Accounting -Assignment Type:Individual Project Deliverable Length

| January 31, 2017

Assignment Type:Individual Project Deliverable Length:5-PowerPoint slides / can include an Excel file for financial analysis
Points Possible:125 Due Date:3/10/2013 11:59:59 PM CT

Choose a public company in the food industry. Analyze the financial statements and assess whether the financial performance has improved or declined year-over-year.

Analysis techniques include the following:

· comparative financial statements

· trend analysis

· ratio analysis

· percentage analysis

Presentation of 5 PowerPoint slides that includes the following:

· At least 3 slides relevant to the analysis prepared

· An analysis of the performance of the firm based on the analysis tools used

· A summary of the company’s financial performance and assessment of whether it has improved or declined year-over-year in terms of profitability, asset utilization, and liquidity

Background on Course Research Requirements:In the business world, it is important to use research to strengthen points made in presentations and projects. Learning to use the search functions in databases for research is a crucial critical thinking skill that complements other research techniques.

There are two main types of databases. You must stay away from inferior Web sites with anonymous writers; articles found on consultant Web sites, and materials on Web sites that are not reputable. Dictionaries and encyclopedias most often repeat the information from textbooks. Acceptable Internet resources include, among others, government sites (especially for statistics). Wikipedia or any open source Web sites are not permitted.

Accounting in Business

Although many people think of accounting as a maze of numbers, in reality it is information that

creates value in businesses. The information tells the business owners and managers about

the outputs produced and the efficiency of their performance. Accounting tells managers

whether they have improved the quality and cycle time of their tasks. To effectively measure

and evaluate improvements, the information must be timely and accurate.

Middle managers need information to summarize the performance of operators and activities

under their responsibility. The information will include summary information about the outputs

being produced as well as the expenses and costs. If the middle managers have responsibility

for sales and marketing, they will also need information on actual prices and margins realized,

and the measures of profitability.

Senior executives will want to see aggregate financial performance of the operations under

their control. Measures such as profitability and return-on-investment will be useful.

Since accounting information must be accurate to be meaningful, therefore ethics play an

important role in accounting. Top management should clearly communicate its ethical

standards through explicit beliefs systems that specify the company’s values. Managers

should model the company’s desired ethical standards. In addition, the company should

develop boundary systems that specify actions that must not be taken.

Accounting has a close relationship to the organization’s objectives and strategies. The

organization’s decision makers choose the operating systems or sequence of activities that the

organization will use to meet the customers’ requirements. The organization’s decisions

makers also choose the performance measurement systems to monitor and assess how well

the organization meets customers’ requirements and the organization’s broader objective that

lead to choosing the target set of customers.

Customer-validated performance measures reflect customer requirements and help employees

manage the value chain’s processes and activities by concentrating their attention on

improving what matters to the customer. For example, if all employees at a fast-food

restaurant know that customers require fast service, consistent quality of food and beverage

products at low prices, and a clean environment, the employees can perform their activities

according to customer requirements.

Preparing Financial Statements

Near the end of the accounting process is preparing the financial statements. The

only steps after that are preparing the year-end closing entries and presenting the

after-closing trial balance.

The Financial Statements

Publicly owned companies whose shares are listed on a stock exchange are

required to release quarterly and annual information to the stockholders and

public, known as financial reports, including the financial statements and

explanatory notes. Before the annual report is issued, the financial statements

must be audited by an external certified public accountant (CPA). Most public

company financial reports for corporations are audited by one of the four major

accounting firms.

Annual reports, known as 10-Ks, must be filed with the Securities and Exchange

Commission (SEC). Public firms must file abbreviated financial statements

quarterly, known as 10-Qs, detailing the financial results for the previous quarter.

These do not provide as many explanatory notes and are unaudited.

Three of the financial statements—the income statement, balance sheet, and

statement of retained earnings—can be prepared directly from the amounts shown

in the adjusted trial balance. The income statement is prepared first because it

determines the amount of net income that will be reported on the statement of

retained earnings; the statement of retained earnings is prepared next because it

determines the amount of retained earnings that will be shown on the balance


The Income Statement

The income statement summarizes the financial results of the business by showing

the revenues (sales) earned and corresponding expenses of the company over a

period of time. Alternative names for the income statement are profit and loss

statement (P&L), earnings statement, or statement of operations.

XYZ Company

Income Statement

For the year ended 2009

Revenue $200,000.00

Cost of goods sold $130,000.00

Gross profit $70,000.00

Operating expenses

Selling expenses $26,000.00

General expenses $32,500.00

Total operating expenses $58,500.00

Operating income before income taxes $11,500.00

Taxes related to operations $3,450.00

Net income $8,050.00The Statement of Retained Earnings

Retained earnings represent the cumulative profits earned by the business that

have not been paid out as dividends and that are retained by the company.

Dividends are the sharing of profits with the shareholders (owners) of the business

and are paid out in cash. A firm that is just beginning operations will show retained

earnings of zero. Thereafter, the retained earnings reflect the cumulative profits

(less any losses) that have occurred since the business began operations.

Increases in retained earnings result from net profits (net income), and decreases

result from losses and the payment of dividends.

The statement of retained earnings is based upon the following relationship:

Retained Earnings at the

beginning of the period +


Income – Dividends =

Retained earnings at

the end of the period

XYZ Company

Statement of Retained Earnings

For the year ended 2009

Retained earnings, January 1, 2008 $0.00

Add: Net income $8,050.00

Subtotal $8,050.00

Less: Dividends $0.00

Retained earnings, Dec. 31, 2009 $8,050.00

1. This statement was prepared as of the business’ first year of operation, so

the beginning retained earnings are zero.

2. The net income for the period is added (or subtracted if a loss had

occurred) and subtotaled.

3. Any dividends paid out are deducted. Dividends for this company are zero,

as they are not usually paid out until after a company has been in existence

for a period of time and no longer needs to retain all profits for growth of

the business. It is important to note that dividends are not an expense, so

they do not appear on the income statement. The dividends represent the

sharing of firm profits and are paid out of retained earnings.

4. The ending retained earnings will appear as retained earnings on the

balance sheet.

The Balance Sheet

The balance sheet shows the assets, liabilities and equity of the company at the

end of the accounting period. Note that the income statement and statement of

retained earnings show the results of operations over a period of time (a quarter

or a year), whereas the balance sheet represents a snapshot of the firm’s financial

position at one point in time.

Balance sheets can be presented with assets on the left and liabilities and equity

on the right-hand side, a reminder that assets must equal liabilities plus equity

(the accounting equation). It can also be presented in report form with assets

appearing first, followed by liabilities and equity (shown below).XYZ Company

Balance Sheet

as of Dec 31, 2009

Cash $20,000

Accounts Receivable $12,000

Inventory $103,050

Other Assets $5,000

Total Assets $140,050

Accounts Payable $10,000

Accrued Liabilities $41,000

Long-term debt $51,000

Total Liabilities $102,000

Common Stock $30,000

Retained Earnings $8,050

Total Liabilities and Equity $140,050

Relationships Among the Financial Statements

While each financial statement presents different information, the statements are

all related to one another, known as articulation. The balance sheet reflects the

While each financial statement presents different information, the statements are

all related to one another, known as articulation. The balance sheet reflects the

retained earnings as shown on the statement of retained earnings. The statement

of retained earnings summarizes the factors that have caused the retained

earnings to change from one balance sheet to the next. The income statement

explains in detail the change in retained earnings as reflected in the net income or

loss of the business.

Business Financial Terminology

Financial statements are the output of the accounting process, composed of financial

data summarized from business transactions reported in monetary terms. A business’s

financial statements provide a format to communicate its economic status to various

segments of the community. The purpose of this unit is to familiarize you with the

content and purpose of bank records as well as the analysis and interpretation of results

including simple interest, simple discount, compound interest, future value, and present


Banks provide many services to individuals and businesses, the most notable being the

checking account. This service enables people to conduct business transactions, such as

purchasing goods and services or paying debts without having to use cash. Practically

all business obligations today are paid by check. This is changing, however, with the

advent of online banking. The bank statement is a chronological listing of all the

checks, deposits, and other charges recorded by the bank during the month. It is a rare

occurrence when the balance shown on the bank statement is exactly the same as the

checkbook balance. This does not mean that a mistake has been made in either record;

usually the bank statement contains several bank charges indicated by code letters that

are explained at the bottom of the statement.

Interest is a specified amount of money that is paid for the privilege of using money

that belongs to another person. It is, literally, the price paid for credit. If you live in an

apartment which you do not own, you pay rent for the privilege of living there. This

rent enables your landlord to pay his mortgage, taxes, and other expenses, and allows

him to make a profit on his investment. Interest, too, can be considered rent, for if the

lender was not loaning his money directly for interest, he could be investing it in an

apartment house or some other venture for profit. Just as rent is paid in regular monthly

or yearly installments, so is interest paid on a regular basis. Lending institutions such

as finance companies and banks are actually in business to rent money. The money

invested, loaned, or borrowed, upon which interest is charged, is the principal and is

expressed in dollars and cents. Interest which is paid on the principal only is called

simple interest.

Discount is a word that makes buyers stop and listen because a simple discount means

greater savings for buyers. A simple discount is a reduction from the list price offered

to customers. This allows customers to save on products and services and enables

businesses to increase their profits.

Sometimes money is loaned or borrowed for periods longer than 1 year. There may be

the dual understanding that the interest is to be paid at regular intervals (annually,

semiannually, quarterly, or monthly), and if the interest is not paid at such intervals, it

shall be added to the principal and itself be subject thereafter to the same rate of

interest as the original principal. Thus, adding this interest to the original principal at

the end of each period yields a larger principal on which the interest is computed for the following period. This is called compound interest, and means that this unpaid

interest is actually converted to additional principal. On the other hand, future value is

the accumulated amount at the end of a loan or investment based on compound interest

(also known as compound amount and maturity value). Present value is the value of an

investment at a specified time during the time frame of the investment.

Generally Accepted Accounting Principles

Financial statements are prepared in accordance with generally accepted accounting

principles (GAAP) which provide a framework for providing timely, relevant, and

reliable information to financial statement users. The Financial Accounting Standards

Board (FASB) is responsible for setting accounting standards. In addition, there are

various other organizations involved with the development, support, and enforcement

of GAAP.

Financial statements should be prepared in accordance with GAAP which are

established by the FASB. GAAP can be found in various forms such as standards,

interpretations, bulletins, and staff positions. The most authoritative are the FASB

standards. An FASB standard is the position taken by the FASB on how a financial

transaction should be accounted. Often, after a standard has been issued, additional

guidance is required. This guidance may be provided in the form of an FASB

Emerging Issues Task Force, FASB Implementation Guide, or AICPA Industry Audit

and Accounting Guide.

The American Institute of Certified Public Accountants (AICPA) has played a crucial

support role for the standard setting and has issued bulletins to provide guidance. The

Securities Exchange Commission (SEC) requires that registered companies adhere to

GAAP; therefore, the financial statements submitted to the SEC must be in accordance.

Financial statements that stray from these principles are considered deficient and can

result in substantial fines.

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