Accounting 201 Final Project Paper

Payton Approved, a new dog bakery opened in July 2014. To measure the businesses success the first six months are reviewed. The first topic will discover the steps of the accounting cycle with descriptions of each process. Next, one will learn and analyze a report of the importance of each step for the accounting process to measure success. The last analyzed step will discuss how the omission of one step can impact the success of the company.

These ratios will help us see how effective a company is at using their sales or assets and turning this into income.

a service department’s costs have been allocated, costs are not reallocated back to it under

According to the fact of this case, Parent Co. (Parent) wholly owns Poor Son Co. (Poor Son) as a legal subsidiary, and both of them all nonpublic companies. However, in January 2007 Poor Son filed a voluntary bankruptcy under Chapter 11 of the U.S. bankruptcy code because of its inability of meet obligations as they became due. Then, Parent claimed the loss of control of Poor Son and deconsolidated Poor Son from its financial statement. Through the bidding process in May 2009, Poor Son and OtherCo, the winning sponsor, filed a joint plan of reorganization to the bankruptcy court, but the plan was rescinded by OtherCo later due to significant market value shrink of Poor Son. After that, the

You may omit explanations of the transactions. Skip a line between eah set of journal entries.

Ratio analysis shows the correlation within certain figures of financial statements, like current assets and current liability, and is used for three types of company needs- within, intra- and inter-company. Association can be shown in proportion, rate, or percentage and can evaluate company’s liquidity, profitability, and solvency. Liquidity ratios show company’s ability to pay obligations and fulfill needs for cash; profitability ratios show wellbeing and success for the certain time period; and solvency ratios show company’s endurance over the years.

Financial ratios are great indicators to find a firm’s performance and financial situation. Most of the ratios are able to be calculated through the use of financial statements provided by the firm itself. They show the relationship between two or more financial variables that can be used to analyze trends and to compare the firm’s financials with other companies to further come up with market values or discount rates, etc.

QuickBooks and Sage 50 Accounting are both great options for small business accounting. These programs help manage business finances which can drastically save time that may have been spent creating Excel spreadsheets and more. However, while both programs are sufficient for small businesses, the programs differ based on what they can offer your company.

Ratio analysis is a tool that is brought in by individuals to perform an evaluative analysis of information in the company’s financial statements. It is an important tool of financial analysis and it focuses on the figures given in the income statement, fund statements and balance sheet. The figures are taken from the current year which is used for calculating the ratios and it is then compared to the previous years, other firms, their industry, and also the firm to evaluate the company’s performance. Moreover, ratio analysis is primarily used by proponents of the financial analysis. In fact, ratio analysis is commonly used in business. The role of ratio analysis is its significance as a means for a company to perform an internal evaluation of its performance over a stated period. The role of ratio analysis is to perform and evaluate within the company based on its performance over a period of time. An important feature of ratio analysis is that it gives a quick image of the financial state of the business to potential investors.

Accounting is a system for gathering data about an entity’s economic activity, processing and organizing the data and in turn, communicating that information to people who want to use it to make decisions.

Ratio analysis is generally used by the company to provide some information on how the company has performed during that year, so that the parties involved including shareholders, lenders, investors, government and other users could make some analysis before making any further decision towards that particular company. As mentioned by Gibson (1982a cited in British Accounting Review, 2002 pg. 290) where he believes that the use of ratio analysis is such an effective tool to evaluate the company’s finance, and to predict its future financial state. Ratios are simply divided in several categories; these are the profitability, liquidity, efficiency and gearing.

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With the help of financial statements that arise by the firm, analytical methods can be used to get information about the course of the business and the economic state. By calculating a small number of ratios it is possible to develop a clear picture of the position and performance of a firm (P.Atrill and E.Mclaney 2013). Financial ratios have two main users, management and inventors. Management uses financial ratios to analyse, control and determine the performance of their company. This will allow companies to improve in the areas where they are weak. On the other

Financial ratios are used in many companies because they can indicate economic and financial success or failure; and provide information and guidance to decision makers. These ratios are generally broken down into 4 types; profitability, liquidity, efficiency and leverage. (Silvia, 2011, pg. 237). One ratio of each type has been calculated in table 1 below, comparing annual reports of two companies within the same industry; the NSW Audit Office (a not-for-profit entity) and KPMG (UK) (a for-profit company).

At the end of the financial or business year of all companies, the company management prepares and publishes their financial statements and makes them available for their shareholders and other stakeholders. This is done so that the shareholders and all other stakeholders are aware of the financial condition of the company and how it is operating in terms of financial and operational success. All these people require being aware of all this information because it is the primary source of data that helps a stakeholder understand the existing and expected future condition of the company in terms of finances. When this information is obtained, the stakeholders are able to judge this information to determine any decisions that are to be made in order to improve and grow their investments in the company (Mustakallio, Autio, & Zahra, 2002). If a company is not in a sound position, which is witnessed through the operations of the company elaborated in the financial statements published by the company, the investors show reluctance to invest their money in such a company on which return is very low and risk of losing the money is high.