Assignment4_JuanHerrera.pptx reporting to management
- 2. What is the purpose of a balance sheet? TO SHOW HOW MONEY HAS BEEN USED AND WHICH ASSETS IT HAS BEEN SPENT ON. CONDUCTING FINANCIAL HEALTH ASSESSMENTS. TO COMPARE YOUR BUSINESS TO YOUR COMPETITORS. TO ASSESS THE COMPANY’S FINANCIAL STANDING AND HEALTH.
- 3. Accounts found in a balance sheet Assets Liabilities Equity
- 4. Reason for the Amounts in Balance Sheet Gem Star Productions, Inc. Balance Sheet Assets: Cash $49,280 Supplies Inventory 1,333 Vehicles 13,953 Deposit at Vendor 500 Total $65,066 Liabilities: Loan Payable $40,000 Interest payable 233 Total 40,233 Equity: Common Stock 20,000 Retained Earnings 4,833 Total 24,833 Total Liabilities and Equity $65,066 Assets
- 5. Reason for the Amounts in Balance Sheet Gem Star Productions, Inc. Balance Sheet Assets: Cash $49,280 Supplies Inventory 1,333 Vehicles 13,953 Deposit at Vendor 500 Total $65,066 Liabilities: Loan Payable $40,000 Interest payable 233 Total 40,233 Equity: Common Stock 20,000 Retained Earnings 4,833 Total 24,833 Total Liabilities and Equity $65,066 Liabilities Equity
- 6. Ratio analysis Return on assets: Net income/average total assets (the higher the number, the better) Average Total Assets= $65066 + $49280 /2 = $57,173 $4,833/$57,173 = 8.45% Return on equity: Net income/shareholders equity. $4,833/$24,833 = 19.46% Debt to assets: total debt/total assets $40,233/$65,066 = 61.8%
- 7. Purpose of Profit & Loss Account
- 8. Profit and loss statement Gem Star Productions, Inc. Profit and Loss Statement ACTUAL BUDGET VARIANCE Sales: Event Revenue $11,400 $12,000 -$600 Less Expenses: Utilities Expense 220 250 -30 Payroll Expense 3,200 3,400 -200 Depreciation Expense 297 320 -23 Interest Expense 233 240 -7 Office Supplies Expense 667 700 -33 Insurance Expense 1,200 1,300 -100 Equipment Rental Expense 750 800 -50 Total 6,567 7,010 Net Income 4,833 4,990 -157
- 9. Purpose of the Statement of Cash Flows.
- 10. Activities GemStar Productions Statement of Cash Flows OPERATING ACTIVITIES Net Income 4,833 Adjustments to reconcile Net Income to net cash provided by operations: Supplies Inventory -1,333 Deposit at Venue -500 Interest Payable 233 Net Cash Provided by Operating Activities 3,233 INVESTING ACTIVITIES Depreciation 297 Vehicles -14,250 Net Cash Provided by Investing Activities -13,953 FINANCING ACTIVITIES Loan Payable 40,000 Common Stock 20,000 Net Cash Provided by Financing Activities 60,000 Net Cash Increase for the Period 49,280 Cash at End of the Period 49,280
- 11. Item in each activity Operating expenses: The deposit at venue is $500. Cash is going out. But this is an advance payment with cash which is not available on the Profit & loss statement and that is why it is reduced from cash (Operations). Vehicle: An asset was bought with cash outflow. Financing: Common stock is when bonds or securities are issued to generate money. So, $20,000 were generated from this activity and cash was received.
- 12. Internal controls 1 Separation of Duties: When tasks are split among multiple individuals, it reduces the chance of any single person engaging in fraudulent behavior. For smaller businesses with fewer accounting staff members, the same result can be attained by distributing responsibilities among two or more team members or making sure that important work is evaluated by peers. 2 Access Controls: Passwords, lockouts, and electronic access logs can be used to control access to various accounting system elements, preventing unauthorized users from using the system. 3 Approval Authority: By ensuring that specific types of transactions undergo scrutiny from the appropriate authorities, the practice of requiring specific managers to authorize particular transactions introduces an additional layer of accountability to accounting records. Significant payments and expenses must be approved in advance to stop dishonest people from using business finances for extensive fraud. 4 Physical Audits: Cash and other tangible assets that are tracked in the accounting system, such as inventory, materials, and tools, are counted by hand as part of physical audits. Physical counting has the potential to uncover irregularities in account balances. 5 Standardized Financial Documents: Standardized document formats simplify the analysis of historical information and make it simpler to investigate the reasons of system failures. When uniformity is implemented, there is a decreased likelihood of inconsistencies or oversights in such a review. A balance sheet is an example of this.
- 13. Key terms and concepts I learned Balance sheet Internal controls Auditing Liabilities Assets Equity This class pushed me a lot because it was about things that I had never dealt with before, but it made me realize how accounting is very enjoyable and it also helped me understand and it taught me a lot of things that I know will be extremely necessary when managing my own finances, which is something this class also taught me; how to properly manage my own finances and an easy way to do it. Here are some key terms that I learned that I know will be very important for me in the future.