Diamond Gem Cleaning and Maintenance Service Company
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Written Assignment 1BUS 5110 AbstractA financial statement is a tool used in the review and analysis of a company’s accounting reports in order to gauge its past, present or projected performance. Economic decision making is dependent on the review of information included within the financial statement and should provide an objective analysis of financial health. Publicly listed companies are required by law to file their financial statements with their respective governmental entities. Here in the United States the Securities and Exchange Commission (SEC) has oversight of the companies that are required to submit financial statements. In addition, stakeholders have a vested interest in how well a company may be performing and are entitled to receive financial statements, typically in the form of an annual report, to review. Preparing financial statements is only the first step, proper analysis is necessary to forecast future profitability and capital flow. In all, the primary function of reviewing financial statements is to translate the information about a company’s performance in order to determine how well it may execute moving forward.Written Assignment 1BUS 5110 – AY2017-T5The Financial Statement of Diamond Gem Cleaning and Maintenance Service Company has omissions throughout. This paper includes the correct values for the missing information, explains how the figures were derived, and how the information contributes to illustrating the company’s fiscal health.Contracts ReceivableThe value for this entry is 505,050. I determined this amount by subtracting the existing Current Assets values from the Total Current Assets line. Contracts Receivables can be defined as an organization’s claim against a customer for an uncollected amount, generally from sales or services rendered. In this case, cleaning and maintenance service fee to office buildings and the contracts in place that outline those fees. Contracts receivable can be a good indicator of future financial health as they illustrate an expectation of cash flow.
Equipment The Equipment line amount is 286,792. This figure came from subtracting the Total Current Assets line from the Total Assets line. In the past I have seen this line item with a title of Property, Plant and Equipment or PP&E. In this case, the Equipment account is the sum of all of the company’s operating equipment and should be inclusive of any amortization, or the devaluation of an asset as time goes on.Accounts Payable The Accounts Payable value is 257,335 and was calculated by subtracting the existing Current Liabilities entries from the Total Current Liabilities line. Accounts Payable is the aggregate of amounts a company owes for goods and/or services it purchased on credit and is reflected on the seller’s balance sheet as an account receivable. It is important to have a clear picture of the unpaid debts that a company may the inability of satisfying these debts could lead to increased interest rates, compounding late fees, and loss of suppliers.Retained Earnings I calculated this figure by subtracting what was listed under Stockholder’s Equity from Total Stockholder’s Equity line, the missing amount is 310,634. Retained earnings represents the portion of net income that is retained by the company as profit. A large positive number here may imply a financially healthy company.Total Liabilities and Stockholder Equity Total liabilities and stockholder equity must balance and equal the total assets figure. The amount of 1,180,660 was calculated by adding the amount from the Total Liabilities account and the Total Stockholders’ Equity account and then checked against the Total Assets total. This figure is important as acceptable debt levels should be understand because the more liabilities compared to equity, the greater there is risk of being unable to repay debts.