Module 1 - SLP



Module 1-SLP

Overview of the topic

The topic is based on the analysis of the financial statements. In the first case, the main task is to review the financial statements of the companies and also to conduct a comparison. The analysis of the financial statements would also help in understanding the important concepts. The company that has been selected for this topic is Costa Company. The financial statements of the Costa Company will be analyzed in detail.

Financial Analysis of Costa Company

The trial balance of the Costa Company includes all the data related to the accounting transactions. The trial balance is going to assist in preparing the Income Statement and Balance Sheet of the company. The income statement of the company is an important element of the Accounting transactions. The biggest reason is that it helps the company in calculating the profits. This is the major aspect for the Company. Similarly, in the case of Balance Sheet, the Total Assets and the Total Liabilities/Equity matters considerably for the company. The simple formula for the Balance Sheet is:

Assets + Liabilities= Capital

The Income Statement and the Balance Sheet of the Costa Company is prepared in the next two pages.

Income Statement of Costa Company

 

 

 

$

Revenues

619,400

 

 

Less COGS

402,610

Gross Profit

216,790

 

 

Less: Operating Expenses

 

Depreciation Expense

18,250

Insurance Expense

1,500

Misc. expenses

4,500

Rent

22,000

Salaries

61,940

Utilities

7,400

Marketing Expense`

5600

Property taxes

6,500

Net Profit

89100



Balance Sheet of Costa Company

 

Assets

$

Liabilities and Equity

$

Equipment

325000

Accounts Payable

14500

Fixed Assets

325000

Current Liabilities

14500

 

 

 

 

Accounts receivable

18,000

Long term Debt

105000

Cash

41500

Long term Liabilities

105000

Inventory

80,500

 

 

Current Assets

140,000

Common Stock

10000

 

 

Paid in Capital

90000

 

 

Net Profit

89100

 

 

Retained Earnings

156400

 

 

Shareholder's Equity

345500

 

 

 

 

Total Assets

465,000

Total Liabilities and Equity

465000

Description of the effect of errors on the Income Statement and Balance Sheet

The effect of errors on the Income Statement and Balance Sheet matters considerably for all the organizations. The main reason is that it does not show a real picture of the financial performance. It provides a misleading view of the Company's financial transactions. For instance, if the ...