Accounting Case Study
explanatory Essay
744 words
Accounting – Essay Question Assignment – Part C Hayden Megchelse “The Statement of financial position is a document with problems” The Statement of financial position is a very useful tool full of information showing the position of an entity. However within this sheet of information lies a lot of limitations and problems. This essay will pinpoint some of the limitations and problems within the balance sheet. These limitations include how the balance sheet does not reflect the true financial position of a business, it does not reflect assets that can’t be measured monetarily and it also has a huge amount of estimated values and not actual verified values so this causes some controversy within the entity and its true position on the market. As well as the problems within the balance sheet there also lies a lot of problems with what’s left out of the balance sheet. The balance sheet does not show a true and fair view of an entity at a specific time. This problem arises as some of the figures within the balance sheet have to be estimated and cannot be proven to be exact. These figures include some of the assets and liabilities held within the entity. Liabilities include vacation pay, pensions and any sort of contingent liability like a coming court case. Assets include any sort of intangible asset, these could be a trademark or goodwill. These examples are all estimates and predictions of what the actual value should be. This causes major problems when trying to measure the exact value of an entity as some of the figures that are being used to measure this value are just estimates and can only be taken as the best judgement of what the actual value should be which could in turn be different and effect the position of the... ... middle of paper ... ...e an income statement needs to be looked at to show if the business is making a profit and if the expenses are too high or what has change in revenue from year to year. This is just an example of many other sources need to be looked at before deciding on the financial position of the entity. There are many issued involved with statement of financial position and the limitations evolved within it. Although there are many reasons to prove that more than just the balance sheet needs to be looked in deciding on the financial position of an entity, it is still a useful tool in looking at parts of an entity’s financial position. Overall I agree with the statement that “the statement of financial position is a document with problems” due to the evidence that has been given but I also feel that it is still an important aspect when looking at an entities financial position.
In this essay, the author
- Explains that the statement of financial position is a useful tool full of information showing the position of an entity, but there are limitations and problems within the balance sheet.
- Explains that the balance sheet does not show the true and fair view of an entity at a specific time.
- Explains how assets without a monetary value cannot be added to the statement of financial position. employees are an asset in the eyes of the entity as they work hard and generate income through one way or another.
- Explains that depreciation is an estimated value used to calculate the carrying amount of non-current assets within an entity. if it is estimated wrong, the asset is wrong in the balance sheet.
- Explains that an entity's financial position cannot be shown with just a balance sheet as the limitations are huge. an individual looking at the position of the business must also look at all the other information given with the financial reports.
- Agrees that the statement of financial position is a document with problems due to the evidence that has been given, but it is still an important aspect when looking at an entity's finances.
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- Understanding Financial Statements and Cash Flowexplanatory essayIn conclusion, a company’s financial statements regarding its financial position are critical to all concerned. First and foremost, these financial statements provide critical tools for companies to make decisions to improve its share value in the global market of fierce competition. Secondly, they provide accountability to shareholders and stakeholders in the company providing better stability in its business practices and requirements regarding the Securities Exchange Commission (SEC) and General Accepted Accounting Principles (GAAP). Lastly, financial statements paint a picture that gives a measurable to the success of a dream once birthed long ago by an entrepreneur to get an idea to the marketplace with great expectations of striking it rich.
In this essay, the author
- Explains that an entrepreneur's dream of starting a business is all about getting an idea to the marketplace with great expectations of striking it rich.
- Explains that success is measured based on the bottom line comparing company profitability from one year to the next in comparison to its competitors.
- Explains the purpose of the balance sheet, which is to show the financial position or value for a particular period of time.
- Explains that a company's assets are items of value to the company that are both tangible and non-tangible used to provide products or services for sale.
- Lists the company's liabilities on the balance sheet based on their due dates. they are broken down into current and long-term liabilities.
- Explains the shareholders' equity section of the balance sheet known as the company's capital or net worth. the shareholders' portion is their investment in purchased stock minus incurred costs to run the business.
- Explains that the balance sheet shows a snapshot shot of the company's assets minus liabilities and shareholders' equity. the assets column on the right side must equal the liabilities.
- Explains that the second financial statement is the income statement, which takes into account revenue, cash inflow, minus expenditures to operate the business, and cash outflow to determine the company's net worth.
- Explains that the third financial statement used among businesses is the statement of retained earnings. the purpose of this statement is to show shareholders the company's ability to reinvest for future growth in the market.
- Explains that the statement of cash flow summarizes the amount of money flowing in and out of a company.
- Concludes that a company's financial statements are critical to all concerned. they provide critical tools for companies to make decisions to improve its share value in the global market of fierce competition.
1226 wordsRead More - Case Study Donahoo's Balance Sheetanalytical essayThe balance sheet provides a snapshot of a firm’s financial position at a specific point in time, by using the company’s Asset and Debit Equity.
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- Explains that the balance sheet provides a snapshot of the firm's financial position by using the company’s asset and debit equity.
- Explains how donahoo's balance sheet looked at the outset of the firm’s life.
- Describes the $ 500less $500inventory 1,000debt 500plus $500plus $1,000total$2,000equity
- Analyzes donahoo's income in january, and the interest expense on the $500,000 long-term debt, which has not been paid but is owed.
- Analyzes donahoo's cash flow for the month of january.
516 wordsRead More - Barnes And Noble Case Studyanalytical essayA strong balance sheet gives an investor an idea of how financially stable the company really is. Many professionals consider the top line, or cash, the most important item on a company’s balance sheet. The big three categories on any balance sheet are “assets, liabilities, and shareholder equity.” Evaluating Barnes & Noble’s assets for the time 2014 at $3,537,449, 2013 at $3,732,536 and 2012 at $3,774,699, the company’s performance summarizes that it is remaining stable. These numbers reflect a steady rate over the three year period. Like assets, liabilities are current or noncurrent. Current liabilities are obligations due within a year. Key investors look for companies with fewer liabilities than assets. Analyzing this type of important information, informs a potential investor that if the company owes more money than they are bringing in that this company is in financial trouble. Assessing the liabilities of the balance sheet, for the same time period, it is also consistent with the assets. The cash flow demonstrates a stable performance in the company’s assets and would be determined that the liabilities of this company are also stable. Equity is equal to assets minus liabilities, and it represents how much the company’s shareholders actually have a claim to. Investors customarily observe closely
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- Explains that expenses show how much it costs to do business, outside of what barnes & noble are spending to produce their product.
- Explains that a strong balance sheet gives an investor an idea of how financially stable the company really is.
- Explains the importance of retained earnings and paid-in capital under the equity section. strong equity indicates commitment or demonstrates a contributed equity. significant equity and low debt signals that your company has the financial resources to absorb any shock or downturn.
- Analyzes barnes & noble's cash flow statement, which reports the cash generated and used during a time interval specified in the heading.
- Explains the "financial ratio" or current ratio when reviewed with barnes & noble's balance sheet indicates that the company has sufficient funding to carry out day-to-day business.
- Explains that barnes & noble is the nation's largest retail bookseller and the leading retailer of content, digital media, and educational products.
- Explains that a fixes asset turnover ratio measures the management's performance. the cost principle and measurable exchanges are important because investors want information about an economic entity.
1677 wordsRead More - The Balance Sheetanalytical essayNow, having reviewed almost all the issues related with the balance sheet, we can say in my opinion that sine its appearance a few centuries ago it has been an important and outstanding financial statement summarizing the financial position of an enterprise at a particular point in time. In the quickly developing technological environemt it might change its form, it might even change some of its principles, it will be viewed along with more and more information in the era of information, but it will keep for some more time its "position of such a great importance".
In this essay, the author
- Explains that the balance sheet is the most inituitive and easily understood document of accounting. it can be perceived from a phylosofical and psychological view point.
- Explains that shareholders want to look at income statements and balance sheets, which give snapshots of the current health of a business.
- Opines that the balance sheet has been an important and outstanding financial statement summarizing the financial position of an enterprise at a particular point in time.
- Explains that the balance sheet is a summary of an enterprise's assets, liabilities, and equity, but it is far from being the perfect and "super" financial document.
- Argues that the balance sheet is in complince with all of the basic accounting principles and concepts.
- Explains arnold j. and s. turley, accounting for management decisions, 3rd ed., 1996, prentice hall europe (uk) limited, london.
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- Explains that looking at the financial reports of a company for the first time can be overwhelming if not intimidating.
- Explains how krispy kreme uses three different methods to calculate depreciation: straight-line, units-of-production, and double-declining-balance.
- Explains that the next analysis to assess the health of krispy kreme would be stock analysis. stocks are what shareholders purchase to give them part ownership within a specific company.
- Explains that krispy kreme has common stocks with no par value. in 2002, 100,000,000 shares were authorized and in 2003, 56,295,000 stocks were issued and outstanding.
- Explains that cash flow statement analysis is the study of the inflow and outflow of cash for operating activities, investing activities and financing activities. creditors may use this information to decide if the company can pay off any loan
- Explains that when looking at cash flow statements it is a good idea to look at what each section tells.
- Explains that in 2002 and 2003, the majority of outflow went to property and equipment additions and the largest inflow for both years was the sale of investments. in 2001, net (repayments) borrowings from revolving line of credit were large.
- Explains that increase statement trend analysis is used to see the difference in each of the years. net income and income taxes increased greatly and at about the same rate.
- Analyzes how operating expenses and revenues increased each year, while intangible assets increased by 5.4%, making up 16% of the total assets.
- Explains management analysis is needed by management to plan, evaluate and control an organization's operations. managerial accountants' will look at things like trend and common-size to help with their findings.
- Explains that krispy kreme's financials show an increase of $96,286,000 from 2002 to 2003 when one looks at the difference in total property, plant and equipment before depreciation.
- Explains that the company changed its method of accounting for goodwill and other tangible assets to conform to statement of financial accounting standards no. 142. shareholders could lose projected money if the new building opens late.
- Explains that this annual report contains statements about future events and expectations, including anticipated store and market openings, planned capital expenditures and trends in or expectations regarding the company's operations and financing abilities.
- Explains that all financial information and notes are used to asses a company's health and predict what the coming year may hold.
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- Explains that coach is defined as a classic american style, which has very unique style and quality.
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- Explains that net sales are what the company generated after subtracting all the returned or damaged items. gross profit is what is the difference between the cost of making and selling the product.
- Explains that on the coach income statement selling, general, and administrative expenses, is 2,290.6, while operating income includes anything from office supplies and power.
- Explains that coach has a 3.00 of current ratio and 2.42 of quick ratio, which measures the company's ability to pay off their short-term liabilities.
1569 wordsRead More - RE: Discussion Board 2 Kevin Linhartexplanatory essayI agree with Kevin’s statement that financial statements provide only a partial look at the picture when valuing a company. While providing the financial data such as sales, expenses, gross profit, total assets and liabilities, and net worth it leaves out the internal influences that most influence the bottom line.
In this essay, the author
- Cites suroweiki, j. (2003, march 10). the wages of war. the new yorker.
- Cites suroweiki, j. (2003, march 10). the wages of war. the new yorker.
- Agrees with kevin's statement that financial statements provide only a partial look at the picture when valuing companies.
- Explains that dividends still don't lie: the truth about investing in blue chip stocks and winning in the stock market.
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583 wordsRead More - Balance Sheet Analysis Paperexplanatory essayThe balance sheet, as provided by McLaughlin (McLaughlin, 2009, p. 125), gives a number of assets that have the potential to be liquefied in an effort to maintain organizational stability. Assets provided by the fictitious organization include cash, savings, pledges, investments, and land and equipment. Cash is usually considered to be the most liquid when meeting debt obligations,
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- Explains that they were asked to assess the financial data of a fictitious non-profit organization as provided in mclaughlin's "financial basics for nonprofit managers".
- Explains that the fictitious organization's balance sheet gives assets that have the potential to be liquefied in an effort to maintain organizational stability.
- Explains that assets that can be liquefied to support annual operations include accounts/pledges receivable, inventories from sale, investments, land, buildings, real estate, etc.
- Opines that the fictitious organization provided by mclaughlin has the assets to liquefy to achieve sustainability when needed.
439 wordsRead More - Accounting Principalsexplanatory essayThe balance sheet however is critical in reporting the assets, liabilities and owner’s equity up until a specified date. When preparing this financial statement a company simply takes all of their assets (cash, accounts payable, supplies, equipment etc.) and adds them together to get a total dollar amount for all assets. A company also takes all liabilities and owner's equity and adds them together as well. This enables the company to get a total dollar amount for all liabilities and owner’s equity just as it can with assets.
In this essay, the author
- Explains that the three main types of financial statements are income statement, balance sheet, and statement of owner's equity.
- Explains that the income statement is important because it presents the revenues and expenses allowing a company to see the net income or net loss.
- Explains that the balance sheet is critical in reporting the assets, liabilities, and owner's equity up until a specified date.
- Explains that the statement of owner's equity is a simple statement that summarizes the changes in owner’s equivalence for specified periods of time.
- Explains that the three financial statements have an interrelationship because each statement uses the numbers from the preceding statement.
- Explains that financial statements are critical to a company's success. they allow companies to see where problems may exist within their spending and formulate solutions to those problems.
389 wordsRead More - Lowell's Country Music Bar Balance Sheet Analysiscomparative essayA balance sheet is an educational, financial tool that summarizes a company’s assets, liabilities, and net worth during a particular time frame. The data provided by the balance sheet informs the organizational leaders of the financial status of the firm. Moreover, the balance sheet displays what the company owns and owes (Edmonds, Tsay, & Olds, 2011). Completing as well as understanding the numbers is equally as critical as the meaning behind the figures.
In this essay, the author
- Explains that a balance sheet is an educational, financial tool that summarizes the company's assets, liabilities, and net worth. completing and understanding the numbers is equally critical.
- Explains that the bookkeeper for lowell's country music bar left an incomplete balance sheet. the answer for letter a is $64,500 for stored inventory.
- Explains that the answer for letter b is $136,500 for total current assets. this number is obtained by adding cash, accounts receivable, inventory prepaid expenses.
- Explains that the answer for letter f is $101,100 for mortgage payable. the calculation principle used is total assets = ($138,600) total liability + ($207,900).
- Concludes that the lowell’s country music bar balance statement sheet balances out in the current assets plus its total liabilities.
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In this essay, the author
- Describes the three most important financial statements, the income statement, cash flow statement and the balance sheet, that managers need to consider in order to make decisions.
- Explains the purpose of the income statement, stating that it shows the company's income and expenses. the operating and non-operating portions are of great importance for investors looking to merge, acquire and inject money into the business.
- Explains that the income statement reports the revenues generated and expenses incurred by a firm over an accounting period.
- Explains the major types of expenses that show up on an income statement, such as the cost of producing the product or the cogs.
- Explains that the non-operating side incurs additional expenses such as other expenses or losses, finance costs or borrowing from various creditors, and income tax expense.
- Explains the purpose of the balance sheet, which is to give an idea of a company's financial position and display what the company owns and owes.
- Analyzes how the balance sheet displays the firm's assets and how they were financed by various liabilities and equity.
- Explains the three different accounts that comprise the owners' equity section on a typical corporate balance sheet: preferred equity, common equity, retained earnings and shareholders equity.
- Explains the three standard sections contained in a statement of cash flows, which indicate the influences affecting the firm's cash account over time.
- Describes the operating and financing activities of a firm, and explains how they measure the flow of cash between themselves and owners and creditors.
- Concludes that it takes the income statement, balance sheet, and statement of cash flows to run a corporation more efficiently.
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In this essay, the author
- Explains that the accounting equation tells us that law assets, liabilities of a company is measured by these three only like accounting for corporation is assets equal to liabilities and stockholders.
- Explains that equity is the ownership interest in a business firm. an owner cannot own 100% of the business shares ownership with others and accounting for business should be separate from personal affairs of its own.
- Explains revenue and the cost period in accounting that the company get income from normal business activities.
- Explains that the asset of a business that owner own are called assets for example building, machinery, etc.
- Explains that liabilities are the depth to be payee by a person or company to bank or other company.
- Explains that expenses are the cost occurred during manufacturing or preparing or on anything of the product unit it is sold out.
- Explains that dividend is that which shareholders earn like the companies profit equally divided into all the shareholders.
- Explains that non-current assets are like the depths that aren't profitable within one accounting year, like purchases, ling term loans, and noncurrent liabilities.
- Explains that it is a non-cash expense that reduces the value of assets of passing of time. assets lose their value by times and need to be replaced.
- Explains that formal entities are used to record revenue expenses that are consumed by selling products but not yet paid or received. it is important to know the correct financial statement.
- Explains the expenses that are paid in advance. these are the current assets of a business, such as rent, tax, and insurance.
- Explains that relevance is information that impacts decision-making, while timely information has predictive value.
- Explains that financial statements should be understandable by persons with reasonable information or knowledge of business, economic, activities.
- Explains that reliable information is reliable if the user can rely on to be accurate physically. large errors or omissions in the financial statement reduce the reliability of the information contained in them.
- Explains that financial statements must be comparable with each other according to the time period. users have to give the meaningful conclusion about the trend in an entity’s financial performance and position over time.
- Explains that information is material, its mission or measurement could influence the economic decision of users on the basic of the financial statements. materiality is also linked closely other accounting concept and principle.
- Explains that an income statement measures a company's financial performance over an accounting period. a balance sheet reflects accounting identity the components of the balance sheets.
- Explains that equity is an owner interest in a company which is obtained by total assets and liabilities. revenue is the amount of money that includes discount and deduction.
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