Essays on Financial Analysis Issues Assignment

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The paper "Financial Analysis Issues" is a good example of a finance and accounting assignment.   The sales are from the invoices issued by the business for the period. The cash paid has been treated as cash in hand and taken to balance sheet. The rental agreement has only gone for two months and therefore half the amount is rental expenses (income statement) and the other half is rent prepaid (balance sheet). The expense is the payment of loan which is $100 every month. This is treated as an expense and reduces the loan amount in the balance sheet ($2400 - $200 = $2200). The method of depreciation used is the straight-line method. The total profit is taken to the balance sheet and the statement of changes in equity. The telephone bills included is for business only. Answer Question 1   2. Clear View Cleaning Statement Of Changes In Equity From 1st May To 30th June 2013   Retained Earnings Capital Drawings Total Equity 1st May - - -   Profit For The Year $ 4,682 $ 1,078   $ 5,760 Drawings     $ 970 $ 970 31st May $ 4,682 $ 1,078 $ 970 $ 6,730 The drawings are a total of the cash and cleaning expenses. Answer Question 1 3. Clear View Cleaning Balance Sheet From 1st May To 30th June 2013 Assets     Current Assets     Cash At Hand $ 120   Cash At Bank $ 2,600   Account Receivables $ 900   Prepaid Rent $ 200   Inventory $ 60   Total Current Assets $ 3,880   Noncurrent Assets     Van $ 2,850   Total Assets $ 6,730   Liabilities     Current Liabilities     Account Payables $ 380   Accrued Telephone Bill $ 125   Accrued Wages $ 320   Total Current Liabilities $ 825   Noncurrent Liabilities     Loan $ 2,200   Total Liabilities $ 3,025   Net Assets $ 3,705   Equity     Drawings $ 970   Capital $ 1,078   Profit For The Year $ 4,682   Total Equity $ 6,730         The van is recorded at its net value (cost – accumulated depreciation). Question 2   Answer Question 2 1. Periodic method of inventory recording Mayo Enterprises Calculation Of Gross Profit Periodic Inventory Recording Total Units   Opening Inventory 900 Purchases 3000 Closing Inventory 370 Total Units Sold 3530     Sales $ 7,100 Fewer Costs Of Sales $ 5,000 Gross Profit $ 2,100 Perpetual method of inventory recording Date Purchases Units Sales Unit Cost Balance Total 1-Jul 900 0.6 540             11-Jul       400 2.5 1000 500 0.6 300 3-Aug       240 2.5 600 260 0.6 156 12-Sep 1200 0.6 720       1460 0.6 876 30-Sep       520 2.5 1300 940 0.6 564 2-Dec 900 0.6 540       1840 0.6 1104 6-Dec       160 2.5 400 1680 0.6 1008 3-Feb       280 2.5 700 1400 0.6 840 22-Mar 900 0.6 540       2300 0.6 1380 19-Apr       920 2.5 2300 1380 0.6 828 26-May       320 2.5 800 1060 0.6 636 Total     1800     7100         Sales 7100                 Cost Of Sales 1800                 Gross Profit 5300               Answer Question 2   2. Perpetual method of inventory recording provides the highest gross profit Again, the perpetual method of inventory recording the most information for control purposes, this is because of the recording of each and every transaction when it occurs. Considering the circumstances, the method that would be the most appropriate for Jane’ s business is perpetual.

This is because it keeps track of the movement of stocks and thus will be able to account for the stocks. She will be able to know in advance when to replenish when to order and the lead time required for the control of stocks.

She will be able to know the buffer stocks needed as well, (Carnegie 2003). Question 3   Answer Question 3 Sometimes there are estimates made on the cost of invoices or in payment of goods or services. Processing of adjusting journal entries is done in order to prepare financial statements with the correct information and to apply some accounting for the adjusting entries made. Hence processing adjusting journal entries are made to update the respective entries with accurate figures and numbers in the financial statements. This statement is not correct.

This is because adjusting entries indicate the real-time when expenses and or income was actually received and or paid. They may be misstated and thus adjusting entries serves to correct them. The original entries may have been misstated with significant amounts. Types of adjusting entries are such as unearned revenue, accrued revenues, prepaid expenses and depreciation. Current account balances of these accounts may not currently indicate the correct balances owing to accountants’ fault in preparing the journal entries or their failure to update the account balances to reflect new happening changes in the previous transactions concerning the accounts. Example A business made cash sales worth $1,000 in the month of September 2013.

However, the accounting clerk recorded the cash sales amount at $100. 

References

Carnegie, G, D, & West, B, P, (2003), how well does accrual accounting fit the public sector? Australian Journal of Public Administration, 62(2), 83-86.

Robinson, M, (2002), Accrual accounting and Australian fiscal policy, Fiscal Studies, Sydney.

Ryan, C. (1998), the introduction of accrual reporting policy in the Australian public sector: an agenda setting explanation, Accounting, Auditing & Accountability Journal, 11(5), 518-539.

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