ACC 201 Project Summary Report KBarrick

docx

School

Southern New Hampshire University *

*We aren’t endorsed by this school

Course

202

Subject

Finance

Date

Feb 20, 2024

Type

docx

Pages

Uploaded by MagistrateAtomGoose29

Summary Report: Financial Statements 1 Summary Report: Financial Statements Kimberly Barrick Southern New Hampshire University

Summary Report: Financial Statements 2 Introduction The financial statements that are included in the workbook, including the reports that were created from all the business transactions of A Company have been recorded. These statements include the four major financial statements- income statement, stockholder’s equity statement, balance statement, and the closing entries. These statements help update the business owner on how his business is doing from a financial standpoint. I will also include recommendations for controls to help protect and help grow assets for the business in the future and ways depreciation could be determined for future and depreciation methods. Process These four main financial statements are the income statement that shows the income earnings and expenses for that period, the statement of stockholder’s equity that shows how the stockholder’s equity has evolved over the period, the balance statement that compiles total liabilities and equity for the period, and the closing entries that reset each account back to zero for the next period. These statements help show the profitability and liabilities of the company and what the financial impact is for that period. These statements help determine if a business can meet short-term debt obligations, the solvency of the assets, and how profitable the business is at the current time. Financial Statement Analysis When looking at A Company’s financial statements we can see that the income statement records revenues of $5,525 and a net income of $2,565, coming to 46.4% of sales. They also show operating expenses of $2,960, coming to 53.6% of sales. A Company has a working capital of $36,779, their current ratio is 2.4. Solvency is good for A Company, showing at 0.5. With the

Summary Report: Financial Statements 3 numbers presented I believe that at the current moment A Company can meet their long-term liabilities expenses which are higher than revenue. This may cause issues down the road. Internal Controls As the business continues to grow, there will need to be internal controls put into place to protect the company from errors in the financial statemen and operate in the best way for the stakeholders. There are three main control areas that help protect business in this way. The first is detective controls. These controls consist of things inventory checking and internal auditing. This helps highlight any errors in accounting practice and illegal activities. The second type form of internal controls is preventative controls. These are controls that all employees follow a standard procedure and company policies. This consists heavily of separation of duties and verifying expenses, making sure there is a dedicated accountant to look over the books and limiting access to inventory to ensure its protection. Lastly there are corrective controls, which consist of things like making sure employees are continually trained in new policies and procedures and putting into effect different policies and procedures for the correcting irregularities in different business practices. My recommendation is to use all forms of internal controls to protect My company, its employees, and all assets as the company continues to grow and expand. Looking to the Future With the owners of A Company looking to add more long-term/fixed assets there will need to be depreciation methods put into place. When placing these assets into the financial statements originally, they will be recorded with the original price. As the asset ages it will

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Summary Report: Financial Statements 4 depreciate. The straight-line method is one way to depreciate an asset. The straight-line method would be one of the easier methods to utilize as the depreciation expense is spread out evenly across a fixed number of years. Another way to record depreciation is the double declining balance way, which puts a larger amount of the cost to be written off in the earlier years and a lower amount for the remaining years. To find the best inventory cost strategy A Company will need to look at different ways for the stocks to be evaluated. There are 4 different ways this can be done. The FIFO method, first in first out, means the first products that were bought are the first ones sold and the last items bought are listed at the most recent purchase. The LIFO method, last in first out, this one has the cost of the items remaining at the end of the financial period consisting of are recorded as the earlier cost of the items. The last method is the Weighted Average Cost, which is determined by takin the total cost of the items for sale and dividing it by the available items for sale. The result of this equation gives you the Weighted Average Unit Cost. With A Company being a new and upcoming business, creating and upholding a strong financial accounting system is crucial as new inventory and assets will be added to grow the business. Keeping correct financial statements will make it easier for A Company to see where changes need to be made for profitable operations along with catching any mistakes and deciding which internal controls are needed to protect the business. As A Company grows it will become more clear which options will be the most beneficial.