assets and liabilities. Footnotes allow investors and stakeholders to make more informed decisions based on the company’s financial health. Some examples of additional context that footnotes provide are the age of an account receivable or the terms of a loan. The First in First out (FIFO) inventory method is a valuation method where the assets produced or acquired first are the first to be sold, used or disposed of. FIFO is appropriate for this inventory because it matches the natural flow of goods, it’s also a method to also calculate the cost of goods sold and accurately price inventory. The oldest goods and oldest costs are expensed first and when you purchase more goods for your inventory, you’ll use the most recent inventory cost as a basis for pricing. By selling the oldest costs first, this helps prevent inaccurate inventory pricing and makes reporting more accurate.

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